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Income Tax FY 2025-26
Old vs New Regime — Complete Guide
By CA Devesh Thakur · AY 2026-27 · Finance Bill 2025
Live Calculator
Rebate u/s 87A
Surcharge & Cess
All Age Groups
New Regime Default
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Interactive
Live Tax Calculator
Move the sliders — both regimes update instantly side by side
Total income (₹)
₹15,00,000
₹1L₹60L
Deductions 80C–80U (old regime only)
₹1,50,000
₹0₹3.5L
Age category (for old regime slabs)
—
—
New regime tax
—
Old regime tax
—
Tax saving
⚡ New Regime · 115BAC(1A) · Default
Total income—
Standard deduction—
Taxable income—
Tax on slab—
Rebate u/s 87A—
Tax after rebate—
Surcharge—
Cess @ 4%—
Total payable—
Effective rate: —
📋 Old Regime · Opt-in required
Total income—
Deductions 80C–80U—
Taxable income—
Tax on slab—
Rebate u/s 87A—
Tax after rebate—
Surcharge—
Cess @ 4%—
Total payable—
Effective rate: —
Note: Includes ₹75,000 standard deduction (new) / ₹50,000 (old) for salaried. Capital gains u/s 111A/112A are NOT eligible for rebate u/s 87A.
📚 Read the Full Tax Guide on etaxsave.com →
FY 2025-26 · AY 2026-27
Tax Slab Rates
New regime is the default. You must actively opt out to use the old regime when filing ITR.
⚡ New Tax Regime · Same for all ages
Standard deduction ₹75,000 allowed for salaried
| Income slab | Rate |
|---|---|
| Up to ₹4,00,000 | Nil |
| ₹4L – ₹8L | 5% |
| ₹8L – ₹12L | 10% |
| ₹12L – ₹16L | 15% |
| ₹16L – ₹20L | 20% |
| ₹20L – ₹24L | 25% |
| Above ₹24L | 30% |
Zero tax up to ₹12L — via rebate u/s 87A (max ₹60,000) on normal slab income only
📋 Old Tax Regime · Opt-in required
| Income slab | Rate |
|---|---|
| Up to ₹2,50,000 | Nil |
| ₹2.5L – ₹5L | 5% |
| ₹5L – ₹10L | 20% |
| Above ₹10L | 30% |
Zero tax up to ₹5L via rebate u/s 87A (max ₹12,500)
| Income slab | Rate |
|---|---|
| Up to ₹3,00,000 | Nil |
| ₹3L – ₹5L | 5% |
| ₹5L – ₹10L | 20% |
| Above ₹10L | 30% |
Higher basic exemption of ₹3L for senior citizens
| Income slab | Rate |
|---|---|
| Up to ₹5,00,000 | Nil |
| ₹5L – ₹10L | 20% |
| Above ₹10L | 30% |
No 5% slab — ₹5L exemption limit itself. No rebate needed.
| Age category | Old regime exemption | New regime exemption | Verdict |
|---|---|---|---|
| Below 60 years | ₹2,50,000 | ₹4,00,000 | New higher |
| 60–80 years (senior) | ₹3,00,000 | ₹4,00,000 | New higher |
| 80+ years (super senior) | ₹5,00,000 | ₹4,00,000 | Old higher |
New regime gives a uniform ₹4L exemption for all ages — no age-based enhancement unlike old regime.
Section 87A
Rebate & Zero-Tax Limit
The biggest structural change in Finance Bill 2025 — new regime rebate limit tripled to ₹12L.
₹60,000
Max rebate — New regime
Income up to ₹12,00,000
₹12,500
Max rebate — Old regime
Income up to ₹5,00,000
| Particulars | Old regime | New regime |
|---|---|---|
| Income limit for rebate | Up to ₹5,00,000 | Up to ₹12,00,000 |
| Maximum rebate amount | ₹12,500 | ₹60,000 |
| Marginal relief available | Yes | Yes |
| Special rate income eligible (111A/112A)? | No | No |
| Effective zero-tax limit | ₹5,00,000 | ₹12,00,000 |
Critical: The ₹12L zero-tax benefit applies only to normal slab income. Capital gains taxed u/s 111A or 112A are NOT eligible for rebate — even if total income is below ₹12L.
