income tax
Published on 7 August 2025
Old vs. New Tax Regime: Choosing the Best Tax Plan for 2025
Old vs. New Tax Regime (FY 2025–26): What’s Changed, What You Need to Know
Starting April 1, 2025, the New Tax Regime is now the default system for individual taxpayers in India. Backed by revised slab rates and a higher rebate, this regime simplifies income tax calculations — but comes with a trade-off: most popular deductions are no longer available.
New Tax Regime (Default Regime from FY 2025–26)
Under the New Regime, taxpayers benefit from simplified slabs and a significantly higher basic exemption limit. However, they forgo deductions like HRA, 80C, 80D, LTA and home loan interest — with a few exceptions.
Updated Slab Rates:
| Annual Income | 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% |
- Basic Exemption Limit: ₹4 lakh (raised from ₹3 lakh)
- Standard Deduction: ₹75,000 for salaried and pensioned taxpayers
- Section 87A Rebate: Now up to ₹60,000 (applicable if taxable income ≤ ₹12 lakh)
Net-zero tax for salaried individuals earning up to ₹12.75 lakh (after standard deduction and rebate)
What’s Not Allowed:
- Deductions under Section 80C, 80D, HRA, LTA, housing loan interest, etc.
- Senior citizen-specific benefits
- Set-off or carry-forward of losses
Switching Regimes:
- Salaried / non-business taxpayers: Can switch every year; notify your employer for accurate TDS, but final choice can be made at ITR filing
- Business / professionals: Can opt in once to the Old Regime after switching to New — the reverse switch is allowed only once in a lifetime (via Form 10-IEA)
Old Tax Regime (Optional)
The Old Regime continues for those who benefit from deductions and exemptions — especially individuals with home loans, insurance, tuition fees, or medical expenses.
Slab Rates (Below 60 years):
| Annual Income | 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% |
- Standard Deduction: ₹50,000
- Section 87A Rebate: Up to ₹12,500 (if taxable income ≤ ₹5 lakh)
- Full deductions under 80C, 80D, 80E, 24(b) (home loan), HRA, LTA and more
Senior Citizen Benefits (Old Regime Only):
| Age | Tax-Free Limit |
|---|---|
| 60 to <80 years | ₹3 lakh |
| 80+ years | ₹5 lakh |
Old vs. New Regime: Quick Comparison
| Feature | Old Regime | New Regime (FY 2025–26) |
|---|---|---|
| Standard Deduction | ₹50,000 | ₹75,000 |
| Section 87A Rebate | ₹12,500 (up to ₹5L income) | ₹60,000 (up to ₹12L income) |
| Basic Exemption (Age <60) | ₹2.5 lakh | ₹4 lakh |
| HRA / LTA / 80C / 80D etc. | Available | Not available |
| Senior Citizen Higher Exemption | Yes | No |
| Surcharge Rates | No change | No change |
| Loss Carry Forward / Set-off | Allowed | Not allowed |
| Default Regime | Opt-in required | Default |
Who Should Consider the New Regime?
✔ If your income is up to ₹12 lakh and you claim few or no deductions, the higher basic exemption and rebate could lead to zero tax.
✔ If your income exceeds ₹24 lakh and your eligible deductions are minimal, the slab structure alone may result in a lower tax outgo.
Who May Benefit More from the Old Regime?
✔ Taxpayers with significant deductions — home loans, life insurance, tuition fees, health insurance, or NPS contributions.
✔ Senior and super senior citizens, who enjoy higher basic exemption limits and deduction eligibility under the Old Regime.
✔ Individuals with business losses or capital losses to carry forward — not permitted under the new regime.
FAQs: What Taxpayers Are Asking
Q1. I earn ₹12 lakh annually. Will I pay tax under the New Regime? If you're salaried, you can claim a ₹75,000 standard deduction. That brings your income down to ₹11.25 lakh — and the new Section 87A rebate can wipe out your entire tax liability (up to ₹60,000 rebate). So, no tax.
Q2. Can I still claim HRA or 80C under the New Regime? No. These are not permitted. Only standard deduction, employer’s NPS contribution (Section 80CCD(2)) and family pension relief are allowed.
Q3. Can I switch tax regimes every year? Yes, if you're salaried or a non-business taxpayer. Just inform your employer early in the financial year, but you’re free to change it again when filing your return.
Q4. Are there special slabs for senior citizens in the New Regime? No. Everyone follows the same slab rates in the new system, regardless of age.
Final Thought: Do the Math Before You Decide
Choosing the right regime depends on your income mix, age and ability to claim deductions. Use a reliable income tax calculator or consult a tax professional to assess which route saves you more.
The FY 2025–26 updates — including the higher basic exemption, enhanced standard deduction and beefed-up rebate — make the New Regime far more appealing than before. But it’s not one-size-fits-all.