New vs old regime: which one wins for FY 2025-26?
For FY 2025-26 (Tax Year 2026-27), the new regime under Section 202 is the default. You no longer opt in — you have to actively choose the old regime if it suits you better. For a large share of taxpayers, the new regime now simply wins. But "most" is not "all", so here is how to tell which side you're on.
The new regime is now genuinely generous
Two things changed the maths. First, a standard deduction of ₹75,000 for salaried people and pensioners. Second, the Section 156 rebate (the successor to 87A): if your taxable income is up to ₹12,00,000, the rebate — up to ₹60,000 — can wipe your tax out entirely.
Put together, a salaried person earning up to roughly ₹12.75 lakh can pay zero tax under the new regime, claiming nothing at all. The slabs above that are:
- 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%
When the old regime still wins
The old regime keeps the deductions but charges higher rates (5% from ₹2.5 lakh, 20% from ₹5 lakh, 30% above ₹10 lakh) and a smaller ₹50,000 standard deduction. It pulls ahead only when your total deductions are large. The usual suspects:
- 80C up to ₹1,50,000 — EPF, PPF, ELSS, life insurance, home-loan principal, children's tuition.
- HRA exemption if you rent — often the biggest single number for city employees.
- Home-loan interest up to ₹2,00,000 on a self-occupied house (Section 24(b)).
- 80D health insurance, and 80CCD(1B) NPS up to ₹50,000.
As a rough gut-check: if your deductions plus exemptions comfortably cross ₹4–5 lakh — typically someone paying big-city rent and a home loan and maxing 80C — the old regime can still be cheaper. Below that, the new regime usually wins. Don't guess, though: the gap can be a few rupees or a lakh, and it flips around the ₹12 lakh rebate edge.
One thing that doesn't change: capital gains
Gains taxed at special rates — listed-equity LTCG at 12.5% over the ₹1.25 lakh exemption, equity STCG at 20%, other LTCG at 12.5% — are taxed the same under either regime, and the Section 156 rebate never applies to them. So capital gains don't tilt the regime choice; they sit on top of it.
The honest answer
There's no universal winner. The only reliable way is to compute both with your actual numbers — salary, deductions, rent, loan and gains — and compare the bottom line. That takes about thirty seconds.
Compare both regimes on your numbers
The income tax calculator shows old vs new side by side, with the rupee difference and every saving you're missing.
This article is general information, not professional advice, and reflects the law as understood for FY 2025-26. Verify against the bare Act, Rules and current notifications, and consult a qualified professional before acting.