Old vs New Tax Regime: Which One Should You Choose in FY 2025-26?

The new tax regime has been the default option since FY 2023-24 — if you don’t actively opt for the old regime while filing, you’re assessed under the new one automatically. For FY 2025-26, the new regime’s slabs and rebate make it genuinely attractive for a much larger group of taxpayers than before.

New regime slabs, FY 2025-26

• 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%

Combined with the Section 87A rebate, total income up to ₹12 lakh works out tax-free under the new regime — ₹12.75 lakh for salaried taxpayers once the ₹75,000 standard deduction is applied. The trade-off is that the new regime doesn’t allow most deductions: no 80C (PF, ELSS, life insurance), no HRA exemption, no home loan interest deduction on a self-occupied property.

When the old regime still wins

If you’re claiming a meaningful HRA exemption, have a home loan on a self-occupied house, and max out 80C plus health insurance under 80D, the old regime’s deductions can bring your effective tax below what the new regime’s lower rates would give you — particularly in the ₹12–20 lakh income band. There’s no shortcut here; it comes down to computing both ways with your actual numbers.

Salaried taxpayers can switch between regimes every year when filing their return. If you have business or professional income, the choice is more restrictive — you can switch back to the old regime only once in your lifetime after opting out of it. Run the comparison before you file, not after.