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Income Tax — New vs Old Regime

The two regimes, the slabs, and how income up to ₹12 lakh can be tax-free.

Up to ₹12 lakh tax-free (new regime)FY 2025-26 (AY 2026-27)

What is Income Tax?

India now has two income-tax regimes, and from FY 2025-26 the new regime is the default. The new regime has lower, wider slabs and a big rebate — income up to ₹12 lakh (₹12.75 lakh for the salaried, after the ₹75,000 standard deduction) is effectively tax-free — but you give up most deductions. The old regime keeps higher rates but lets you claim 80C, 80D, HRA and home-loan interest. Which is better depends on how many deductions you actually use.

Default regime
New regime (you must opt out for the old one)
Tax-free income
Up to ₹12 lakh (₹12.75 lakh salaried) — new regime, via 87A rebate
Standard deduction
₹75,000 (new regime) · ₹50,000 (old regime)
New-regime slabs
0–4L nil, then 5/10/15/20/25/30% up to 24L+
Old regime
Lower slabs but lets you claim 80C/80D/HRA etc.

Income Tax — The Complete Guide

10 questions answered — everything from eligibility and HUF/NRI rules to tax, withdrawals and edge cases.

The two regimes

What are the new-regime tax slabs for FY 2025-26?
Under the new regime (AY 2026-27): up to ₹4 lakh — nil; ₹4–8 lakh — 5%; ₹8–12 lakh — 10%; ₹12–16 lakh — 15%; ₹16–20 lakh — 20%; ₹20–24 lakh — 25%; above ₹24 lakh — 30%. A 4% health & education cess applies on the tax.
How is income up to ₹12 lakh tax-free?
Through the Section 87A rebate. Under the new regime, a resident with taxable income up to ₹12 lakh gets a rebate that wipes out the tax entirely (up to ₹60,000). Add the ₹75,000 standard deduction and a salaried person earning up to ₹12.75 lakh pays zero tax. Above ₹12 lakh, tax is charged on the slabs from the first rupee (with marginal relief near the threshold).
What are the old-regime slabs?
Old regime: up to ₹2.5 lakh — nil; ₹2.5–5 lakh — 5%; ₹5–10 lakh — 20%; above ₹10 lakh — 30% (with a ₹12,500 rebate making income up to ₹5 lakh tax-free). Seniors get slightly higher basic exemptions. The old regime's appeal is the deductions, not the slabs.

Choosing a regime

Which regime should I choose?
Roughly: if your total deductions (80C + 80D + HRA + home-loan interest + NPS, etc.) are large — often ₹3.75–4 lakh+ — the old regime may still win. If you claim few deductions, the new regime's lower rates and ₹12 lakh rebate usually win. The only reliable way is to compute your tax both ways — use our income-tax calculator.
Can I switch regimes every year?
Salaried individuals (with no business income) can choose the regime afresh each year when filing. Those with business/professional income can switch to the new regime only once and face restrictions on switching back. The new regime is the default, so you must actively opt for the old one if you want it.

Deductions

Which deductions survive in the new regime?
Most don't — 80C, 80D, HRA, LTA and home-loan interest on a self-occupied house are NOT available in the new regime. What DOES survive: the ₹75,000 standard deduction, the employer's NPS contribution under 80CCD(2), and a few others. The old regime is where the familiar deductions live.
What is Section 80C?
An old-regime deduction of up to ₹1.5 lakh a year for specified investments/expenses — PPF, ELSS, EPF/VPF, life-insurance premium, principal on a home loan, tuition fees, NSC, 5-year tax-saver FD, Sukanya, and more. It's the workhorse deduction for old-regime taxpayers.
What is Section 80D?
An old-regime deduction for health-insurance premiums: up to ₹25,000 for self/spouse/children (₹50,000 if any insured is a senior), plus another ₹25,000 for parents (₹50,000 if a parent is a senior) — a maximum of ₹1 lakh. A ₹5,000 preventive health check-up is included within these limits.

Filing & good to know

When is the tax return (ITR) due?
For most individuals, 31 July following the financial year (e.g. 31 July 2026 for FY 2025-26), unless extended. Filing late attracts a fee and interest, and you may lose the ability to carry forward certain losses.
What is advance tax and TDS?
TDS is tax deducted at source on salary, interest, etc. Advance tax is tax you pay in instalments during the year if your total tax liability (after TDS) exceeds ₹10,000 — due in June, September, December and March. Missing advance-tax instalments attracts interest under sections 234B/234C.

Related tools & guides

Income Tax calculator Tax-saving (80C/80D) Old vs New — Advance Tax

Educational information only, not investment advice. Interest rates for government small-savings schemes are set by the Government of India and reviewed every quarter; bank FD/RD rates vary by bank and tenure. Figures are indicative — confirm the current rate and rules with the bank/post office before investing. Calculator results are for illustration purposes only. Actual returns may vary based on market conditions, fund performance, and other factors.

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