CA Pratibha Goyal | May 24, 2025 |

Income Tax: When to choose New or Old Tax Regime for FY 2025-26

In this article, we will discuss the pros and cons of the Old and new tax regimes and when to choose the New or Old Tax Regime for FY 2025-26.

Income Tax Slabs in New Tax Regime for Financial Year 2025-26 (Assessment Year 2026-27):

Income Slabs	Tax Rates
0-4L	0%
4-8L	5%
8-12L	10%
12-16L	15%
16-20L	20%
20-24L	25%
Above 24L	30%

Income Tax Slabs in Old Tax Regime for Financial Year 2025-26 (Assessment Year 2026-27):

0-2.5L	0%
2.5-5L	5%
5-10L	20%
Above 10L	30%

Salaried Taxpayers under New Tax Regime:

Salary Income of Rs.12,75,000 will be Tax-Free under the New Tax Regime. Salaried Taxpayers in New Tax Regime enjoy a Standard Deduction of Rs.75,000, Which means the Taxable Salary is Rs.12,00,000.

Rebate under Section 87A increased from Rs. 25000 to Rs. 60,000 under the New Tax Regime with annual income up to Rs. 12,00,000.

Therefore Total Tax will be Zero after the rebate.

Brief comparison between the New and Old Tax Regime

Particulars	Old Tax Regime	New Tax Regime
Particulars	Old Tax Regime	(FY 2025-26)
Income level for rebate eligibility	Rs. 5 lakhs	Rs. 12 lakhs
Standard Deduction	Rs. 50,000	Rs. 75,000
Effective Tax-Free Salary income	Rs. 5.5 lakhs	Rs. 12.75 lakhs
Rebate u/s 87A	Rs.12,500	Rs.60000
HRA Exemption	Yes	No
Leave Travel Allowance (LTA)	Yes	No
Other allowances including food allowance of Rs 50/meal subject to 2 meals a day	Yes	No
Entertainment Allowance and Professional Tax	Yes	No
Perquisites for official purposes	Yes	Yes
Interest on Home Loan u/s 24b on: Self-occupied or vacant property	Yes	No
Interest on Home Loan u/s 24b on: Let-out property	Yes	Yes
Deduction u/s 80C (EPF, LIC, ELSS, PPF, 5 year FD, Children’s tuition fee etc)	Yes	No
Employee’s (own) contribution to NPS U/s 80CCD(1B)	Yes	No
Employer’s contribution to NPS U/s 80CCD(2)	Yes	Yes
Medical insurance premium – 80D	Yes	No
Disabled Individual – 80U	Yes	No
Interest on education loan – 80E	Yes	No
Interest on Electric vehicle loan – 80EEB	Yes	No
Donation to Political party/trust etc – 80G	Yes	No
Savings Bank Interest u/s 80TTA and 80TTB	Yes	No
Other Chapter VI-A deductions	Yes	No
All contributions to Agniveer Corpus Fund – 80CCH	Yes	Yes
Deduction on Family Pension Income	Yes	Yes
Gifts upto Rs 50,000	Yes	Yes
Exemption on voluntary retirement 10(10C)	Yes	Yes
Exemption on gratuity u/s 10(10)	Yes	Yes
Exemption on Leave encashment u/s 10(10AA)	Yes	Yes
Daily Allowance (For Official purpose)	Yes	Yes
Conveyance Allowance (For Official purpose)	Yes	Yes
Transport Allowance for a specially abled person (For Official purpose)	Yes	Yes

New or Old Tax Regime: Pros and Cons

New Tax Regime Gives beneficial Tax Rates, but very limited exemptions/ Deductions
Old tax regime gives all exemptions/ Deductions but high tax rates.

So what’s the key?

Choosing New or Old Tax Regime depends upon the Tax at different Income and Exemption levels:

