The Income Tax Act allows individuals and HUFs to choose between two tax regimes:
Tax Slabs Under New Regime (FY 2025-26)
| 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% |
📦 Rebate under Section 87A
If taxable income is up to ₹12 lakh, rebate is available, making tax liability effectively Nil (subject to applicable conditions).
Tax Slabs Under Old Regime
| Income | Tax Rate |
| Up to ₹2.5 lakh | Nil |
| ₹2.5 lakh – ₹5 lakh | 5% |
| ₹5 lakh – ₹10 lakh | 20% |
| Above ₹10 lakh | 30% |
📦 Rebate under Section 87A
Available up to taxable income of ₹5 lakh.
Major Deductions Available in Old Regime
Section 80C (Maximum ₹1.5 Lakh)
Examples:
✅ LIC Premium
✅ PPF
✅ ELSS Mutual Funds
✅ Sukanya Samriddhi
✅ NSC
✅ Tax Saving FD
✅ Principal Repayment of Home Loan
Section 80CCD(1B)
Additional Deduction for NPS
✅ Up to ₹50,000
Section 80D
Health Insurance Premium
✅ Self & Family
✅ Parents
Home Loan Benefits
Section 24(b)
✅ Interest on Home Loan: Up to ₹2 lakh deduction
Section 80C
✅ Principal repayment eligible
HRA Exemption
✅ House Rent Allowance exemption available
Leave Travel Allowance (LTA)
✅ Exemption available as per rules
What is Not Available in New Regime?
❌ Deductions and Exemptions Not Allowed
❌ Section 80C deductions
❌ Section 80D deductions
❌ HRA exemption
❌ LTA exemption
❌ Home loan interest deduction (self-occupied)
❌ Education loan deduction under Section 80E
❌ Most exemptions and allowances
Example 1
Salary = ₹8,00,000
No investments.
Old Regime
- Taxable Income = ₹8,00,000
- Tax ≈ ₹72,500
New Regime
- Lower slab rates + rebate benefits
- Tax significantly lower
🏆 Winner: New Regime
Example 2
Salary = ₹12,00,000
Investments:
- 80C = ₹1.5 lakh
- NPS = ₹50,000
- Health Insurance = ₹25,000
- Home Loan Interest = ₹2 lakh
Total Deductions = ₹4.25 lakh
Old Regime
- Taxable Income = ₹7.75 lakh
- Tax considerably reduced
New Regime
- No deduction benefit
🏆 Winner: Old Regime
When Should You Choose Old Regime?
Choose Old Regime if you have:
✅ Large 80C investments
✅ NPS contribution
✅ Health insurance
✅ Home loan
✅ HRA exemption
✅ Significant deductions
When Should You Choose New Regime?
Choose New Regime if:
✅ You do not invest much
✅ No home loan
✅ No major deductions
✅ Want simple tax filing
✅ Salary up to ₹12 lakh with rebate benefit
Practical Rule
📦 Quick Thumb Rule
If your total deductions exceed ₹3–4 lakh, Old Regime may be beneficial.
If your deductions are low or negligible, New Regime is generally better.
