Detailed comparison of the old and new tax regimes for FY 2025-26 (AY 2026-27) with salary, freelancer and business examples, break-even tables and the deductions that still matter.
The new tax regime is now the default for every individual. The old regime still exists, but you must consciously opt in. The right answer is not philosophical — it's arithmetic. For FY 2025-26 (AY 2026-27), this guide compares both regimes across salary, freelance and business profiles, with worked numbers and a clear break-even table.
The old regime offers lower tax-free slabs but a generous list of deductions (80C, 80D, HRA, LTA, home loan interest, NPS, etc). The new regime offers higher tax-free slabs, lower tax rates, a ₹75,000 standard deduction for salaried, and a Section 87A rebate that makes income up to ₹12 lakh effectively tax-free — but almost all deductions are gone.
| Income slab | 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% |
Section 87A rebate under the new regime makes tax payable zero for net taxable income up to ₹12,00,000 (₹12,75,000 for salaried after standard deduction). Beyond ₹12 lakh, marginal relief kicks in to avoid a cliff.
| Income slab | Tax rate |
|---|---|
| Up to ₹2,50,000 | Nil |
| ₹2,50,001 – ₹5,00,000 | 5% |
| ₹5,00,001 – ₹10,00,000 | 20% |
| Above ₹10,00,000 | 30% |
Section 87A rebate under the old regime makes tax payable zero for income up to ₹5,00,000. Surcharge and 4% cess apply under both regimes.
| Deduction | Old regime | New regime |
|---|---|---|
| Standard deduction (salary) | ₹50,000 | ₹75,000 |
| Section 80C (PF, ELSS, life insurance, PPF, tuition) | ₹1.5 lakh | ❌ |
| Section 80CCD(1B) — NPS additional | ₹50,000 | ❌ |
| Section 80CCD(2) — employer NPS contribution | ✅ (10% of salary) | ✅ (14% of salary) |
| Section 80D — health insurance | ₹25k / ₹50k / ₹1 lakh | ❌ |
| HRA exemption | ✅ | ❌ |
| LTA exemption | ✅ | ❌ |
| Home loan interest (self-occupied) | ₹2 lakh | ❌ |
| Home loan interest (let-out) | ✅ (no cap, loss capped at ₹2L) | ✅ (no cap, no set-off against other heads) |
| Section 80E — education loan interest | ✅ | ❌ |
| Section 80G — donations | ✅ | ❌ |
| Section 80TTA / 80TTB — savings interest | ✅ | ❌ |
| Professional tax, entertainment allowance | ✅ | ❌ |
New regime: taxable ₹8L – ₹75k SD = ₹7.25L. Tax under slabs = ₹16,250 → 87A rebate makes it zero.
Old regime: taxable ₹8L – ₹50k SD = ₹7.5L. Tax = ₹62,500 → minus 87A only if under ₹5L (no). Tax payable ₹65,000 with cess.
Winner: New regime by ~₹65,000.
New regime: ₹15L – ₹75k SD = ₹14.25L. Tax = ₹4k + ₹40k + ₹33,750 = ₹77,750 + 4% cess = ₹80,860.
Old regime: ₹15L – ₹50k SD – ₹1.5L 80C – ₹25k 80D – ₹2L home loan – ₹1L HRA = ₹9.75L. Tax = ₹1,12,500 + 4% cess = ₹1,17,000.
Winner: New regime by ~₹36,000.
New regime: ₹22L – ₹75k SD = ₹21.25L. Tax = ₹4k + ₹40k + ₹60k + ₹80k + ₹31,250 = ₹2,15,250 + cess = ₹2,23,860.
Old regime: ₹22L – ₹50k – ₹1.5L – ₹50k – ₹50k – ₹2L – ₹3L = ₹14L. Tax = ₹2,32,500 + cess = ₹2,41,800.
Winner: New regime by ~₹18,000 — but only narrowly. If HRA were ₹4.5L instead of ₹3L, old regime would win.
New regime tax ~₹4.65 lakh + cess. Old regime tax ~₹4.20 lakh + cess after all deductions.
Winner: Old regime by ~₹45,000.
| Gross salary | Break-even deductions (old wins above this) |
|---|---|
| ₹8 LPA | Old regime almost never wins — 87A kills it |
| ₹12 LPA | ₹3.0 lakh+ |
| ₹15 LPA | ₹3.75 lakh+ |
| ₹20 LPA | ₹4.25 lakh+ |
| ₹25 LPA | ₹4.50 lakh+ |
| ₹30 LPA | ₹4.75 lakh+ |
| ₹50 LPA | ₹5.50 lakh+ (surcharge matters) |
As a thumb rule: if your total deductions (80C + 80D + HRA + home loan + NPS) cross ~₹4 lakh, old regime starts winning above ₹15 LPA. Below that, new regime almost always wins.
