New Tax Regime vs Old Tax Regime: Which Is Better for You?
A direct comparison of new and old tax regimes for FY 2025-26. The answer depends entirely on your deductions — here is how to find out which saves you more.
All figures and facts in this article are sourced directly from primary government and regulatory publications — including the Reserve Bank of India, SEBI, EPFO, the Income Tax Department, PFRDA, and IRDAI — and verified before publication. No claim is published from a single source without corroboration.
The core difference
The old and new tax regimes are not simply different rate tables. They represent two different philosophies about how to structure income tax.
The old regime has higher headline rates but allows you to significantly reduce your taxable income through deductions and exemptions — HRA, 80C, 80D, home loan interest, and more. The more deductions you claim, the lower your actual tax.
The new regime has lower, flatter rates across the board and eliminates most deductions. What you earn is largely what gets taxed, with fewer ways to reduce it. In exchange, the rates are lower and the 87A rebate provides zero tax up to ₹12 lakh.
Side-by-side: slabs for FY 2025-26
New regime (all ages, as per Finance Act 2025):
| Income slab | Rate |
| Up to ₹4L | 0% |
| ₹4L – ₹8L | 5% |
| ₹8L – ₹12L | 10% |
| ₹12L – ₹16L | 15% |
| ₹16L – ₹20L | 20% |
| ₹20L – ₹24L | 25% |
| Above ₹24L | 30% |
Old regime (below 60):
| Income slab | Rate |
| Up to ₹2.5L | 0% |
| ₹2.5L – ₹5L | 5% |
| ₹5L – ₹10L | 20% |
| Above ₹10L | 30% |
Senior citizens (60–79) get a ₹3L basic exemption. Super senior citizens (80+) get a ₹5L basic exemption and pay zero tax up to ₹5L.
What deductions are available where?
| Deduction | New regime | Old regime |
| Standard deduction (₹75,000) | Yes | Yes |
| HRA exemption | No | Yes |
| Section 80C (max ₹1.5L) | No | Yes |
| Section 80D health insurance | No | Yes |
| Home loan interest — Section 24(b) | No | Yes (max ₹2L) |
| Employer NPS — 80CCD(2) | Yes | Yes |
| LTA | No | Yes |
| Professional tax | No | Yes |
The CBDT Circular No. 4/2023 lists all deductions and exemptions that are not available under the new regime.
When the new regime wins
Income up to ₹12.75 lakh (salaried): The Section 87A rebate under the new regime makes tax zero for taxable income up to ₹12 lakh. For a salaried employee, the ₹75,000 standard deduction brings this to ₹12.75L gross. If you are in this income range, the new regime is almost certainly better regardless of your deductions.
Limited deductions: If you do not pay significant rent, have not maximised 80C, do not have a home loan, and do not have high health insurance premiums — your deductions may not be large enough to make the old regime worthwhile. The new regime's lower rates win by default.
Very high income: The new regime caps surcharge at 25% even above ₹5 crore. The old regime applies a 37% surcharge at this level. For very high earners, this makes the new regime substantially cheaper.
When the old regime wins
Large HRA: If you live in a metro city and pay significant rent, the HRA exemption can be ₹2–4L annually. This deduction alone can tilt the calculation toward the old regime. HRA is completely absent from the new regime.
Maximised deductions: If you invest ₹1.5L in 80C instruments (PPF, ELSS, EPF), pay ₹25,000 in health insurance premiums (80D), and have a home loan with ₹2L in annual interest, that is ₹4.25L in deductions beyond the standard deduction. At incomes of ₹15–25L, this is often enough to make the old regime cheaper.
Employer's NPS contribution is small: If your employer does not contribute to NPS (or the contribution is modest), you lose the one deduction that carries across both regimes — making the new regime's lack of deductions more costly.
The breakeven point
For a salaried employee below 60 with no HRA or home loan, assuming maximum 80C (₹1.5L) and 80D (₹25K):
| Gross income | New regime tax | Old regime tax | Better regime |
| ₹10L | ₹0 | ~₹33,800 | New |
| ₹12.75L | ₹0 | ~₹67,600 | New |
| ₹15L | ~₹93,600 | ~₹1,30,000 | New |
| ₹20L | ~₹2,08,000 | ~₹2,34,000 | New |
| ₹25L | ~₹3,90,000 | ~₹3,90,000 | Tie |
| ₹30L | ~₹5,72,000 | ~₹5,46,000 | Old |
Add HRA of ₹3L and home loan interest of ₹2L, and the old regime starts winning from around ₹18–20L gross.
These figures include 4% education cess. For your exact situation, use the [old vs new tax regime calculator](/tools/tax-regime-calculator).
How to choose
Sources
Content on Ek Crore is for educational purposes only. Nothing here is financial advice. Always consult a SEBI-registered advisor, CA, or qualified professional before making investment or tax decisions.