ITR Filing: Old Tax Regime Vs New Tax Regime for FY 25-26

INTRODUCTION

As the due dates are approaching, it’s necessary to understand what the tax benefits are that one can avail to save taxes to the maximum. For that purpose, it’s important to know how tax is actually calculated.

For Individual/HUF/AOP/BOI/AJP, there are normally two regimes: one is the OLD tax Regime (Normal Provisions) & another is the New Tax regime (us 115BAC)

So, the question arises: what are the differences among them, & which one is beneficial for you in FY 25-26? So, if you want the answers, then this article is for you

TAX SLABS COMPARISONS: FY: 25-26, AY: 26-27

NORMAL PROVISIONS

Different basic exemption limits apply based on age: General (Rs 2.5L), Senior Citizens 60-80 years (Rs 3L), Super Senior Citizens 80+ years (Rs 5L)

Note:

• Senior Citizens (60-80 years): Nil up to Rs 3,00,000 & other rates will remain same i.e. 3L to 5L: 5%, Above 5L to 10L: 20% & Above 10L: 30%
• Super Senior Citizens (80+ years): Nil up to Rs 5,00,000 & other rates will remain the same, i.e. Above 5L to 10L: 20% & Above 10L: 30%
• Any Resident Individual whose 60^th/80^th birthday falls on 1^st April 2026 will be treated as having completed the age of 60/80 years on 31-3-2026, i.e. for FY 25-26 & will be eligible for a higher exemption limit.

NEW TAX REGIME (SECTION 115BAC, AS AMENDED BY FINANCE ACT 2025)

Under the New Regime, a UNIFORM basic exemption limit of Rs 4,00,000 applies to ALL individuals regardless of age (General, Senior Citizens, and Super Senior Citizens alike).

Key Highlight: Special income (u/s 111A, 112, 112A, etc.) remains taxable at special rates even under Section 115BAC.

Zero Tax Benefit: With Rebate u/s 87A (Rs 60,000), a Resident Individual with total income up to Rs 12,00,000 pays ZERO income tax under Section 115BAC

SURCHARGE & HEALTH EDUCATION CESS

There is a significant benefit for taxpayers with higher incomes under the new regime:

Note: The HEC at 4% is the same under both regimes, & it should be calculated over and above the tax calculated, including the surcharge.

REBATE US 87A & MARGINAL RELIEF

Rebate u/s 87A is available only to Resident Individuals. It reduces the income tax payable as follows:

NOTE: Rebate u/s 87A is available ONLY against tax calculated at normal rates under Sec 115BAC. It is NOT available against tax on special rate income (u/s 111A, 112, 112A, etc.).

MARGINAL RELIEF

Its benefit is given under the new tax regime, that if when Total Income slightly exceeds Rs 12,00,000. The tax payable on such income cannot exceed the amount by which Total Income exceeds Rs 12,00,000, which can be understood by following the example.

COMPREHENSIVE FEATURE-BY-FEATURE COMPARISON

The table below covers all major aspects to help you make an informed decision between the two regimes, as under the new regime, there are various deductions & allowances which are not available due to the lower slab rate; hence, it’s important to choose wisely.

SECTION 115BAC DEDUCTIONS & EXEMPTIONS ALLOWED

Under Section 115BAC(1A), only specific deductions and exemptions are permitted to be set off against total income as follows:

Exempt Allowances under Section 10 

HOW TO CHOOSE A REGIME

After knowing all about both regimes its critical to decide which one is beneficial, so below are some points under both regimes by which you can make a decision:

Why Choose Old Regime

• You have a self-occupied home loan with significant interest payment (up to Rs 2L u/s 24(b))
• You receive substantial HRA and live in rented accommodation
• You are a Senior / Super Senior Citizen with higher exemption limits
• You pay significant health insurance premiums (80D)
• You have more investments for which you can avail deductions under Chapter VI-A. Then it’s advisable to compare both

Why choose New Regime

• Your total income is Rs 12,00,000 or below — ZERO tax after 87A rebate
• You are a young professional or new earner with limited investments
• Your employer contributes to NPS (80CCD (2) is still available in the New Regime)
• You prefer a simpler, hassle-free tax filing without tracking multiple exemptions
• Income above Rs 5 Crore — surcharge capped at 25% vs 37% in Old Regime
• You do not claim HRA (living in your own house or your parents’ house)

CONCLUSION

The Finance Act 2025 has made the New Tax Regime under Section 115BAC significantly more attractive for FY 2025-26 (AY 2026-27) with a raised exemption limit of Rs 400,000; an enhanced rebate of Rs 60,000, making up to Rs 12 Lakh tax-free; and a higher standard deduction of Rs 75,000.

However, the Old Regime remains relevant for taxpayers with high deductions, home loans, HRA claims, and significant Chapter VI-A investments. The ‘best’ regime is entirely personal. Hence, one should choose wisely to evaluate the best.