1. 🎯 At a Glance
- New tax regime (Section 115BAC): Lower slab rates, only a standard deduction, no exemptions.
- Old tax regime: Higher slab rates, but allows multiple deductions like HRA, 80C, 80D, home loan interest, etc.
2. 📊 Tax Slabs for FY 2025–26
New Regime:
- ₹0–4 lakh: 0%
- ₹4–8 lakh: 5%
- ₹8–12 lakh: 10%
- ₹12–16 lakh: 15%
- ₹16–20 lakh: 20%
- ₹20–24 lakh: 25%
- Above ₹24 lakh: 30%
Plus a ₹60,000 rebate under Section 87A, making incomes up to ₹12 lakh effectively tax-free—₹12.75 lakh for salaried individuals after a ₹75,000 standard deduction.
Old Regime:
- ₹0–2.5 lakh: 0%
- ₹2.5–5 lakh: 5%
- ₹5–10 lakh: 20%
- Above ₹10 lakh: 30%
Includes deductions and exemptions like HRA, LTA, 80C, 80D, and home loan interest.
3. 🛡 Deductions & Exemptions
New Regime:
- Standard deduction for salaried individuals: ₹75,000.
- Employer NPS contributions are allowed.
- No other deductions like HRA, 80C, 80D, LTA, or home loan interest are permitted.
Old Regime:
- Standard deduction: ₹50,000
- Section 80C: up to ₹1.5 lakh (PPF, ELSS, EPF)
- Section 80D: health insurance
- HRA, LTA, home loan interest, and more
4. ✅ Who Stands to Gain?
New Regime:
- Salaried/pensioned individuals with income up to ₹12.75 lakh can pay no tax (slab benefit + rebate + standard deduction).
- Ideal for those with minimal deductions.
- Marginal relief ensures a smooth tax transition for incomes slightly above ₹12 lakh.
Old Regime:
- Beneficial for those with substantial deductions—like HRA, 80C, home loan interest, etc.
- High-income individuals or property owners often benefit more here.
5. 📈 Feature Comparison Table
| Feature | New Regime | Old Regime |
|---|---|---|
| Tax Slab Rates | Lower slabs + ₹60k rebate | Fewer slabs, higher top rates |
| Allowed Deductions | ₹75k standard + NPS only | HRA, LTA, 80C, 80D, home loan, etc. |
| Simplicity | High (minimal documentation) | Complex (multiple records needed) |
| Best For | ≤₹12.75 lakh CTC, few deductions | Higher-income earners with many deductions |
6. 🔍 Example Scenarios
- ₹15 lakh income:
- New Regime: ₹75k deduction → ₹14.25 lakh taxed.
- Old Regime: With ₹4 lakh in deductions → ₹11 lakh taxable → likely lower tax.
- ₹25 lakh income:
- If you claim ₹1.5 lakh under 80C and ₹2 lakh home loan interest:
- New Regime: ₹24.25 lakh taxable.
- Old Regime: Large deductions reduce taxable income—potentially more tax-efficient.
- If you claim ₹1.5 lakh under 80C and ₹2 lakh home loan interest:
7. 📝 How to Decide
- Use a calculator to compute tax under both regimes.
- List all your eligible deductions for the old regime.
- Compare actual tax payable, not just taxable income.
- Factor in simplification and documentation effort.
8. 📌 Final Verdict
- New Regime is ideal for low-to-mid income earners (≤₹12.75 lakh) with few deductions—offers lower rates and easier filing.
- Old Regime benefits those with heavy deductions (home loans, investments, insurance).
- As income increases, higher and mid-range earners should reassess annually to choose the most beneficial option.
