Every July, the same question lands on my desk a dozen times: "Sir, should I go with the old regime or the new one?" And honestly, it's a fair question because the right answer genuinely changes from one person to the next.
For FY 2025-26 (AY 2026-27), the New Tax Regime under Section 115BAC stays the default. But the real headline this year isn't a new deduction, it's the enhanced Section 87A rebate, which makes income up to ₹12 lakh completely tax-free under the new regime. Stack the ₹75,000 standard deduction on top of that, and a salaried person can earn up to roughly ₹12.75 lakh without paying a rupee of income tax. That single change has quietly shifted the old-vs-new maths for a huge chunk of salaried taxpayers.
So let me walk you through it the way I'd explain it to a client across the table - comparison tables, a simple decision checklist, and clear "if this, then that" recommendations.
1. Old Regime vs New Regime: The Core Differences
| Factor | Old Regime | New Regime (Sec 115BAC) |
|---|---|---|
| Basic Exemption Limit | ₹2.5L (<60Y), ₹3L (60–80Y), ₹5L (>80Y) | Uniform ₹4L slab — no age-based differentiation |
| Standard Deduction | ₹50,000 | ₹75,000 |
| Family Pension Deduction | ₹15,000 | ₹25,000 (or 1/3rd, whichever is lower) |
| Tax Slabs | Traditional, higher rates kick in earlier | More slabs, gentler rates |
| 80C, 80D, HRA, LTA, etc. | Fully available | Mostly not available |
| Section 87A Rebate | Up to ₹12,500 (income ≤ ₹5L) | Up to ₹60,000 (income ≤ ₹12L) |
| Default Regime? | No | Yes |
| Employer NPS — 80CCD(2) | Available | Available |
A small but important note: the ₹75,000 standard deduction isn't new for this year, it was raised from ₹50,000 back in Budget 2024 and simply continues. The genuinely new lever for FY 2025-26 is the rebate making ₹12 lakh tax-free.
2. New Regime Slabs - FY 2025-26 (AY 2026-27)
| Income Slab | 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% |
Add 4% Health & Education Cess on the tax payable, plus surcharge where applicable on higher incomes (capped at 25% under the new regime).
A question I get a lot: "If income up to ₹12 lakh is tax-free, why do the slabs even matter below that?" Because the slabs would normally levy tax in the ₹4–12 lakh range — the ₹60,000 rebate is what wipes it out. Cross ₹12 lakh of taxable income and the rebate falls away, so the slabs apply in full (with marginal relief smoothing the jump just above ₹12 lakh).
3. Old Regime Slabs (for comparison)
- Up to ₹2.5L (general) / ₹3L (senior) / ₹5L (super senior): Nil
- Beyond that: 5%, 20% and 30%, with the age-based basic exemption benefits.
4. A Simple, Four-Step Decision Checklist
Step 1 - Add up your Gross Total Income. Salary, house property, business/profession, capital gains, and other sources.
Step 2 - List what you can actually claim.
- 80C (EPF, PPF, ELSS, home-loan principal, etc.): up to ₹1.5 lakh — Old regime only
- 80D (health insurance): up to ₹1 lakh in the best case — Old regime only
- HRA / LTA exemptions — Old regime only
- Home-loan interest (Sec 24): up to ₹2 lakh — primarily Old regime
- Other 80-series deductions
- Standard deduction: ₹50K (Old) vs ₹75K (New)
My rule of thumb:
- Total deductions + exemptions above ₹1.5–2 lakh → the Old regime often wins.
- Deductions low or moderate (under ₹1 lakh), or you're salaried with nothing major to claim → the New regime usually wins, thanks to the ₹75K standard deduction, lower slabs and the bigger rebate.
Step 3 - Run the tax both ways. Use the slabs above, apply the 87A rebate if you qualify, add 4% cess. Don't eyeball it - a five-minute calculation settles most arguments.
Step 4 - Compare and choose. The new regime is the default. If you have business or professional income and want the old regime, you must file Form 10-IEA before the ITR due date.
5. Who Should Pick What? (My Practical Take)
| Your profile | My suggestion | Why |
|---|---|---|
| Salaried, modest deductions (80C < ₹50K, no HRA/LTA) | New Regime | ₹75K standard deduction + rebate do the heavy lifting |
| High deductions (80C + 80D + home-loan interest > ₹1.5–2L) | Old Regime | Your exemptions outweigh the new-regime benefits |
| Family pension recipients | New Regime | ₹25K deduction beats the old ₹15K |
| Income up to ₹12 lakh | New Regime | Potentially zero tax after the rebate |
| Senior citizens | Compare carefully | Old gives a higher basic exemption; New gives better slabs + bigger standard deduction |
| Presumptive business (44AD/44AE) | Usually New Regime | Simpler, and often lower tax |
| NRIs | Compare on deductions alone | The 87A rebate isn't available to NRIs under either regime, so the ₹12-lakh-tax-free draw doesn't apply — decide purely on which deductions you can use |
That NRI point trips people up, so it's worth repeating: Section 87A is for resident individuals only. An NRI doesn't get it in the old regime or the new one — so their choice should rest entirely on which deductions and exemptions they can genuinely claim.
6. Dates and Details You Can't Afford to Miss (FY 2025-26)
The new regime is the default. Salaried taxpayers simply choose at the time of filing; business income needs Form 10-IEA to opt out into the old regime.
ITR filing due dates (AY 2026-27) — note the new staggered calendar:
| Category | Due Date |
|---|---|
| Salaried / investors (ITR-1, ITR-2) | 31 July 2026 |
| Non-audit business & profession (ITR-3, ITR-4) | 31 August 2026 |
| Audit cases | 31 October 2026 |
- Belated return: up to 31 December 2026 (with late fee and interest).
- Revised return: up to 31 March 2027 for AY 2026-27.
- The new Income-tax Act, 2025 applies from FY 2026-27 onwards - FY 2025-26 continues to be governed by the Income-tax Act, 1961.
- And please always reconcile Form 26AS and AIS before you hit submit. It saves a world of notices later.
7. A Quick Real-World Snapshot
Take a salaried person earning ₹12 lakh gross with nothing to claim beyond the Rs 75,000 standard deduction. Under the new regime, the enhanced 87A rebate brings the tax down to zero. To match that under the old regime, they'd need a genuinely heavy stack of deductions which most people in this bracket simply don't have.
For fellow professionals: the ₹12-lakh-tax-free threshold has shifted the balance more than any tweak in recent memory. It's worth refreshing your client calculators and proactively nudging moderate-deduction salaried clients toward the new regime both for the savings and the sheer simplicity.
Disclaimer: This article is for general information based on provisions applicable as of June 2026. Individual situations - capital gains, multiple income heads, surcharge thresholds and the like carry their own nuances. Please consult your Chartered Accountant or use the Income-tax e-filing portal for a personalised, final calculation.
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