Finance · 7 min read
Old vs New tax regime FY 2025-26: which one saves you more?
Every Indian salaried employee gets to choose: Old regime, with full deductions but higher tax slabs, or New regime, with revised slabs but almost no deductions. The right choice depends entirely on your deduction profile. Here's how to figure it out in 5 minutes.
By UltraConvert Editorial · Published · Updated
What changed in FY 2025-26
Budget 2025 sweetened the New regime significantly. The standard deduction went from ₹50,000 to ₹75,000. The tax-free threshold (via Section 87A rebate) was raised from ₹7L to ₹12L. The slabs were widened: 0% up to ₹4L, then 5/10/15/20/25/30% in ₹4L bands until ₹24L. Effectively, anyone earning under ₹12L pays zero income tax under the New regime. Under ₹15L, the New regime is a slam dunk for almost everyone.
When the Old regime still wins
The Old regime preserves all the classic deductions — 80C (₹1.5L for PPF/ELSS/EPF), 80D (₹25K-1L for medical), 80CCD(1B) (₹50K extra for NPS), HRA exemption, home loan interest u/s 24(b) (₹2L), 80E (education loan interest, no cap), 80G (donations). If you maxe these out, you can shield ₹4-5L of income on top of the standard deduction. For high earners (₹20L+) with a home loan and full 80C/80D, the Old regime still saves money.
The break-even rule of thumb
If your total deductions exceed roughly ₹3.75–4L, the Old regime wins. Below that, New regime wins by default. A single 80C investment of ₹1.5L isn't enough on its own — you need 80C + HRA + medical + something else. In practice, only homeowners with sizable interest deductions and people maxing every available section come out ahead under Old. Run both calculations to be sure.
Surcharge and cess: don't forget these
Both regimes layer on Health & Education cess (4% of tax). Above ₹50L taxable income, surcharge kicks in: 10% (₹50L-1Cr), 15% (1-2Cr), 25% (2-5Cr). The Old regime additionally has a 37% surcharge tier above ₹5Cr; the New regime caps at 25%. For ultra-high earners, this is one of the few clear advantages of New over Old.
When to switch
You can switch between regimes once a year (declaration to your employer in April). If you took a home loan mid-year and now have meaningful interest deduction, switch to Old. If your kid's school fees stopped being a qualifying 80C item (because they graduated), switch to New. Don't optimize once and forget — re-run the math every year.
Use the calculator
Plug your gross salary and deductions into our income tax calculator. It computes both regimes side-by-side, includes 87A rebate, surcharge, and 4% cess, and tells you which one saves more. The slabs are FY 2025-26 (AY 2026-27) and the tool has no server — your salary stays in your browser.