Last updated: October 7, 2026, 12:00 PM IST
If you've ever googled 'new regime vs old regime which is better', you know the feeling. Pick wrong and you quietly overpay tax by tens of thousands. Pick right and the money stays in your pocket.
For FY 2025-26 (the year you're filing for in 2026), the maths got a big shake-up from Budget 2025 — and Budget 2026, presented on February 1, 2026, left the slabs completely untouched, so the same framework rolls forward. Let's lay both regimes side by side, with real numbers, so you can decide with a calculator instead of a gut feeling.
The New Regime in One Picture
The new regime (Section 115BAC) is the default now. Its pitch is simple: lower slab rates, almost no deductions, minimal paperwork. Here are the FY 2025-26 slabs:
- Up to ₹4 lakh — nil
- ₹4–8 lakh — 5%
- ₹8–12 lakh — 10%
- ₹12–16 lakh — 15%
- ₹16–20 lakh — 20%
- ₹20–24 lakh — 25%
- Above ₹24 lakh — 30%
The real magic is the Section 87A rebate: if your taxable income is up to ₹12 lakh, you get a rebate of up to ₹60,000 — which wipes your tax out entirely. Add the ₹75,000 standard deduction for salaried folks, and someone earning ₹12.75 lakh gross salary pays zero tax under the new regime. That's not a trick; it's just arithmetic (12,75,000 − 75,000 = 12,00,000, and the rebate covers the rest).
There's also marginal relief for the awkward spot just above ₹12 lakh. Without it, earning ₹1 extra would cost you the whole ₹60,000 rebate — a cliff. With marginal relief, your tax is capped at the amount by which your income exceeds ₹12 lakh. So at ₹12.25 lakh taxable income, you pay roughly ₹25,000, not the full slab tax.
The Old Regime Hasn't Gone Anywhere
The old regime keeps its familiar structure — higher rates, but a long menu of deductions for those who use them:
- Up to ₹2.5 lakh — nil
- ₹2.5–5 lakh — 5%
- ₹5–10 lakh — 20%
- Above ₹10 lakh — 30%
Plus a ₹50,000 standard deduction for salaried employees, and an 87A rebate of ₹12,500 that makes taxable income up to ₹5 lakh tax-free. The rates look worse than the new regime — and they are, until deductions enter the picture.
That's the old regime's whole game: 80C (₹1.5 lakh — PPF, ELSS, EPF, life insurance), 80D (health insurance premiums), HRA exemption, home-loan interest under 24(b) up to ₹2 lakh, 80E (education loan interest, no cap), and the extra ₹50,000 NPS deduction under 80CCD(1B). If you genuinely use several of these, the old regime can still win.
What Each Regime Lets You Claim
This is where most comparisons get sloppy, so let's be precise.
New regime allows: the ₹75,000 standard deduction, employer's NPS contribution under 80CCD(2), a deduction for family pension (up to ₹25,000), and standard retirement exemptions (gratuity, leave encashment, EPF within limits).
New regime does NOT allow: 80C, 80D, HRA exemption, LTA, or home-loan interest under 24(b) for a self-occupied house. If these make up a big chunk of your tax planning, the new regime's low rates may not compensate.
Old regime keeps everything: all of the above deductions and exemptions, exactly as before. Nothing was taken away.
A 4% health and education cess applies on top of the tax under both regimes, so factor that into every comparison. If you want to run your own numbers, Comrevo's old-vs-new tax calculator lets you plug in income and deductions side by side.
New Regime vs Old Regime Which Is Better for You: a Simple Way to Decide
Forget rules of thumb you read on WhatsApp forwards. The honest method: compute tax under both regimes with your numbers and pick the lower one. But here's a worked example to show how the crossover works.
Example: Priya, salaried, gross ₹15 lakh. She claims 80C (₹1.5L), 80D (₹25K), HRA exemption (₹2.4L), home-loan interest 24(b) (₹2L), NPS 80CCD(1B) (₹50K), plus the old regime's ₹50K standard deduction. Total deductions: ₹7.15 lakh.
- Old regime: taxable = 15,00,000 − 7,15,000 = ₹7,85,000. Tax = ₹69,500 + 4% cess = ₹72,280.
