Old vs New Tax Regime 2025-26: Which Saves You More Money?
Choosing between the old and new tax regime can save you thousands of rupees annually. This comprehensive guide compares both regimes with real-world examples to help you make the right choice for FY 2025-26.
Key Takeaways:
- New regime offers lower rates but no deductions
- Old regime allows deductions but has higher rates
- New regime better for income ₹7L-15L with low deductions
- Old regime better for high earners with ₹2L+ deductions
- You can switch regimes every year (salaried employees)
Quick Comparison Overview
Up to ₹12L income
Up to ₹7L income
Example 1: ₹8 Lakh Annual Income
New Regime
Gross Income: ₹8,00,000
Less: Std Deduction: ₹75,000
Taxable Income: ₹7,25,000
Tax Calculation:
₹0-3L: ₹0
₹3L-7L: ₹20,000
₹7L-7.25L: ₹1,250
Total Tax: ₹21,250
Add Cess (4%): ₹850
Final Tax: ₹22,100
Old Regime
Gross Income: ₹8,00,000
Less: 80C: ₹1,50,000
Less: Std Deduction: ₹50,000
Taxable Income: ₹6,00,000
Tax Calculation:
₹0-2.5L: ₹0
₹2.5L-5L: ₹12,500
₹5L-6L: ₹20,000
Total Tax: ₹32,500
Add Cess (4%): ₹1,300
Final Tax: ₹33,800
✅ New Regime saves ₹11,700 for ₹8L income!
Example 2: ₹15 Lakh Annual Income with High Deductions
New Regime
Gross Income: ₹15,00,000
Less: Std Deduction: ₹75,000
Taxable Income: ₹14,25,000
Tax: ₹1,62,500
Add Cess (4%): ₹6,500
Final Tax: ₹1,69,000
Old Regime
Gross Income: ₹15,00,000
Less: 80C: ₹1,50,000
Less: 80D: ₹25,000
Less: HRA: ₹2,00,000
Less: Home Loan: ₹2,00,000
Less: Std Ded: ₹50,000
Taxable Income: ₹8,75,000
Tax: ₹90,000
Add Cess (4%): ₹3,600
Final Tax: ₹93,600
✅ Old Regime saves ₹75,400 for ₹15L income with high deductions!
Who Should Choose Which Regime?
Choose New Regime If:
- ✓Your annual income is between ₹7-15 lakh
- ✓You have minimal deductions (below ₹1.5 lakh)
- ✓You don't receive HRA or live with parents
- ✓You prefer simple tax planning
- ✓You're a first-time taxpayer
Choose Old Regime If:
- ✓You have deductions exceeding ₹2 lakh
- ✓You pay rent in metro cities (high HRA)
- ✓You have a home loan (interest deduction)
- ✓You invest heavily in tax-saving instruments
- ✓Your income is above ₹15 lakh with deductions
Not Sure Which Regime Saves You More?
Use our free tax calculator to compare both regimes instantly with your exact income and deductions.
Disclaimer: Tax calculations are for informational purposes based on FY 2025-26 rules. Consult a qualified tax advisor for personalized advice.