New Tax Regime vs Old Tax Regime FY 2025-26: Complete Tax Slab Comparison

Key Takeaways

• The New Tax Regime is the default tax regime for FY 2025-26 with a ₹75,000 standard deduction.
• Income up to ₹7 Lakhs incurs zero net tax under the New Tax Regime due to 100% Section 87A rebate.
• The Old Tax Regime remains beneficial ONLY if your total tax deductions (80C, 80D, HRA, Sec 24b) exceed ₹3.75 Lakhs to ₹4 Lakhs.
• Employer NPS contribution under Section 80CCD(2) up to 14% of Basic + DA is tax-deductible under BOTH tax regimes.

Overview of Tax Regimes in India for FY 2025-26

Budget announcements reinforced the New Tax Regime as the default tax framework for salaried individuals and taxpayers in India. However, taxpayers still retain the option to switch to the Old Tax Regime at the time of filing their Income Tax Return (ITR).

• New Tax Regime Default: Features lower tax slab rates and wider income brackets, but disallows traditional deductions like 80C, 80D, and HRA.
• Standard Deduction Boost: Salaried employees get an increased Standard Deduction of ₹75,000 under the New Tax Regime (compared to ₹50,000 under the Old Regime).

Income Tax Slab Rates Comparison (FY 2025-26 / AY 2026-27)

Understanding the exact tax slab rates helps you calculate tax liabilities accurately:

• New Regime Slabs: ₹0 to ₹3L (Nil), ₹3L to ₹7L (5%), ₹7L to ₹10L (10%), ₹10L to ₹12L (15%), ₹12L to ₹15L (20%), Above ₹15L (30%).
• Old Regime Slabs: ₹0 to ₹2.5L (Nil), ₹2.5L to ₹5L (5%), ₹5L to ₹10L (20%), Above ₹10L (30%).

Section 87A Tax Rebate & Marginal Relief

Under the New Tax Regime, taxable income up to ₹7,000,000 receives a full Section 87A tax rebate of up to ₹25,000, reducing net tax payable to zero. If your income slightly exceeds ₹7 Lakhs, marginal relief ensures your tax does not exceed the income earned above ₹7 Lakhs.

Frequently Asked Questions