Deductions	Income	700000	1000000	1325000	1375000	1575000	1750000	1825000	1900000	2050000	2100000	2250000	2400000	3400000	4400000	5000000
	Income After SD (NTR)	625000	925000	1250000	1300000	1500000	1675000	1750000	1825000	1975000	2025000	2175000	2325000	3325000	4325000	4925000
	Income After SD (OTR)	650000	950000	1275000	1325000	1525000	1700000	1775000	1850000	2000000	2050000	2200000	2350000	3350000	4350000	4950000
0	Tax NTR	0	0	67500	75000	105000	135000	150000	165000	195000	206250	243750	281250	577500	877500	1057500
450000	Tax OTR	0	0	77500	87500	135000	187500	210000	232500	277500	292500	337500	382500	682500	982500	1162500
0	Tax NTR	0	0	67500	75000	105000	135000	150000	165000	195000	206250	243750	281250	577500	877500	1057500
500000	Tax OTR	0	0	67500	77500	120000	172500	195000	217500	262500	277500	322500	367500	667500	967500	1147500
0	Tax NTR	0	0	67500	75000	105000	135000	150000	165000	195000	206250	243750	281250	577500	877500	1057500
512500	Tax OTR	0	0	65000	75000	116250	168750	191250	213750	258750	273750	318750	363750	663750	963750	1143750
0	Tax NTR	0	0	67500	75000	105000	135000	150000	165000	195000	206250	243750	281250	577500	877500	1057500
562500	Tax OTR	0	0	55000	65000	105000	153750	176250	198750	243750	258750	303750	348750	648750	948750	1128750
0	Tax NTR	0	0	67500	75000	105000	135000	150000	165000	195000	206250	243750	281250	577500	877500	1057500
625000	Tax OTR	0	0	42500	52500	92500	135000	157500	180000	225000	240000	285000	330000	630000	930000	1110000
0	Tax NTR	0	0	67500	75000	105000	135000	150000	165000	195000	206250	243750	281250	577500	877500	1057500
650000	Tax OTR	0	0	37500	47500	87500	127500	150000	172500	217500	232500	277500	322500	622500	922500	1102500
0	Tax NTR	0	0	67500	75000	105000	135000	150000	165000	195000	206250	243750	281250	577500	877500	1057500
675000	Tax OTR	0	0	32500	42500	82500	120000	142500	165000	210000	225000	270000	315000	615000	915000	1095000
0	Tax NTR	0	0	67500	75000	105000	135000	150000	165000	195000	206250	243750	281250	577500	877500	1057500
725000	Tax OTR	0	0	22500	32500	72500	107500	127500	150000	195000	210000	255000	300000	600000	900000	1080000
0	Tax NTR	0	0	67500	75000	105000	135000	150000	165000	195000	206250	243750	281250	577500	877500	1057500
737500	Tax OTR	0	0	20000	30000	70000	105000	123750	146250	191250	206250	251250	296250	596250	896250	1076250
0	Tax NTR	0	0	67500	75000	105000	135000	150000	165000	195000	206250	243750	281250	577500	877500	1057500
762500	Tax OTR	0	0	15000	25000	65000	100000	116250	138750	183750	198750	243750	288750	588750	888750	1068750
0	Tax NTR	0	0	67500	75000	105000	135000	150000	165000	195000	206250	243750	281250	577500	877500	1057500
787500	Tax OTR	0	0	0	20000	60000	95000	110000	131250	176250	191250	236250	281250	581250	881250	1061250
0	Tax NTR	0	0	67500	75000	105000	135000	150000	165000	195000	206250	243750	281250	577500	877500	1057500
800000	Tax OTR	0	0	0	17500	57500	92500	107500	127500	172500	187500	232500	277500	577500	877500	1057500
0	Tax NTR	0	0	67500	75000	105000	135000	150000	165000	195000	206250	243750	281250	577500	877500	1057500
815000	Tax OTR	0	0	0	14500	54500	89500	104500	123000	168000	183000	228000	273000	573000	873000	1053000

Hope you find the same helpful.

StudyCafe Membership

Join StudyCafe Membership. For More details about Membership Click Join Membership Button

Join Membership

In case of any Doubt regarding Membership you can mail us at [email protected]

Join Studycafe's WhatsApp Group or Telegram Channel for Latest Updates on Government Job, Sarkari Naukri, Private Jobs, Income Tax, GST, Companies Act, Judgements and CA, CS, ICWA, and MUCH MORE!"

Author Bio

Name: CA Pratibha Goyal

Designation: Co Founder

Company: Studycafe

Location: Delhi, India

Total Posts: 1487

CA Pratibha Goyal is Chartered Accountant qualified in 2016, is a Member of The Institute of Chartered Accountants of India having wide experience in the field of Auditing, Taxation, ROC, GST and Secretarial matters etc. She has written over a thousand articles & has made several videos on topics related to Auditing & Taxation. As a Speaker she has delivered various sessions on various branches of NIRC of ICAI.

My Recent Articles

Biggest Labour Reform in Indian History: 4 Labour Codes Effective from today Tax Audit and ITR Due date not extended in this case: Know More Government notifies Agreement and Protocol between India and Qatar [Read Notification] CA Breaking: Results of ICAI Examination to be announced soon, Know probable Date Breaking: GSTR-3B Due Date for September 2025 extended by CBIC amid Diwali Festivities View All Posts

Income Tax: When to choose New or Old Tax Regime for FY 2025-26

Choose Right Tax Regime for FY 2025-26

StudyCafe Membership