Old vs New Tax Regime FY 2025-26: Which Is Better?

Last updated: 1 July 2026

Every salaried Indian faces the same question at the start of the year: old regime or new regime? The right answer depends entirely on how many deductions you claim. Here's a plain-English guide for FY 2025-26.

The core difference

The new regime (now the default) has lower tax rates but almost no deductions. The old regime has higher rates but lets you claim deductions like 80C, 80D, HRA and home-loan interest.

So the choice is really: do your deductions save you more than the new regime's lower rates?

New regime — the headline benefit

For FY 2025-26, income up to ₹12 lakh is effectively tax-free under the new regime thanks to the Section 87A rebate. With the ₹75,000 standard deduction, salaried people pay zero tax up to about ₹12.75 lakh of salary.

When the old regime still wins

  • You claim the full ₹1.5 lakh under 80C (EPF, PPF, ELSS, insurance).
  • You pay significant home-loan interest (up to ₹2 lakh under Section 24b).
  • You claim large HRA because you live in a rented metro home.
  • Together these deductions push your taxable income far below your gross.

The simplest way to decide

Don't guess — calculate both. Our income tax calculator computes your tax under both regimes side by side and tells you which is cheaper for your exact numbers.

Try it yourself

Use the Income Tax Calculator to run your own numbers.

Open the Income Tax Calculator →