Deemed income = 50% × ₹18L = ₹9L.
New regime: ₹9L – ₹0 SD (no salary) = ₹9L. Tax = ₹4k + ₹10k = ₹14,000 — wiped out by 87A. Net tax ₹0.
Old regime: ₹9L – ₹1.5L 80C – ₹25k 80D = ₹7.25L. Tax = ₹57,500 + cess = ₹59,800.
Winner: New regime by ~₹60,000.
Filing ITR-3 with books. Deductions: ₹1.5L 80C + ₹50k NPS + ₹25k 80D + ₹2L home loan = ₹4.25L.
New regime taxable: ₹14L. Tax = ₹4k + ₹40k + ₹30k + ₹30k = ₹1,04,000 + cess = ₹1,08,160.
Old regime taxable: ₹14L – ₹4.25L = ₹9.75L. Tax = ₹1,12,500 + cess = ₹1,17,000.
Winner: New regime by ~₹9,000. Margin is thin — small change in deductions flips it.
New regime: ₹25L taxable. Tax = ₹4k + ₹40k + ₹60k + ₹80k + ₹1L + ₹25k = ₹3,09,000 + cess = ₹3,21,360.
Old regime: ₹25L – ₹50k NPS – ₹50k 80D – ₹3L home loan = ₹21L. Tax = ₹4,42,500 + cess = ₹4,60,200.
Winner: New regime by ~₹1,39,000.
Business and professional taxpayers can switch between old and new regimes only once in a lifetime (Form 10-IEA). Salaried employees without business income can switch every year.
Yes, if you have only salary / pension / other source income. No, if you have business or professional income — you get one lifetime switch via Form 10-IEA.
No. Special-rate incomes — long-term capital gains, short-term capital gains under 111A, lottery winnings, crypto — are excluded from the Section 87A rebate. The rebate applies only to slab-rated income.
Only if it's a self-occupied house — the ₹2 lakh interest deduction is lost under the new regime. For let-out property, both regimes allow full interest deduction, but the new regime doesn't permit loss set-off against salary.
Employer NPS contribution under 80CCD(2) is allowed under both regimes (up to 14% of basic salary in new vs 10% in old). Your own contributions (80C, 80CCD(1B)) are only deductible under the old regime.
Surcharge applies under both regimes, but the new regime caps the maximum surcharge at 25% (vs 37% under the old regime). For very high incomes (above ₹5 Cr), the new regime reduces the effective tax rate substantially.
For most salaried Indians earning under ₹15 LPA, the new regime is the better default. Above ₹15 LPA, the answer depends on how much you actually claim — not how much you could. Run your numbers in both regimes before locking in. And if you have business income, decide carefully — you only get one lifetime switch.
Senior contributor at Taxpex Consultancy. Reviewed by a practising Chartered Accountant. Published on 8 April 2026 · Updated on 8 April 2026.
Income Tax / ITR — done for you by Taxpex
Prefer a CA to handle this end to end? Income Tax Return Filing is our dedicated, fixed-fee service — this guide explains the process, that page gets it filed.
Go to Income Tax Return FilingReliable, accurate and CA-reviewed income tax return filing for salaried individuals, freelancers, professionals, startups and businesses — with proactive tax planning.
Every ITR due date for AY 2025-26 — salaried, businesses, audit cases, revised and belated returns — plus penalties, interest under 234A/B/C and how to avoid a notice.
5 April 2026 · 14 minITR-1, ITR-2, ITR-3 and ITR-4 explained for AY 2025-26 — eligibility, examples, comparison table and the mistakes that cause defective return notices.
14 March 2026 · 8 minPPF, ELSS, NPS, life insurance, home loan principal — a ranked, honest comparison of which 80C options actually build wealth.
The new regime is the default. You must actively opt for the old regime while filing.
via Income Tax Calculator FY 2025-26Most Chapter VI-A deductions (80C, 80D, 80E, HRA, LTA) are NOT available in the new regime. Only NPS employer contribution and standard deduction survive.
via Income Tax Calculator FY 2025-26A full tax rebate if your taxable income does not exceed ₹12L (new) or ₹5L (old). Effectively zero tax up to those thresholds.
via Income Tax Calculator FY 2025-26No. HRA under Section 10(13A) is available only in the old regime.
via HRA Calculator