income tax
Published on 21 July 2025
Understanding Section 115BAC: Key Insights on the New Tax Regime
Section 115BAC and the New Income Tax Regime for FY 2025-26: What Every Taxpayer Should Know
If you’re a salaried individual or run a small business, chances are you’ve already heard about the “new tax regime.” But what’s actually changed? And how do you decide which system—old or new—puts you in a better financial spot?
At the heart of it all lies Section 115BAC of the Income-tax Act, 1961. First introduced in Budget 2020, it promised to simplify how we pay taxes. But since Budget 2023, it’s no longer just an option—it has become the default regime for most taxpayers, unless you proactively opt out.
So, What Exactly Is Section 115BAC?
Think of it as the government’s attempt to clean up the clutter. The idea is simple: lower tax rates, wider slabs, and fewer exemptions. For those who don’t want to keep track of dozens of deductions and investment proofs, this regime offers relief. But for people with home loans, hefty insurance premiums, or high rent, the decision isn’t so straightforward.
Since FY 2023-24, all individual and HUF taxpayers are automatically shifted to this new regime unless they choose to stick with the old one by submitting Form 10-IEA before the ITR deadline.
Latest Tax Slabs Under 115BAC (FY 2025-26)
Here’s how the numbers stack up in the new system:
| Taxable 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% |
In comparison, the previous year (FY 2024-25) had slightly tighter slabs:
| Taxable Income (₹) | Tax Rate |
|---|---|
| Up to ₹3,00,000 | Nil |
| ₹3,00,001 – ₹7,00,000 | 5% |
| ₹7,00,001 – ₹10,00,000 | 10% |
| ₹10,00,001 – ₹12,00,000 | 15% |
| ₹12,00,001 – ₹15,00,000 | 20% |
| Above ₹15,00,000 | 30% |
Rebates: Who Gets a Free Pass?
For FY 2025-26, taxpayers with income up to ₹12 lakh get a rebate of ₹60,000, effectively bringing their tax liability to zero.
Compare that with FY 2024-25, where the rebate capped at ₹25,000 for incomes up to ₹7 lakh. In the old regime, the standard rebate still holds at ₹12,500 for incomes up to ₹5 lakh.
Old vs New Regime: Who Pays What?
Here’s how tax slabs compare across age groups and regimes:
| Income Slab (₹) | Old Regime (<60) | 60–80 Years | 80+ Years | New Regime FY25 |
|---|---|---|---|---|
| Up to 2.5 lakh | Nil | Nil | Nil | Nil |
| 2.5–3 lakh | 5% | Nil | Nil | Nil (in FY25) |
| 3–5 lakh | 5% | 5% | Nil | 5% |
| 5–7 lakh | 20% | 20% | 20% | 5% |
| 7–15 lakh | 30% | 30% | 30% | 20% |
| Above 15 lakh | 30% | 30% | 30% | 30% |
What Deductions Survive Under the New System?
If you’re used to claiming deductions under Sections 80C, 80D, HRA, or LTA, the new regime might feel a bit restrictive.
What You Can Claim (New Regime):
- ₹75,000 standard deduction (from FY 2025-26) for salaried and pensioners
- Employer’s contribution to NPS (Sec 80CCD(2)): up to 10% (private), 14% (government)
- ₹25,000 deduction on family pension (up from ₹15,000 in old regime)
- Additional employee cost deduction (80JJAA) for eligible businesses
- Housing loan interest—but only on rented property, not self-occupied
- Specific allowances for disabled employees (travel, conveyance, etc.)
- Agniveer Corpus contributions (Sec 80CCH)
What’s NOT Allowed:
- HRA, LTA, standard home loan interest
- Popular Section 80C investments (PPF, LIC, ELSS)
- Medical premiums (80D), donation (80G), education loans (80E)
- Interest from savings accounts (80TTA, 80TTB)
Quick Comparison Table: Deductions
| Deduction/Exemption | Old Regime | New Regime |
|---|---|---|
| Section 80C (PPF, ELSS etc.) | Up to ₹1.5 lakh | Not available |
| HRA | Allowed | Not available |
| Standard Deduction (Salary) | ₹50,000 | ₹75,000 |
| Section 80D (Medical) | Allowed | Not available |
| Home Loan (Self-occupied) | Up to ₹2 lakh | Not available |
| Donations (80G), LTA | Allowed | Not available |
| Employer’s NPS | Allowed | Allowed |
| Family Pension | ₹15,000 | ₹25,000 |
Switching Between Regimes: Rules to Know
For Salaried Employees:
- You can change regimes every year.
- Tell your employer your choice at the start of the year to help them deduct the correct TDS—but the final say is yours when filing ITR.
For Self-Employed or Business Professionals:
- You can switch back to the old regime only once after moving to the new.
- Once you revert, you’re locked in unless the law changes.
Restrictions on Loss Set-Off
- Loss from house property can only be adjusted within the same head under the new regime.
- No carry forward of losses from disallowed deductions or unabsorbed depreciation.
Should You Stick to the Old Regime?
Here’s the golden rule: run the numbers before you file.
- The new regime benefits those with few deductions, no home loan, or simple finances.
- The old regime often works better if you invest in PPF, pay rent (and claim HRA), or have hefty insurance or loan repayments.
Practical Filing Tips
- Use your actual income and deduction documents to run a comparison.
- Want to stick to the old regime? File Form 10-IEA before the due date.
- Salaried taxpayers can switch every year. Business professionals—only once back to old regime.
Common Doubts Answered
Can I claim 80C in the new regime? No, except employer’s NPS contribution.
HRA allowed? No.
Standard deduction? Yes—₹75,000 from FY 2025-26.
Home loan interest (self-occupied)? Not allowed in new regime.
Switch every year? Salaried: Yes. Business: Only once back to old.
Final Thoughts
The new tax regime under Section 115BAC isn’t just a policy—it’s a shift in philosophy. By removing clutter and offering broader slabs, it rewards simplicity. But whether it actually saves you money comes down to your personal finances. There’s no one-size-fits-all answer.
So, before clicking that final Submit button on your ITR, take a moment. Do the math. The right choice could save you a lot more than just paperwork