Since the introduction of the new tax regime in Budget 2020 and its subsequent enhancements, taxpayers face a crucial choice every year. The new regime is now the default, but is it always better? Let us break it down with real numbers.
Tax Slabs Comparison (FY 2025-26)
New Regime (Default)
| Income | Rate |
|---|---|
| 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% |
Old Regime
| Income | Rate |
|---|---|
| Up to ₹2.5 lakh | Nil |
| ₹2.5–5 lakh | 5% |
| ₹5–10 lakh | 20% |
| Above ₹10 lakh | 30% |
When the Old Regime Wins
The old regime is better if you have significant deductions and exemptions:
- •Section 80C — up to ₹1.5 lakh (PPF, ELSS, life insurance, tuition fees)
- •HRA exemption — significant for employees paying rent in metro cities
- •Home loan interest — up to ₹2 lakh under Section 24(b)
- •Section 80D — health insurance premiums (up to ₹75,000 with parents)
- •NPS contribution — additional ₹50,000 under Section 80CCD(1B)
When the New Regime Wins
The new regime is typically better if you have few deductions — for example, if you do not have a home loan, do not pay significant rent, or do not make large investments under 80C. The higher basic exemption and lower slab rates in the new regime often result in lower tax even without deductions.
Quick Decision Rule
If your total deductions and exemptions (80C + 80D + HRA + home loan + NPS + others) exceed roughly ₹3.75 lakh, the old regime is likely better. Below that, the new regime usually wins. But the exact breakeven depends on your income level — always run both calculations.
Not sure which regime saves you more? Our CAs will run a detailed comparison for your specific income and deductions. Book a free consultation.