The Union Budget 2025 brought significant changes to the new tax regime, making it the default choice for taxpayers. But does that mean the old regime is obsolete? Let's break it down with real numbers.
Key Changes in New Tax Regime (AY 2026-27)
- Standard deduction increased to ₹75,000 (from ₹50,000)
- Family pension deduction raised to ₹25,000
- Revised tax slabs with lower rates for income up to ₹15 lakh
- No tax on income up to ₹7,00,000 (with rebate under Section 87A)
New Tax Regime Slabs (AY 2026-27)
| Income Slab | Tax Rate |
|---|---|
| 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% |
Old Tax Regime Slabs
| Income Slab | Tax Rate |
|---|---|
| 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% |
When Old Regime is Better
Choose Old Regime if your total deductions exceed ₹3.75 lakh
This includes Section 80C (₹1.5L), 80D (₹75K), HRA exemption, home loan interest (Section 24b up to ₹2L), NPS (80CCD(1B) ₹50K), and other deductions.
Income: ₹10 Lakh (Salaried)
New Regime: Taxable income after standard deduction = ₹9,25,000. Tax = ₹20,000 + ₹22,500 = ₹42,500
Old Regime (with ₹4L deductions): Taxable income = ₹6,00,000. Tax = ₹12,500 + ₹20,000 = ₹32,500
Winner: Old Regime saves ₹10,000
Income: ₹15 Lakh (Salaried)
New Regime: Tax = ₹1,12,500
Old Regime (with ₹3L deductions): Tax = ₹1,72,500
Winner: New Regime saves ₹60,000
Our Recommendation
If your annual income is above ₹12 lakh and you don't have substantial deductions (less than ₹3.75 lakh), the new regime is clearly better. For those with heavy investments in PPF, ELSS, NPS, and home loan EMIs, the old regime may still win.
Not sure which regime works for you? Use our free tax calculator or talk to our experts for personalized advice.
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