The choice between old and new tax regime is one of the most important financial decisions for any Indian taxpayer. With the new regime becoming the default from FY 2023-24, many salaried employees unknowingly pay more tax by not opting out. This guide will help you decide.
New Tax Regime — FY 2025-26 Slabs:
- 0 to 3,00,000: NIL
- 3,00,001 to 7,00,000: 5%
- 7,00,001 to 10,00,000: 10%
- 10,00,001 to 12,00,000: 15%
- 12,00,001 to 15,00,000: 20%
- Above 15,00,000: 30%
Rebate u/s 87A: Zero tax for income up to 7,00,000. Standard deduction: 75,000.
Old Tax Regime Slabs (Below 60):
- 0 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%
Plus: Standard deduction 50,000, 80C up to 1.5L, 80CCD(1B) 50K, 80D, HRA, etc.
When Old Regime is Better:
- You have home loan interest (Section 24(b) — up to 2L)
- Significant 80C investments (1.5L max)
- HRA exemption in high-rent cities (Mumbai, Pune, Delhi)
- NPS contributions under 80CCD(1B) (50K)
- Medical insurance premium (80D)
When New Regime is Better:
- You have no major investments or loans
- Younger employees early in career
- Business owners preferring simplicity
- Income below 7L (zero tax under new regime)
Important: Deadline to Switch Salaried employees can switch between regimes every year at the time of ITR filing. Business owners can switch only once. Declaration must be given to employer before April 1 for TDS purposes.