Since FY 2023-24, the new regime is the default. You can still choose the old regime, but only if it actually leaves you better off. For most people the answer now depends on how much they claim in deductions.
The FY 2025-26 slab rates
| Taxable income | New regime | Old regime (below 60) |
|---|---|---|
| Up to ₹2.5 lakh | Nil | Nil |
| ₹2.5 to 4 lakh | Nil | 5% |
| ₹4 to 5 lakh | 5% | 5% |
| ₹5 to 8 lakh | 5% | 20% |
| ₹8 to 10 lakh | 10% | 20% |
| ₹10 to 12 lakh | 10% | 30% |
| ₹12 to 16 lakh | 15% | 30% |
| ₹16 to 20 lakh | 20% | 30% |
| ₹20 to 24 lakh | 25% | 30% |
| Above ₹24 lakh | 30% | 30% |
Health and education cess of 4% applies on top in both regimes, and surcharge applies at higher incomes.
The rebate changes everything below ₹12 lakh
Under the new regime, a resident individual with taxable income up to ₹12 lakh pays no tax because of the rebate. Add the ₹75,000 standard deduction for salaried employees and salary of up to ₹12.75 lakh is effectively tax free. The rebate does not cover income taxed at special rates, such as capital gains on shares.
What you give up in the new regime
- Section 80C investments such as PPF, ELSS and life insurance
- Health insurance under section 80D
- House rent allowance (HRA)
- Interest on a home loan for a self-occupied house
- Most other deductions and exemptions
You keep the standard deduction and the deduction for your employer's contribution to NPS.
A simple way to decide
Add up every deduction you would actually claim under the old regime: 80C, 80D, HRA, home loan interest and the rest. If the total is small, the new regime almost always wins. If you pay high rent in a metro and have a home loan and full 80C and 80D claims, the old regime can still come out ahead, especially at higher incomes. The only reliable answer is to compute both with your own numbers.
Can you switch?
Salaried individuals without business income can choose a regime every year when filing. If you have business or professional income, switching back and forth is restricted, so the choice needs more care.
This article is general information, not advice for your situation. Tax rules change, so speak to us before acting on it.