Marginal relief — how it prevents tax anomalies
If income slightly exceeds ₹12L (new) or ₹5L (old), marginal relief ensures the incremental tax does not exceed the incremental income above the threshold.
Example: Income = ₹12,10,000 (new regime). Normal tax = ₹65,000. With marginal relief, tax is capped at ₹10,000 — the excess over ₹12L.
Finance Bill 2025 change: New regime rebate limit raised ₹7L → ₹12L. Max rebate enhanced ₹25,000 → ₹60,000.
Chapter VI-A
Deductions & Exemptions
Old regime allows most deductions. New regime restricts them — but compensates with lower slab rates.
| Deduction / exemption | Old regime | New regime |
|---|---|---|
| Standard deduction (salaried) | ✓ ₹50,000 | ✓ ₹75,000 |
| 80C — PF, LIC, ELSS, PPF, principal | ✓ ₹1,50,000 | ✗ Not allowed |
| 80CCD(1B) — Additional NPS | ✓ ₹50,000 | ✗ Not allowed |
| 80D — Health insurance premium | ✓ ₹25K / ₹50K | ✗ Not allowed |
| HRA exemption | ✓ Allowed | ✗ Not allowed |
| LTA exemption | ✓ Allowed | ✗ Not allowed |
| 24(b) — Home loan interest | ✓ ₹2L (self-occ.) | ✗ Not allowed |
| 80E — Education loan interest | ✓ No limit (8 yrs) | ✗ Not allowed |
| 80G — Donations | ✓ Allowed | ✗ Not allowed |
| 80GG — Rent paid (no HRA) | ✓ ₹60,000 | ✗ Not allowed |
| 80TTA / 80TTB — Savings interest | ✓ ₹10K / ₹50K | ✗ Not allowed |
| 80U — Own disability | ✓ ₹75K / ₹1.25L | ✗ Not allowed |
| Section | Nature | Limit (old regime) |
|---|---|---|
| 80C | PF, LIC, ELSS, PPF, home loan principal | ₹1,50,000 |
| 80CCC | Pension fund contribution | Within 80C cap |
| 80CCD(1) | NPS employee contribution | Within 80C cap |
| 80CCD(1B) | Additional NPS contribution | ₹50,000 |
| 80D | Health insurance premium | ₹25,000 / ₹50,000 (senior) |
| 80DD | Dependent disability | ₹75,000 / ₹1,25,000 |
| 80E | Education loan interest | No limit (up to 8 years) |
| 80EEA | Home loan interest — affordable housing | ₹1,50,000 |
| 80G | Donations to eligible funds | Depends on fund type |
| 80GG | Rent paid — no HRA in salary | ₹60,000 p.a. |
| 80TTA / 80TTB | Interest on savings / deposits | ₹10,000 / ₹50,000 |
| 80U | Own disability | ₹75,000 / ₹1,25,000 |
Above ₹50 Lakh
Surcharge, Cess & Corporate Rates
Surcharge applies on tax. Cess applies on tax + surcharge. New regime caps surcharge at 25% — a key advantage for HNIs.
25%
Max surcharge — New regime
37%
Max surcharge — Old regime (income >₹5Cr)
| Total income range | Old regime | New regime |
|---|---|---|
| Up to ₹50 lakh | Nil | Nil |
| ₹50L – ₹1 crore | 10% | 10% |
| ₹1Cr – ₹2 crore | 15% | 15% |
| ₹2Cr – ₹5 crore | 25% | 25% |
| Above ₹5 crore | 37% | Capped at 25% |
High earners above ₹5Cr save 12% surcharge by choosing new regime — significant at that income level.
| Income type | Max surcharge (both regimes) |
|---|---|
| Dividend income | 15% |
| Sec 111A — STCG on equity | 15% |
| Sec 112A — LTCG on equity | 15% |
| Sec 112 — Other LTCG | 15% |
Health & Education Cess: 4% on (Income Tax + Surcharge) — applies to all taxpayers in both regimes without exception.
| Entity | Condition | Rate |
|---|---|---|
| Domestic company | Turnover ≤ ₹400Cr (FY 2023-24) | 25% |
| Domestic company | Other cases (general) | 30% |
| Domestic company | Sec 115BAA (special rate) | 22% |
| Domestic company | Sec 115BAB (new manufacturing) | 15% |
| Foreign company | Reduced from 40% — Finance Bill 2025 | 35% |
| Firm / LLP | Flat rate | 30% |
| Co-operative (Sec 115BAD) | Special regime | 22% |
Strategic Planning
Which Regime is Better for You?
