New vs old tax regime in FY 2025-26: how to actually decide

The new regime became the default some years ago, and from FY 2025-26 it got genuinely generous: income up to ₹12 lakh is effectively tax-free thanks to the enhanced section 87A rebate, and salaried taxpayers get a ₹75,000 standard deduction on top (so a ₹12.75 lakh salary can pay zero tax).

So is the old regime dead? Not quite.

The one-line rule

The old regime wins only when your deductions are large enough to beat the new regime's lower slab rates.

For most salaried people with modest investments, the new regime now wins. The old regime still deserves a look when several of these stack up:

• Home-loan interest on a self-occupied house (up to ₹2 lakh under 24(b))
• HRA exemption — significant for renters in cities
• Full 80C (₹1.5 lakh) plus 80D health-insurance premiums
• NPS contributions (80CCD(1B) — extra ₹50,000)

A practical threshold: if your total deductions cross roughly ₹4–4.5 lakh (including HRA), run both computations carefully — the old regime may still win at higher incomes.

What business owners should remember

Once you opt out of the new regime and have business income, switching back has restrictions — the choice isn't freely reversible every year like it is for salaried taxpayers. Decide with a multi-year view, not just this year's numbers.

Do the comparison properly

Our income-tax calculator runs both regimes side by side on your actual figures. For the final call — especially with business income, capital gains or a regime switch involved — talk to us first.