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Includes 4% cess, §87A rebate with marginal relief, and surcharge where income crosses ₹50L. FY 2025-26 (AY 2026-27).
How the two regimes differ
Since FY 2023-24 the new regime is the default. It offers lower slab rates and, from FY 2025-26, zero tax up to ₹12 lakh of taxable income via the enlarged §87A rebate — but it drops almost every deduction. The old regime keeps the deductions (80C, 80D, HRA, home-loan interest and more) but taxes you on higher, older slabs. So the comparison is really: do your deductions save more than the new regime's lower rates?
FY 2025-26 slabs at a glance
| New regime | Rate |
|---|---|
| Up to ₹4,00,000 | Nil |
| ₹4,00,001 – 8,00,000 | 5% |
| ₹8,00,001 – 12,00,000 | 10% |
| ₹12,00,001 – 16,00,000 | 15% |
| ₹16,00,001 – 20,00,000 | 20% |
| ₹20,00,001 – 24,00,000 | 25% |
| Above ₹24,00,000 | 30% |
| Old regime (below 60) | Rate |
|---|---|
| Up to ₹2,50,000 | Nil |
| ₹2,50,001 – 5,00,000 | 5% |
| ₹5,00,001 – 10,00,000 | 20% |
| Above ₹10,00,000 | 30% |
Senior citizens get a ₹3 lakh exemption in the old regime and super seniors ₹5 lakh. Standard deduction is ₹75,000 (new) versus ₹50,000 (old) for salaried income. A 4% health-and-education cess applies in both, and surcharge kicks in above ₹50 lakh of income.
The break-even intuition
For most salaried incomes, the old regime needs roughly ₹4–5 lakh of genuine annual deductions (80C maxed, meaningful HRA or home-loan interest, 80D) before it beats the new regime. With only the 80C cap of ₹1.5 lakh, the new regime usually wins comfortably — especially between ₹8 lakh and ₹16 lakh where its rate cuts bite hardest. Rent-paying employees in metros with big HRA components and home-loan holders are the main groups who should check carefully before defaulting.
Assumptions and sources
Slabs, rebate and surcharge follow the Income Tax Department's published rates for FY 2025-26 (AY 2026-27), unchanged by Budget 2026. The calculator assumes salary income (toggle off if not salaried), applies §87A only for residents, includes marginal relief at the rebate and surcharge boundaries, and caps 80C at ₹1.5L, 80CCD(1B) at ₹50,000 and self-occupied home-loan interest at ₹2L. It does not model capital gains, business income or every niche deduction — treat it as a planning estimate, not a filing figure.
Questions, answered
Which tax regime is better for FY 2025-26?
It depends on your deductions. The new regime has lower rates, a ₹75,000 standard deduction and zero tax up to ₹12 lakh taxable income (₹12.75 lakh for salaried). The old regime only wins when your combined deductions — 80C, 80D, HRA exemption, home-loan interest — are large enough to offset its higher rates. This calculator shows the exact crossover for your numbers.
Is income really tax-free up to ₹12.75 lakh in the new regime?
For salaried residents, effectively yes. The ₹75,000 standard deduction brings a ₹12.75 lakh salary to ₹12 lakh taxable, and the Section 87A rebate of up to ₹60,000 wipes out the tax on it. Above that level the rebate no longer applies (with marginal relief just past the line), and normal slab tax kicks in.
What deductions does the new regime allow?
Very few: the ₹75,000 standard deduction for salaried income and the employer's NPS contribution under Section 80CCD(2) are the main ones. Popular deductions like Section 80C, 80D, HRA exemption and self-occupied home-loan interest are not available — they only apply in the old regime.
Can I switch between regimes every year?
Salaried individuals without business income can choose either regime each year when filing their return. Those with business or professional income can opt out of the new regime, but the switch back is allowed only once, so the choice needs more care.
Do NRIs get the ₹60,000 rebate?
No. The Section 87A rebate is available only to resident individuals. NRIs are taxed from the first slab above the basic exemption in either regime, which often changes the regime comparison — uncheck “resident” in the calculator to see your numbers.