The answer is always mathematical. Compute both with your real numbers, then decide.
| Your scenario | Better option |
|---|---|
| Income up to ₹5L (any deduction level) | Either — zero tax in both |
| Income ₹5L–₹12L, minimal deductions | ✓ New regime |
| Income ₹5L–₹12L, high 80C + HRA + home loan | ✓ Old regime |
| Salaried, no HRA, no home loan | ✓ New regime |
| Home loan interest + HRA + 80C > ₹3.75L | ✓ Old regime |
| Senior citizen with high medical expenses | ✓ Old regime |
| Super senior (80+) with income under ₹5L | ✓ Old regime (₹5L exemption) |
| Income ₹12L–₹15L, fewer deductions | ✓ New regime usually |
| Income above ₹5 crore | ✓ New regime (surcharge cap) |
| Freelancer / professional, no deductions | ✓ New regime |
Golden rule: Never choose a regime emotionally. Always compute actual tax under both regimes before filing ITR.
1.Choosing old regime only because “I’ve always claimed 80C” — new regime’s lower slabs often offset it, especially above ₹10L.
2.Assuming ₹12L = zero tax without checking if any income is at special capital gains rates — rebate u/s 87A doesn’t apply there.
3.Ignoring surcharge impact at income above ₹50L — a 10–25% surcharge can significantly shift which regime wins.
4.Super seniors assuming old regime is always better — above ₹15L, new regime slabs are often lower even without the ₹5L exemption.
5.Not recalculating every year — slab structures and rebate limits change. Recalculate before submitting Form 12BB to your employer.
Break-even logic for ₹12L–₹15L income range
New regime wins if your total deductions under old regime are less than approximately ₹3.75 lakh. Above that threshold, old regime may give lower tax. The break-even point shifts with income — use the Live Calculator above to find your exact number.
Standard Format
Tax Computation Proforma
Follow this exact sequence when computing income tax liability — used in CA exams and professional practice.
Income from SalaryXXXXX
Less: Standard deduction (₹75K new / ₹50K old)(XXXXX)
Income from House PropertyXXXXX
Less: 30% standard deduction / interest u/s 24(b)(XXXXX)
Profits & Gains of Business / ProfessionXXXXX
Capital GainsXXXXX
Income from Other SourcesXXXXX
Set-off of losses (inter-source / inter-head / b/f)(XXXXX)
Gross Total Income (GTI)XXXXX
Less: Deductions u/s 80C to 80U (old regime)(XXXXX)
Total Income (Taxable Income)XXXXX
Tax on normal slab incomeXXXXX
Tax on special rate income (111A / 112A / 112)XXXXX
Less: Rebate u/s 87A(XXXXX)
Tax after rebateXXXXX
Add: Surcharge (if applicable)XXXXX
Tax after surchargeXXXXX
Add: Health & Education Cess @ 4%XXXXX
Tax before reliefXXXXX
Less: Relief u/s 86 / 89 / 90 / 90A / 91(XXXXX)
Tax liability before prepaid taxesXXXXX
Less: TDS / TCS / Advance Tax paid(XXXXX)
Tax Payable / RefundableXXXXX
Sec 86 — AOP / BOI memberPrevents double taxation of share of income from AOP/BOI already taxed at entity level.
Sec 89 — Salary arrearsSpreads tax impact of arrears/advance salary across relevant years to avoid bunching.
Sec 90 / 90A — DTAA reliefChoose the more beneficial provision between domestic law and treaty. NRIs need TRC.
Sec 91 — Unilateral reliefWhere no treaty exists — relief at the lower of Indian or foreign tax rate on doubly-taxed income.
| Head of income — Sec 14 | What it covers |
|---|---|
| Salary | Basic pay, allowances, perquisites, gratuity, retirement benefits |
| House Property | Rental income / deemed rent from owned properties |
| Business / Profession | Profit from business, freelancing, professional practice |
| Capital Gains | Profit from sale of shares, mutual funds, property, bonds |
| Other Sources | Interest, dividends, lottery winnings, gifts, any residual income |