Introduction
The Union Budget 2025 brought significant changes to India's income tax landscape, making the New Tax Regime even more attractive. With revised slabs, enhanced rebates, and a higher standard deduction, choosing the right regime has never been more important. Budget 2026 (February 2026) confirmed that these slabs remain unchanged for FY 2026-27, making this guide relevant for both current and upcoming assessment years.
Revised Tax Slabs Under the New Regime (FY 2025-26 & FY 2026-27)
| Income Range | Tax 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% |
Key change: The nil slab was raised from ₹3 lakh to ₹4 lakh, all other slabs were restructured upwards, and a new 25% slab (₹20–24 lakh) was introduced. Previously, the 30% rate kicked in above ₹15 lakh.
Old Tax Regime Slabs (Unchanged)
For individuals below 60 years / HUFs / NRIs:
| Income Range | Tax 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 (60–79 years): Nil up to ₹3,00,000
- Super Senior Citizens (80+ years): Nil up to ₹5,00,000
Section 87A Rebate — The Game Changer
| Detail | New Regime | Old Regime |
|---|---|---|
| Rebate Amount | ₹60,000 | ₹12,500 |
| Income Limit | ₹12,00,000 | ₹5,00,000 |
| Tax-Free Income | ₹12,00,000 | ₹5,00,000 |
With the ₹75,000 standard deduction for salaried individuals, effective tax-free income under the new regime becomes ₹12,75,000.
Key Deductions — What You Lose in the New Regime
Available ONLY under Old Regime:
- Section 80C: Up to ₹1.5 lakh (PPF, ELSS, LIC, EPF, etc.)
- Section 80D: Medical insurance — ₹25,000 (self/family), ₹50,000 (senior citizens)
- Section 80E: Education loan interest (entire amount)
- Section 80G: Charitable donations
- HRA exemption
- Home loan interest on self-occupied property (up to ₹2 lakh)
- Leave Travel Allowance (LTA)
Available in BOTH Regimes:
- Standard deduction (₹75,000 new / ₹50,000 old)
- Employer NPS contribution — Section 80CCD(2) (14% of basic in new / 10% in old)
- Gratuity, leave encashment, VRS exemptions
Who Should Choose Which Regime?
New Regime is better for:
- Individuals with income up to ₹12 lakh (zero tax with rebate)
- Salaried employees with minimal deductions/investments
- Those who prefer simpler tax filing
- High-income earners (above ₹5 crore) due to lower surcharge cap of 25%
Old Regime is better for:
- Heavy Section 80C investors (₹1.5 lakh)
- Metro residents paying high rent (HRA)
- Home loan borrowers claiming ₹2 lakh interest deduction
- Those with substantial medical insurance premiums
Break-even: You generally need ₹5–8+ lakh in total deductions for the old regime to beat the new regime.
Conclusion
For most taxpayers, the New Tax Regime is now the clear winner — especially if your total deductions are below ₹5–6 lakh. However, if you have significant investments, home loans, and insurance premiums, the Old Regime may still save you more.