New vs Old Tax Regime for FY 2025-26: Which One Saves You More?
A plain-language breakdown to help salaried Indians make the smarter choice this financial year.
Every year, millions of salaried Indians face the same question: should I stick with the familiar old tax regime — with its maze of deductions — or switch to the new one that promises simplicity and lower rates? For FY 2025-26, the stakes are higher than ever after the government sweetened the new regime significantly in the Union Budget.
What Changed in Budget 2025?
The big headline: income up to ₹12 lakh is now effectively tax-free under the new regime (₹12.75 lakh for salaried individuals, thanks to the standard deduction of ₹75,000). The rebate under Section 87A was raised to ₹60,000. These changes made the new regime far more attractive than it was when it launched in 2020.
The Tax Slabs at a Glance
| Income Slab | New Regime | Old Regime |
|---|---|---|
| Up to ₹2.5 lakh | Nil | Nil |
| ₹2.5 – ₹5 lakh | Nil (rebate) | 5% (rebate available) |
| ₹5 – ₹6 lakh | 5% | 20% |
| ₹6 – ₹9 lakh | 10% | 20% |
| ₹9 – ₹12 lakh | 15% | 30% |
| ₹12 – ₹15 lakh | 20% | 30% |
| Above ₹15 lakh | 30% | 30% |
Who Benefits From Which Regime?
New Regime suits you if…
- Income is up to ₹12.75 lakh (salaried)
- You have few investments or deductions
- You're early in your career
- You prefer simplicity over tax planning
- No home loan or HRA benefit
Old Regime suits you if…
- Income is above ₹15–20 lakh
- You fully utilise 80C, HRA, and 80D
- You have an active home loan
- You contribute to NPS via employer
- You claim LTA or other allowances
A Quick Example
Take Priya, a salaried professional earning ₹15 lakh a year. Under the new regime, her tax (post standard deduction of ₹75,000) works out to roughly ₹1.05 lakh. Under the old regime, if she claims ₹1.5 lakh under 80C, ₹25,000 under 80D, and ₹2 lakh on home loan interest, her taxable income drops to ₹10.5 lakh, and her tax comes to around ₹1.17 lakh — slightly more. The new regime wins here.
But for Ramesh at ₹20 lakh with a large home loan, active 80C investments, and HRA — the old regime could save him ₹50,000 or more. The math always depends on your specific deduction profile.
The Bottom Line
For most middle-income earners — especially those earning under ₹15 lakh — the new regime is now the default winner. If you're a diligent tax planner with a home loan, NPS contributions, and full 80C utilisation at a higher income, the old regime can still edge ahead. Run the numbers both ways before your employer freezes your tax declaration for the year.
Not sure which regime saves you more? Consult BNKS & Associates for personalised tax planning advice.