The income tax return (ITR) filing season for FY 2025-26 (AY 2026-27) is underway, with the deadline for most individual taxpayers set for July 31, 2026. While the new tax regime is the default option, eligible taxpayers can still choose the old tax regime if it helps them save more tax. Here’s a simple guide to help you decide. (Representative Image: Pexels)
What Is The New Tax Regime?
The new tax regime is the default tax system. It offers lower tax rates but allows only a limited number of deductions and exemptions. (Representative Image: Pexels)
Tax Slabs Under The New Regime (FY 2025-26)
Under the new tax regime, income up to Rs 4 lakh is tax-free. Income between Rs 4 lakh and Rs 8 lakh is taxed at 5%, while income from Rs 8 lakh to Rs 12 lakh attracts 10% tax. Those earning between Rs 12 lakh and Rs 16 lakh pay 15%, income between Rs 16 lakh and Rs 20 lakh is taxed at 20%, earnings from Rs 20 lakh to Rs 24 lakh are taxed at 25%, and income above Rs 24 lakh is taxed at 30%. (Representative Image: Canva)
Who Pays Zero Tax Under The New Regime?
One of the biggest advantages of the new regime is the enhanced rebate under Section 87A, which ensures that individuals earning up to Rs 12 lakh annually pay no income tax. Salaried employees also receive a standard deduction of Rs 75,000, making income up to Rs 12.75 lakh effectively tax-free, provided there is no income taxed at special rates, such as certain capital gains. (Representative Image: Pexels)
What Is The Old Tax Regime?
The old tax regime continues to be available for taxpayers who want to claim a wide range of deductions and exemptions. While the tax rates are higher, the regime can help reduce taxable income significantly if you have eligible investments and expenses. (Representative Image: Pexels)
Tax Slabs Under The Old Regime
Under the old regime, income up to Rs 2.5 lakh is tax-free. Income between Rs 2.5 lakh and Rs 5 lakh is taxed at 5%, income from Rs 5 lakh to Rs 10 lakh is taxed at 20%, and income above Rs 10 lakh attracts a 30% tax rate. (Representative Image: Pexels)
What Are The Main Deductions Under The Old Regime?
The old regime allows taxpayers to claim several deductions that can substantially lower their taxable income. These include deductions of up to Rs 1.5 lakh under Section 80C for investments such as EPF, PPF, ELSS, tax-saving fixed deposits and life insurance. Taxpayers can also claim deductions under Section 80D for health insurance premiums, up to Rs 2 lakh as home loan interest deduction under Section 24(b) for a self-occupied property, along with exemptions for House Rent Allowance (HRA) and Leave Travel Allowance (LTA), subject to conditions. (Representative Image: Pexels)
Which Tax Regime Should You Choose?
The new tax regime is generally more suitable for salaried individuals earning up to Rs 12.75 lakh, those who do not claim HRA or home loan benefits, have limited tax-saving investments, or simply prefer a straightforward tax filing process. On the other hand, the old tax regime may be a better option for taxpayers who claim significant HRA, are repaying a home loan, fully utilise deductions under Sections 80C and 80D, or have substantial overall deductions. (Representative Image: Pexels)
According to tax experts, the old regime generally becomes more beneficial when total deductions are around Rs 3.75 lakh for an annual income of Rs 15 lakh, Rs 5.43 lakh for an income of Rs 20 lakh, and Rs 8 lakh for an income of Rs 30 lakh. As a general rule, if your total deductions exceed around Rs 7 lakh, the old regime is often likely to result in lower tax liability. (Representative Image: Pexels)
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