In short: For most salaried taxpayers without large deductions, the new regime now wins — a salaried person earning up to ₹12.75 lakh pays zero tax (₹75,000 standard deduction + Section 87A rebate). The old regime can still be better if your combined deductions (80C, 80D, home-loan interest, HRA) are substantial relative to income. The only reliable way to choose is to compute both.
What changed in the new regime?
The new regime’s slabs for FY 2025-26: nil up to ₹4 lakh, then 5% (₹4–8L), 10% (₹8–12L), 15% (₹12–16L), 20% (₹16–20L), 25% (₹20–24L) and 30% above ₹24 lakh. Salaried taxpayers get a ₹75,000 standard deduction, and the Section 87A rebate makes net taxable income up to ₹12 lakh entirely tax-free, with marginal relief just above that line.
What does the old regime still offer?
Lower exemption limits and steeper slabs (5% above ₹2.5L, 20% above ₹5L, 30% above ₹10L) — but the full deduction menu: 80C up to ₹1.5 lakh, 80CCD(1B) NPS ₹50,000, 80D health insurance, Section 24(b) home-loan interest up to ₹2 lakh, HRA exemption, LTA and more.
The break-even logic
The decision comes down to one comparison: do your total old-regime deductions push your taxable income low enough to beat the new regime’s gentler slabs? As a rough indicator, a ₹16 lakh salary needs well over ₹4 lakh of combined deductions before the old regime competes. Heavy HRA claims in metro cities plus a home loan plus maxed-out 80C are usually what it takes.
Three real-world patterns we see:
- Young renters with few investments — new regime wins almost always.
- Home-loan + insurance + PF families — genuinely close; must be computed annually.
- Income above ₹5 crore — the new regime caps surcharge at 25% versus 37%, a major saving at the top end.
Common mistakes when choosing
Choosing once and never revisiting (the better regime changes as your life changes); forgetting that business taxpayers have restrictions on switching back; assuming HRA is claimable in the new regime (it isn’t); and ignoring employer NPS contributions, which remain deductible in the new regime under 80CCD(2).
Compute it for yourself in 60 seconds
Our free tax calculator compares both regimes with your actual numbers — slabs, rebate, surcharge and cess included — and flags savings opportunities. For anything beyond a salary-only picture (capital gains, F&O, foreign assets, multiple properties), have our tax team verify before you file.
FAQs
Can I switch regimes every year? Salaried taxpayers can choose each year while filing. Taxpayers with business income can switch out of the new regime essentially once, so the choice needs more care.
Is the new regime the default? Yes — if you do nothing, the new regime applies. Choosing the old regime is an active election.
Does the ₹12 lakh zero-tax limit include capital gains? No — special-rate income such as equity capital gains is taxed separately and doesn’t get the rebate.
This article is for general information only and is not professional advice. Compute your own numbers, or ask us to.