FY 2025-26 (Assessment Year 2026-27) brought significant changes to the New Tax Regime, making it the default and more attractive option for most salaried individuals. Here's the complete picture: both regimes, all slabs, standard deductions, surcharges, and the decision framework.
New Tax Regime Slabs for FY 2025-26
The New Tax Regime is now the default — you must explicitly opt for the Old Regime when filing. The slabs for individuals below 60 years:
| Income Slab | Tax Rate (New Regime) |
|---|---|
| Up to ₹3,00,000 | Nil |
| ₹3,00,001 – ₹7,00,000 | 5% |
| ₹7,00,001 – ₹10,00,000 | 10% |
| ₹10,00,001 – ₹12,00,000 | 15% |
| ₹12,00,001 – ₹15,00,000 | 20% |
| Above ₹15,00,000 | 30% |
Key benefits in New Regime (FY 2025-26):
- Standard deduction of ₹75,000 for salaried individuals (up from ₹50,000 in FY24-25)
- Income up to ₹7 lakh effectively zero tax after rebate under Section 87A (₹25,000 rebate)
- With standard deduction of ₹75,000, zero tax effectively up to ₹7.75 lakh gross salary
- NPS employer contribution deduction (Section 80CCD(2)) — up to 14% of basic salary for central/state govt employees, 10% for others
Old Tax Regime Slabs for FY 2025-26
| Income Slab | Tax Rate (Old Regime) |
|---|---|
| Up to ₹2,50,000 | Nil |
| ₹2,50,001 – ₹5,00,000 | 5% |
| ₹5,00,001 – ₹10,00,000 | 20% |
| Above ₹10,00,000 | 30% |
Old Regime key deductions (not available in New Regime):
- Section 80C: ₹1.5 lakh (PPF, ELSS, LIC, home loan principal, tuition fees)
- Section 80D: Health insurance premium (₹25,000–₹75,000)
- Section 24(b): Home loan interest (up to ₹2 lakh for self-occupied)
- HRA exemption (rent payments — city-based formula)
- Standard deduction: ₹50,000
- LTA, professional tax, and other allowances
Worked Examples: New vs Old Regime
Example 1: Gross Salary ₹8 Lakh
| Calculation | New Regime | Old Regime |
|---|---|---|
| Gross salary | ₹8,00,000 | ₹8,00,000 |
| Standard deduction | −₹75,000 | −₹50,000 |
| 80C deductions | Nil | −₹1,50,000 |
| 80D deductions | Nil | −₹25,000 |
| Taxable income | ₹7,25,000 | ₹4,75,000 |
| Tax before cess | ₹27,500 | ₹11,250 |
| Section 87A rebate | Nil (above ₹7L) | −₹11,250 |
| Health+Education cess (4%) | ₹1,100 | Nil |
| Total tax | ₹28,600 | ₹0 |
At ₹8 lakh with full 80C and 80D utilisation, the Old Regime wins significantly.
Example 2: Gross Salary ₹15 Lakh (No Active Deductions)
| Calculation | New Regime | Old Regime |
|---|---|---|
| Gross salary | ₹15,00,000 | ₹15,00,000 |
| Standard deduction | −₹75,000 | −₹50,000 |
| Taxable income | ₹14,25,000 | ₹14,50,000 |
| Tax before cess | ₹1,62,500 | ₹2,62,500 |
| Health+Education cess (4%) | ₹6,500 | ₹10,500 |
| Total tax | ₹1,69,000 | ₹2,73,000 |
Without deductions, New Regime saves ₹1,04,000. This is why people who haven't built investment habits benefit from the New Regime.
Surcharge Rates
| Income | Surcharge |
|---|---|
| Up to ₹50 lakh | Nil |
| ₹50 lakh – ₹1 crore | 10% |
| ₹1 crore – ₹2 crore | 15% |
| ₹2 crore – ₹5 crore | 25% (New Regime: capped at 25%) |
| Above ₹5 crore | 37% (New Regime: capped at 25%) |
Health and Education Cess: 4% on (Tax + Surcharge) for all taxpayers.
The Break-Even Deduction Amount
The New Regime is better when your total deductions are below a threshold. Approximately:
- Income ₹10L: Old Regime wins if deductions exceed ~₹2.5 lakh
- Income ₹15L: Old Regime wins if deductions exceed ~₹3.5 lakh
- Income ₹20L: Old Regime wins if deductions exceed ~₹4 lakh
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