- New regime: taxable = 15,00,000 − 75,000 = ₹14,25,000. Tax = ₹93,750 + 4% cess = ₹97,500.
Old regime wins by about ₹25,000 — because her deductions are large. Now flip it: same salary, but Priya claims only 80C of ₹1.5 lakh and no HRA or home loan. Old regime taxable = ₹12.5 lakh → tax ≈ ₹1,95,000 with cess. New regime stays ₹97,500. New wins by nearly a lakh.
The pattern: the old regime only starts winning when your total deductions and exemptions are large — roughly ₹3.5–5 lakh or more, depending on income. For a plain-salaried person with modest 80C and no HRA or home loan, the new regime wins comfortably. For someone with HRA + 80C maxed + home-loan interest + NPS, the old regime deserves a real calculation.
Bajaj Finserv's new-regime slab guide is a handy reference if you want the slab tables in one place while you calculate.
Special Cases: Senior Citizens and Switching Rules
Senior citizens (60–80) get a higher basic exemption under the old regime — ₹3 lakh instead of ₹2.5 lakh — and super seniors (80+) get ₹5 lakh. The new regime has a uniform ₹4 lakh exemption regardless of age. For retirees with medical-heavy 80D claims and no salary, the old regime often still makes sense.
Switching: the new regime is the default, but salaried employees can switch between regimes every financial year — you're not locked in. Business owners face stricter switching limits, so they should check the conditions before opting out of the new regime.
One more wrinkle: the 87A rebate under the new regime applies only to income taxed at normal slab rates — special-rate income like equity capital gains doesn't get the rebate. If you have large capital gains, run the numbers carefully or ask a professional.
What Budget 2026 Actually Changed
Short version: nothing, on rates. Budget 2026 — presented February 1, 2026 — proposed no changes to income-tax slabs, the standard deduction, or the rebate structure under either regime. Multiple outlets confirmed the status quo for FY 2026-27, so the FY 2025-26 framework described above carries forward for planning.
What is changing is the legal plumbing: the new Income-tax Act, 2025 takes effect from April 1, 2026, replacing the 1961 Act, with redesigned forms, simpler language, and revised compliance timelines. Rates stayed put; paperwork is getting the overhaul. That's worth knowing, but it doesn't change your regime maths.
If your money situation involves freelance or business income alongside salary, the switching rules get trickier — another reason to get professional advice rather than guessing.
Frequently Asked Questions
Which regime is better for a salaried person earning ₹15 lakh with no investments?
Almost certainly the new regime. Without large deductions, the new regime's lower slab rates and the ₹75,000 standard deduction beat the old regime's higher rates easily. The old regime needs roughly ₹3.5–5 lakh+ of deductions to become competitive.
Can I switch regimes every year?
Salaried employees, yes — you can choose afresh each financial year. Those with business income face restrictions on switching back once they opt out of the new regime, so check the conditions first.
Is the ₹12.75 lakh "zero tax" figure really true?
For a salaried resident individual with no other complications, yes: ₹12.75 lakh gross minus the ₹75,000 standard deduction = ₹12 lakh taxable income, and the ₹60,000 Section 87A rebate wipes out the tax. But other income or special-rate income (like capital gains) can change the answer — it's not a universal guarantee.
What is marginal relief in simple words?
If your taxable income is just above ₹12 lakh, marginal relief caps your tax at the excess amount. Earn ₹12.25 lakh and you pay about ₹25,000 — not the full slab tax. It smooths out the cliff where the 87A rebate ends.
Should I consult a CA for this decision?
If your income is straightforward salary, the calculators and examples above are usually enough. But with rental income, capital gains, business income, or a home loan, a tax professional can easily save you more than their fee. This article is education, not personal advice.
Sources
My Personal Take
Here's what I actually think after writing this: most salaried people are overthinking it. If you don't have a home loan and your 80C is just EPF plus a small ELSS, the new regime wins and it's not close. I see friends doing elaborate tax gymnastics to "save" under the old regime while leaving money on the table. Run your own numbers once and the answer is usually obvious.
The one thing I'd insist on, though, is doing the actual calculation once — with your real salary slip, not a YouTube example. It takes twenty minutes with a calculator, and the answer is usually obvious. And since salaried folks can switch every year, there's no pressure to get it perfect forever. Just get this year right, and revisit it next April.
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