The two tax regimes in India
Since FY 2020-21, India has had two income tax systems running in parallel. The old regime offers deductions (80C, 80D, HRA, etc.) but has higher base tax rates. The new regime has lower tax rates but almost no deductions.
For FY 2025-26, the new regime has been made more attractive with a raised basic exemption limit and a higher standard deduction.
New regime tax slabs — FY 2025-26
The new regime slabs for FY 2025-26 (AY 2026-27):
- Up to ₹4,00,000 — Nil
- ₹4,00,001 to ₹8,00,000 — 5%
- ₹8,00,001 to ₹12,00,000 — 10%
- ₹12,00,001 to ₹16,00,000 — 15%
- ₹16,00,001 to ₹20,00,000 — 20%
- ₹20,00,001 to ₹24,00,000 — 25%
- Above ₹24,00,000 — 30%
Standard deduction: ₹75,000. Rebate under section 87A: full tax rebate if taxable income is up to ₹7,00,000.
Old regime tax slabs — FY 2025-26
- Up to ₹2,50,000 — Nil
- ₹2,50,001 to ₹5,00,000 — 5%
- ₹5,00,001 to ₹10,00,000 — 20%
- Above ₹10,00,000 — 30%
Standard deduction: ₹50,000. Rebate under 87A: full rebate if taxable income up to ₹5,00,000. Plus deductions under 80C (₹1.5L), 80D (₹25K-₹1L), HRA, 80CCD(1B) (₹50K), and more.
When the old regime saves more
The old regime is better when you have significant deductions. Specifically:
- You claim HRA exemption (renting in a metro city)
- You max out 80C (₹1.5L via EPF + PPF + ELSS + insurance)
- You have health insurance for yourself and parents (80D: ₹25K + ₹50K for senior parents)
- You contribute ₹50K to NPS (80CCD(1B))
- You have a home loan (Section 24: up to ₹2L interest deduction)
If your total deductions exceed approximately ₹3.75 lakh, the old regime usually wins.
When the new regime saves more
The new regime is better when:
- You live in your own house (no HRA claim)
- Your employer doesn't offer EPF or you have minimal 80C investments
- You don't have health insurance premiums or home loan interest
- Your salary is under ₹7 lakh (zero tax under new regime with rebate)
- Your salary is above ₹20 lakh but deductions are under ₹2 lakh
Quick comparison at different salary levels
Assuming max common deductions (₹1.5L 80C + ₹50K NPS + ₹25K 80D + ₹2L HRA + ₹75K standard deduction = ₹5L total deductions):
- ₹6 lakh CTC: New regime wins — zero tax vs ~₹5,200 in old
- ₹10 lakh CTC: Old regime wins by ~₹15,000 if you have HRA + 80C + 80D
- ₹15 lakh CTC: Old regime wins by ~₹30,000 with full deductions
- ₹20 lakh CTC: Depends on HRA — old wins with metro HRA, otherwise new
- ₹30 lakh+ CTC: Old regime usually wins if deductions exceed ₹4L
How to check which is better for you
Upload your Form 16 on Kosh ITR filing. Our AI reads your salary components, computes tax under both regimes, and shows you exactly how much you save with each — including unused deductions you might be missing.