As the ITR filing season for FY 2025-26 (Assessment Year 2026-27) kicks off, lakhs of salaried employees across India are asking the same question:
Which tax regime should I choose — Old or New?
With Budget 2025 continuing the New Tax Regime as the default and offering a higher standard deduction of Rs. 75,000, this guide explains everything you need to decide — income tax slabs, deductions, rebates, salary examples, take-home comparison, and CTC impact.
Income Tax Slabs for FY 2025-26
New Tax Regime (Default from FY 2025-26)
| Taxable Income Range | Tax Rate |
|---|---|
| Up to Rs. 3,00,000 | Nil |
| Rs. 3,00,001 – 6,00,000 | 5% |
| Rs. 6,00,001 – 9,00,000 | 10% |
| Rs. 9,00,001 – 12,00,000 | 15% |
| Rs. 12,00,001 – 15,00,000 | 20% |
| Above Rs. 15,00,000 | 30% |
Key benefits:
- Standard deduction of Rs. 75,000 (for salaried/pensioners)
- Full tax rebate under Section 87A if taxable income is up to Rs. 7.5 lakh
- No deductions allowed (like 80C, HRA, etc.)
Old Tax Regime
| Taxable Income Range | Tax Rate |
|---|---|
| Up to Rs. 2,50,000 | Nil |
| Rs. 2,50,001 – 5,00,000 | 5% |
| Rs. 5,00,001 – 10,00,000 | 20% |
| Above Rs. 10,00,000 | 30% |
Key features:
- Standard deduction of Rs. 50,000
- Allows deductions like 80C (Rs. 1.5 lakh), 80D (health insurance), HRA, and home loan interest
- Full tax rebate only if taxable income is up to Rs. 5 lakh
Typical Deductions Available in Old Tax Regime
Most salaried taxpayers can typically claim the following deductions:
- Section 80C: Rs. 1.5 lakh (includes PF, LIC, PPF, ELSS)
- Section 80D: Rs. 25,000 to Rs. 50,000 (depending on parents’ age)
- HRA: Rs. 2 to 4 lakh in metro cities depending on rent and salary structure
- Home Loan Interest: Up to Rs. 2 lakh (Section 24b)
- NPS (additional under 80CCD(1B)): Rs. 50,000
With a combination of these, deductions can reach Rs. 4 to 6 lakh or even higher in some cases.
CTC vs In-Hand Salary: Regime-Wise Comparison
We’ve compared old and new tax regimes for typical CTC levels. These examples assume standard payroll structure and common deduction claims under old regime.
CTC Rs. 12,00,000
Old Regime (claimed: 80C, 80D, HRA): Rs. 3 lakh deductions
- Taxable Income: Rs. 8.5 lakh
- Tax: Rs. 77,500
- In-hand salary: approx Rs. 80,500/month
New Regime
- Taxable income after standard deduction: Rs. 11.25 lakh
- Tax before rebate: Rs. 52,500
- Rebate u/s 87A: Rs. 52,500
- Final Tax: Zero
- In-hand: approx Rs. 83,000/month
Verdict: New Regime is better due to full tax rebate.
CTC Rs. 15,00,000
Old Regime (deductions: Rs. 4 lakh)
- Taxable: Rs. 10.5 lakh
- Tax: Rs. 1.42 lakh
New Regime
- Taxable: Rs. 14.25 lakh
- Tax: Rs. 1.42 lakh
Verdict: Almost same. Old Regime better if you claim full deductions.
CTC Rs. 18,00,000
Old Regime (deductions: Rs. 7.3 lakh)
- Taxable: Rs. 10.7 lakh
- Tax: Rs. 1.46 lakh
New Regime
- Taxable: Rs. 17.25 lakh
- Tax: Rs. 1.56 lakh
Verdict: Old Regime better by about Rs. 10,000. Only makes sense if you fully utilize deductions.
CTC Rs. 22,00,000
Old Regime (deductions: Rs. 9.1 lakh incl. Rs. 2 lakh home loan interest)
- Taxable: Rs. 12.9 lakh
- Tax: Rs. 2.07 lakh
New Regime
- Taxable: Rs. 21.25 lakh
- Tax: Rs. 2.37 lakh
Verdict: Old Regime better by about Rs. 30,000. But ensure proper documentation if claiming both home loan and HRA.
Summary Table – Which Regime is Better?
| CTC Range | Best Regime | Why? |
|---|---|---|
| Rs. 12,00,000 | New Regime | Zero tax due to 87A rebate |
| Rs. 15,00,000 | Old Regime | Better if you claim more than Rs. 3.5L in deductions |
| Rs. 18,00,000 | Old Regime | Slightly lower tax if deductions are Rs. 7L+ |
| Rs. 22,00,000 | Old Regime | Tax saving of ~Rs. 30,000 with home loan and HRA claimed |
Important Note
Many salaried professionals — even those who used to aggressively claim deductions — are now switching to the New Regime for simplicity and peace of mind.
Why?
- No need to submit rent agreements, LIC receipts, or investment proofs
- No risk of deduction rejection by employers
- Transparent and clean compliance, especially useful for salaried individuals not investing fully in 80C/80D
If your deductions are limited or you want to reduce paperwork and audit exposure, New Regime is worth considering.
Want to Compare It Yourself?
Use our free Income Tax Calculator to compare both regimes based on your salary and actual deductions.
Written by Team Stox N Tax
Clarity, Comparisons, and Compliance — made simple for you.
Stox N Tax 
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