The choice between the old and new tax regimes has been one of the most discussed topics among salaried individuals and professionals. With the latest updates in the Union Budget 2025, the government has made the new tax regime more attractive, simplified, and beneficial for most taxpayers. If you are wondering which regime works best for you in the financial year 2025-26, let's break it down clearly.
Old vs New Tax Regime: The Key Difference
Earlier, the old regime often looked better with Section 80C investments, health insurance premiums, and home loan deductions. However, recent changes in tax slabs and rebate limits have tilted the balance in favour of the new regime.

- Old Regime: Rebate available up to Rs 5 lakh of income.
- New Regime: Rebate available up to Rs 12 lakh of income.
Additionally, the standard deduction under the new regime is Rs 75,000 compared to Rs 50,000 under the old regime. This means a salaried individual can enjoy tax-free income up to Rs 12.75 lakh under the new tax regime.
Why the Old Regime Struggles Now
For the old regime to compete, you need very high deductions. For example, a taxpayer earning Rs 12 lakh would need at least Rs 6.5 lakh in deductions just to match the new regime. This is difficult unless you have heavy HRA claims, home loan interest, or education loan deductions.
That said, a small segment of taxpayers with significant exemptions might still find the old regime beneficial. But for the majority, the new regime offers better relief with less hassle.
Understanding Breakeven Points
The breakeven calculation helps you decide which regime is better:
- If total deductions > breakeven point → Old regime is beneficial
- If total deductions < breakeven point → New regime is better
Important Notes
- The breakeven figures do not include the Rs 50,000 standard deduction of the old regime.
- Both regimes already account for their respective standard deductions: Rs 75,000 in the new and Rs 50,000 in the old.
- If you don't earn a salary (and cannot claim the standard deduction), your breakeven figures will differ.
Which Deductions Are Still Available?
While the old regime allows deductions under 80C, 80D, HRA, home loan interest, education loan, etc., the new regime has a much shorter list. However, some deductions still survive under the new regime, such as:
- Employer contributions to NPS (Section 80CCD(2))
- Interest on home loan for let-out property
- Standard deduction of Rs 75,000 for salaried and pensioners
These limited benefits still reduce taxable income under the new system.
Compliance and Hassle Factor
Another drawback of the old regime is the increasing documentation and disclosure requirements. Every deduction you claim needs proof, which means more time, effort, and potential queries from the Income Tax Department.
On the other hand, the new regime is clean, simple, and paperwork-free, making it the government's preferred option.
Switching Between Regimes
- Salaried employees can choose their preferred regime each year.
- Taxpayers with business or professional income need to file Form 10-IEA to switch regimes.
This flexibility ensures that individuals can re-evaluate their tax planning annually.
Conclusion: Which Regime Should You Choose?
In practice, the new tax regime has become the default choice for most taxpayers. Unless you have large deductions well above the breakeven point, sticking with the new regime is financially and practically better.
Think of it this way: for many, the old regime isn't dead by law, but it is almost dead in practice. The simplicity, higher rebate, and reduced compliance burden make the new regime the smarter option for FY 2025-26.
Download Automatic Income Tax Calculator in Excel (FY 2025-26)
To make tax planning easier, you can use the Automatic Income Tax Calculator All-in-One in Excel for both Government and Non-Government employees. This tool helps you compare both regimes and instantly compute your liability.
Key Features of the Excel Calculator
- Prepares Tax Computed Sheet as per Budget 2025.
- Inbuilt salary structures for Government and Non-Government employees.
- Automatic Salary Sheet for quick calculations.
- HRA Exemption calculation under Section 10(13A).
- Arrears Relief calculation under Section 89(1) with automatic Form 10E.
- Generates Form 16 Part A & B
- Provides Form 16 Part B for employees.
This ready-to-use Excel file ensures accurate tax planning and saves valuable time.
Final Tip: Before filing your return for FY 2025-26, compare both regimes using the calculator. If your deductions are high, check if the old regime works; otherwise, the new regime is the clear winner.