Income Tax Slabs for FY 2025-26 — Old vs New Regime

Every financial year, Indian taxpayers face the same decision: should you file under the old tax regime, which rewards deductions, or the new regime, which offers lower rates but strips away exemptions? The budget for FY 2025-26 (Assessment Year 2026-27) further refined the new regime, making the choice sharper than ever.

This guide lays out both regimes side by side, with worked examples and a framework for choosing. Use our Income Tax Calculator to compute your liability in seconds.

New Tax Regime Slabs for FY 2025-26

The new regime, now the default, applies these slabs:

1. Up to Rs 4,00,000 — Nil
2. Rs 4,00,001 to Rs 8,00,000 — 5%
3. Rs 8,00,001 to Rs 12,00,000 — 10%
4. Rs 12,00,001 to Rs 16,00,000 — 15%
5. Rs 16,00,001 to Rs 20,00,000 — 20%
6. Rs 20,00,001 to Rs 24,00,000 — 25%
7. Above Rs 24,00,000 — 30%

Key features:

• Standard deduction of Rs 75,000 for salaried individuals.
• Section 87A rebate makes income up to Rs 12,00,000 tax-free after rebate.
• No deductions under 80C, 80D, HRA, or home loan interest.
• NPS employer contribution (80CCD-2) deduction up to 14% of basic salary is allowed.

Old Tax Regime Slabs for FY 2025-26

The old regime retains its structure:

1. Up to Rs 2,50,000 — Nil
2. Rs 2,50,001 to Rs 5,00,000 — 5%
3. Rs 5,00,001 to Rs 10,00,000 — 20%
4. Above Rs 10,00,000 — 30%

For senior citizens (60-80 years), the basic exemption rises to Rs 3,00,000, and for super seniors (above 80) to Rs 5,00,000. The old regime allows all classic deductions: 80C (Rs 1,50,000), 80D (health insurance), HRA, home loan interest up to Rs 2,00,000, and more.

Worked Example 1: Salaried Person Earning Rs 10,00,000

New Regime

• Gross salary: Rs 10,00,000
• Standard deduction: Rs 75,000
• Taxable income: Rs 9,25,000
• Tax: 0% on first 4,00,000 + 5% on 4,00,000 (4L-8L) + 10% on 1,25,000 (8L-9.25L) = 0 + 20,000 + 12,500 = Rs 32,500
• Rebate: Nil (income above Rs 12,00,000 threshold)
• Cess (4%): Rs 1,300
• Total tax: Rs 33,800

Old Regime (with Rs 1,50,000 under 80C)

• Gross salary: Rs 10,00,000
• Standard deduction: Rs 50,000
• 80C deduction: Rs 1,50,000
• Taxable income: Rs 8,00,000
• Tax: 0 + 5% on 2,50,000 + 20% on 3,00,000 = 12,500 + 60,000 = Rs 72,500
• Cess (4%): Rs 2,900
• Total tax: Rs 75,400

Here, the new regime saves Rs 41,600 despite losing 80C benefits.

Worked Example 2: Salaried Person Earning Rs 15,00,000

New Regime

• Taxable income after Rs 75,000 standard deduction: Rs 14,25,000
• Tax: 0 + 20,000 + 40,000 + 15% on 2,25,000 = 20,000 + 40,000 + 33,750 = Rs 93,750
• Cess: Rs 3,750
• Total: Rs 97,500

Old Regime (with Rs 4,00,000 deductions: 80C, 80D, HRA, home loan interest)

• Taxable income: Rs 15,00,000 − 50,000 − 4,00,000 = Rs 10,50,000
• Tax: 12,500 + 20% on 5,50,000 = 12,500 + 1,10,000 = Rs 1,22,500
• Cess: Rs 4,900
• Total: Rs 1,27,400

The new regime still wins by Rs 29,900. The breakeven deductions threshold is roughly Rs 4,00,000 for this income level.

Worked Example 3: Rs 20,00,000 With Heavy Deductions

A taxpayer with Rs 6,00,000 in total deductions (aggressive use of 80C, 80D, HRA, home loan interest, NPS):

Old Regime

• Taxable: Rs 20,00,000 − 50,000 − 6,00,000 = Rs 13,50,000
• Tax: 12,500 + 1,10,000 + 30% on 3,50,000 = Rs 2,27,500
• Cess: Rs 9,100
• Total: Rs 2,36,600

New Regime

• Taxable: Rs 19,25,000
• Tax: 20,000 + 40,000 + 60,000 + 20% on 3,25,000 = Rs 1,85,000
• Cess: Rs 7,400
• Total: Rs 1,92,400

Here the old regime loses by Rs 44,200. The old regime only wins at higher incomes when deductions exceed roughly Rs 8,00,000+. Very few taxpayers reach that.

How to Decide Between the Two

• Calculate deductions honestly — add up 80C (PF, PPF, ELSS, insurance premiums), 80D, HRA, home loan interest.
• If deductions are under Rs 3.75 lakh — the new regime almost always wins.
• If deductions are Rs 3.75-4.5 lakh — compute both; the margin is thin.
• If deductions are above Rs 4.5 lakh — the old regime may win, especially at higher incomes.

Use our Income Tax Calculator to run both scenarios side by side.

Frequently Asked Questions

Which tax regime is better for FY 2025-26?

The new regime is better for taxpayers with minimal deductions. The old regime can be better if your total deductions (80C, 80D, HRA, home loan interest, etc.) exceed roughly Rs 3.75 to 4 lakh.

What is the tax-free income limit under the new regime for FY 2025-26?

Under the new regime for FY 2025-26, income up to Rs 12,00,000 is tax-free after the Section 87A rebate. The basic exemption limit is Rs 4,00,000, and salaried individuals get a Rs 75,000 standard deduction.

Can I switch between regimes every year?

Individuals without business income can switch between old and new regimes every year. Those with business income can switch only once; returning to the old regime requires Form 10-IEA.

Conclusion

The old vs new regime debate has no universal answer, but for most salaried Indians the new regime now wins thanks to wider slabs and the Rs 12,00,000 rebate. The old regime remains valuable for those with large investment-linked and interest deductions. Always compute both before filing. Pair the Income Tax Calculator with our HRA Calculator and TDS Calculator to cover your full tax picture.