New Tax Regime vs Old Tax Regime: Complete Comparison for FY 2025–26
The new tax regime is default from FY 2024-25 with zero tax up to ₹12L income. But the old regime can save more tax for high earners with large deductions. Here's the complete comparison.
Last updated: 2026-05-15 · CA-reviewed
New Tax Regime
Lower rates, zero deductions, default from FY 2024-25
- Zero tax for income up to ₹12 lakh (after ₹75K standard deduction)
- Simpler — no need to track investments
- Better for those with few deductions
- Default regime — no action needed
- Lower rates across all brackets vs old regime
- No 80C deduction (ELSS, PPF, LIC, home loan principal)
- No HRA exemption
- No Section 80D (health insurance)
- No home loan interest deduction under Section 24b
- No LTA, children education allowance
- Not ideal for high earners with large deductions
Salaried employees earning up to ₹12L, those with minimal investments, young professionals without HRA/home loan, and anyone who values simplicity over tax optimisation.
Old Tax Regime
Higher rates with full deduction flexibility
- Full 80C deduction up to ₹1.5L
- HRA exemption for rent-payers
- Home loan interest up to ₹2L (Section 24b)
- 80D for health insurance
- Better for high earners with large deductions
- Can carry forward housing loan benefits
- Must actively opt in each year (no longer default)
- Higher base tax rates
- Requires tracking investments and documentation
- Complex for people with multiple deductions
- Business owners can only switch once (new to old)
High-income earners with substantial deductions — HRA + home loan interest + 80C + 80D combined exceeding ₹3-4L; senior employees above ₹20-25L income.
New Tax Regime vs Old Tax Regime: Feature Comparison
| Parameter | New Tax Regime | Old Tax Regime |
|---|---|---|
| Default from FY 2024-25 | ✓ Yes (default) | Must actively opt-in |
| Zero tax threshold | ₹12L (with ₹75K std deduction) | ₹5L (with rebate) |
| Section 80C (₹1.5L) | ✗ Not available | ✓ Available |
| HRA Exemption | ✗ Not available | ✓ Available |
| Home loan interest (24b) | ✗ Not available | ✓ Up to ₹2L |
| Section 80D (health insurance) | ✗ Not available | ✓ Available |
| Standard Deduction | ✓ ₹75,000 | ✓ ₹50,000 |
| NPS (80CCD(1B)) | ✗ Not available | ✓ ₹50,000 |
| NPS employer (80CCD(2)) | ✓ Available | ✓ Available |
| Tax rate at ₹15L income | ~15% | ~20% (before deductions) |
Expert Verdict: Which Should You Choose?
New regime wins for income up to ₹12L (zero tax with rebate) and for taxpayers with deductions below ₹3-4L. Old regime wins for high earners with substantial deductions (HRA + home loan + 80C + 80D together exceeding ₹3.5-4L for 30% bracket). The breakeven deduction for the 30% bracket is approximately ₹3.75L — only opt for old regime if you exceed this.
Frequently Asked Questions
Salaried employees: Yes, you can switch between new and old regime every year when filing ITR. Business owners / professionals with business income: Switching is allowed but complicated — you can move from old to new once, and then back to old once. After switching back to old, you cannot switch to new again. Plan carefully.
Yes. Your employer's TDS calculation under new regime doesn't bind you. When filing ITR, you can choose old regime — but you'll need to calculate tax correctly and pay any shortfall (or claim excess TDS as refund). Inform your employer by submitting a declaration to switch to old regime for TDS purposes — this avoids a large self-assessment tax payment at filing time.