This guide is general information. If you would rather a chartered accountant handled it, see ITR Filing Online.
Individuals can pay tax under the new regime, which is the default, or opt for the old regime. Neither is better for everyone. The right choice depends on how many deductions you can claim. The figures below are for FY 2025-26 (assessment year 2026-27); check the current year's slabs after each Budget.
New regime slabs, FY 2025-26
| Income slab | Rate |
|---|---|
| Up to ₹4,00,000 | Nil |
| ₹4,00,001 to ₹8,00,000 | 5% |
| ₹8,00,001 to ₹12,00,000 | 10% |
| ₹12,00,001 to ₹16,00,000 | 15% |
| ₹16,00,001 to ₹20,00,000 | 20% |
| ₹20,00,001 to ₹24,00,000 | 25% |
| Above ₹24,00,000 | 30% |
A rebate under Section 87A means no tax is payable if taxable income is up to ₹12 lakh, with marginal relief just above it. A standard deduction of ₹75,000 is available for salaried taxpayers. Health and education cess of 4% applies.
Old regime slabs (below 60 years)
| Income slab | Rate |
|---|---|
| Up to ₹2,50,000 | Nil |
| ₹2,50,001 to ₹5,00,000 | 5% |
| ₹5,00,001 to ₹10,00,000 | 20% |
| Above ₹10,00,000 | 30% |
The old regime allows deductions and exemptions such as Section 80C, 80D, HRA, home loan interest and a standard deduction of ₹50,000 for salaried taxpayers. The rebate applies if taxable income is up to ₹5 lakh.
How to decide
- If you have few deductions, the new regime usually costs less
- If you claim large deductions such as HRA, home loan interest, 80C and 80D, compare both
- Employer contribution to NPS under Section 80CCD(2) is allowed in the new regime too
- Salaried individuals can switch each year; business taxpayers have restrictions on switching back
Quick method
Compute tax under both regimes with your actual income and deductions. Our income tax calculator does this for you in seconds. Remember that surcharge for higher incomes is not covered by simple calculators.
A worked comparison
Take a salaried person earning ₹15,00,000 a year. Under the new regime, the standard deduction of ₹75,000 reduces taxable income to ₹14,25,000, and tax with cess comes to about ₹97,500. Under the old regime, with the standard deduction of ₹50,000 and deductions of ₹1,50,000 under Section 80C, taxable income is ₹13,00,000, and tax with cess is about ₹2,10,600. Here the new regime is cheaper by a large margin. To make the old regime competitive at this income, deductions would need to be far higher, for example through HRA and a home loan.
When the old regime still wins
- You pay a large amount of rent and claim HRA.
- You have a home loan with substantial interest.
- You invest fully under Section 80C and also claim Section 80D and other deductions.
- Your income is in a range where the extra deductions bring you into a lower slab.
Switching between regimes
Salaried individuals can choose the regime each year when they file the return, and can tell their employer which one to use for TDS. Individuals with business income have fewer chances to switch back after opting for the new regime. Check the current rules before deciding for a business.
How to make a quick decision
- Step 1: list the deductions and exemptions you actually claim, such as HRA, home loan interest, 80C, 80D and NPS.
- Step 2: add them up. If the total is small, the new regime is likely to win.
- Step 3: compute tax under both regimes with the calculator, and compare.
- Step 4: check what your employer is deducting and correct the declaration if it is wrong.
- Step 5: revisit each year, because your income, investments and the law change.
Mistakes to avoid
- Investing only to save tax, without needing the investment.
- Assuming the regime chosen with the employer is final.
- Forgetting that the new regime does not allow most deductions that you used to claim.
- Ignoring surcharge at higher incomes, which can change the comparison.
Remember that the law changes every Budget. Check the current year's slabs before you decide.
Special groups to think about
- Senior citizens: the old regime has a higher basic exemption for them, which can matter at lower incomes.
- Taxpayers with business income: switching back to the old regime after opting out has restrictions, so decide carefully.
- Employees changing jobs mid-year: tell the new employer which regime to use so TDS is correct, and combine income from both employers when filing.
- Taxpayers with large capital gains: special rates apply, so the regime choice affects only the rest of the income.
Official sources: the Income Tax Department website publishes slabs, rebates and the rules for choosing a regime for each year.
Frequently asked questions
Is the new regime the default?
Yes. If you do not choose the old regime, your tax is computed under the new regime.
Can I claim HRA in the new regime?
No. HRA exemption and most other deductions are available only in the old regime.
Can I change the regime after my employer has deducted TDS?
Yes. The employer's choice only affects TDS. At the time of filing your return, you can choose the regime that gives the lower tax, subject to the rules.
Does the choice affect capital gains tax?
Special rates for capital gains apply under either regime. The choice mainly affects the slab-rate income and the deductions you can claim.
This content is for general information and does not constitute professional advice. Laws, rates and due dates change; confirm the current position for your case. Section references are to the Income-tax Act, 1961 unless stated; the Income-tax Act, 2025 applies to later periods with renumbered sections.