Old vs New Tax Regime: How to Choose in 10 Minutes

For FY 2025-26, start with the new regime. It is the default, and a salary up to Rs 12,75,000 pays no tax under it. Choose the old regime only if your deductions, over and above the standard deduction, cross a break-even figure: about Rs 5.4 lakh at a Rs 15 lakh salary and Rs 8 lakh at Rs 25 lakh or more.

The slabs for both regimes

A tax regime is simply a set of rates and rules. You have two to pick from. These are the rates for income earned between 1 April 2025 and 31 March 2026, for a person below 60, as shown on the e-filing portal.

In the old regime the nil slab is Rs 3,00,000 if you are 60 or older and Rs 5,00,000 if you are 80 or older. The new regime has the same slabs at every age. Both regimes add a 4% health and education cess on the tax.

Then comes the rebate under section 87A, which wipes out tax for smaller incomes. In the new regime it is up to Rs 60,000 when taxable income does not exceed Rs 12 lakh. In the old regime it is up to Rs 12,500 when taxable income does not exceed Rs 5 lakh. Add the Rs 75,000 standard deduction and a salary of Rs 12,75,000 comes to zero tax in the new regime.

Which deductions survive in the new regime?

Why is it built this way? The new regime trades deductions for lower rates and less paperwork. The old regime rewards you for specific spending and saving, at higher rates.

The 10-minute way to decide

1. Write down your gross salary for the year.
2. Add up what only the old regime gives you: HRA exemption, 80C, 80D, home loan interest on your own house, your own NPS, and anything similar. Leave out the standard deduction. Count only what you actually spent or invested, not the maximum limits.
3. Compare your total with the break-even figure for your salary in the table below.
4. If your total is lower, stay in the new regime. If it is higher, the old regime saves tax.

We worked these out from the slabs above for a salaried person below 60, before surcharge. Between the rows, pick the nearer figure and then confirm with the calculator on the e-filing portal. Just above Rs 12,75,000 a relief limits the new regime tax to roughly the amount by which taxable income exceeds Rs 12 lakh, so the new regime still wins there.

Three worked examples

Anita, salary Rs 10,00,000. New regime: Rs 10,00,000 less Rs 75,000 is Rs 9,25,000. Slab tax is Rs 32,500, and the rebate removes all of it. Tax: nil. Under the old regime she would need Rs 4,50,000 of deductions only to match nil. New regime.

Vikram, salary Rs 15,00,000. He has 80C of Rs 1,50,000, 80D of Rs 25,000 and home loan interest of Rs 2,00,000: Rs 3,75,000 in all.

• New regime: taxable Rs 14,25,000. Tax Rs 60,000 plus 15% of Rs 2,25,000, which is Rs 93,750. With cess: Rs 97,500.
• Old regime: Rs 15,00,000 less Rs 50,000 less Rs 3,75,000 is Rs 10,75,000. Tax Rs 1,12,500 plus 30% of Rs 75,000, which is Rs 1,35,000. With cess: Rs 1,40,400.
• The new regime saves him Rs 42,900. His Rs 3,75,000 is well short of the Rs 5,43,750 break-even.

Sunita, salary Rs 24,00,000. She pays high rent in a metro. HRA exemption Rs 6,00,000, 80C Rs 1,50,000, 80D Rs 50,000 (herself and her parents), own NPS Rs 50,000: Rs 8,50,000 in all.

• New regime: taxable Rs 23,25,000. Tax Rs 2,00,000 plus 25% of Rs 3,25,000, which is Rs 2,81,250. With cess: Rs 2,92,500.
• Old regime: Rs 24,00,000 less Rs 50,000 less Rs 8,50,000 is Rs 15,00,000. Tax Rs 1,12,500 plus 30% of Rs 5,00,000, which is Rs 2,62,500. With cess: Rs 2,73,000.
• The old regime saves her Rs 19,500. She is above the Rs 7,87,500 break-even.

The default regime, and how to opt out

The new regime applies unless you opt out. How you opt out depends on your income.

Salaried, with no business income. Tell your employer which regime you want, so the right TDS is cut. If you say nothing, the employer deducts under the new regime. That intimation is not the final choice. The real choice is made in your return, by selecting the opt-out option in ITR-1 or ITR-2. No separate form is needed, and you may choose afresh every year.

Business or professional income. You must file Form 10-IEA on the portal on or before the due date under section 139(1), and then file ITR-3 or ITR-4.

In both cases the choice must be made by the due date. For FY 2025-26 that was 31 July 2026 for salaried taxpayers and 31 August 2026 for business without audit. Miss it, and your belated return is taxed under the new regime, whatever proofs you hold.

Switching rules if you have business income

Sellers and freelancers get less freedom. The portal's guidance says a person with business income cannot choose between the regimes every year. Once you opt for the old regime through Form 10-IEA, you get one chance to come back to the new regime, again through Form 10-IEA. After you come back, you cannot opt for the old regime again.

For a small online seller this usually settles the matter. Presumptive tax under section 44AD already replaces most expense claims, and few sellers have Rs 5 lakh or more of personal deductions. Stay in the new regime unless the numbers clearly say otherwise, because the way back is one-way.

The mistake people usually make

They compare limits, not what they really spent. "I have 80C, 80D and a home loan" sounds like a lot, yet for Vikram it added up to Rs 3,75,000 and the old regime cost him Rs 42,900 more. The other mistake is declaring the old regime to the employer, then filing late, or filing with the default option left on. The return decides, and only a return filed on time can pick the old regime.

Should you do this yourself?

Yes, if you are salaried. The four steps above and your salary documents are enough. Take help if you have business income and are thinking of Form 10-IEA, capital gains taxed at special rates, or income above Rs 50 lakh, where surcharge changes the sums.

Frequently asked questions

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