The Budget 2025 changes have made the new regime the default for most salaried taxpayers — and for incomes up to ₹12 lakh, your tax is effectively zero after the section 87A rebate. But that doesn't mean the old regime is dead. If you have a home loan, life insurance, school fees, and 80C/80D/HRA deductions stacking up, the old regime can still win.
What changed in FY 2025-26
- Standard deduction under the new regime: ₹75,000 (vs ₹50,000 in old).
- Rebate u/s 87A extended to total income up to ₹12,00,000 under the new regime.
- Revised slabs in the new regime — first ₹4L is nil, then 5% / 10% / 15% / 20% / 30% in successive ₹4L bands.
- Surcharge under new regime capped at 25% (vs 37% in old).
When the old regime still wins
Add up everything you can claim — typically:
- HRA exemption (often the biggest lever for renters)
- Section 80C: PF + ELSS + LIC + tuition + home-loan principal — capped at ₹1.5L
- Section 80D: health insurance for self + parents
- Home-loan interest under section 24(b) — capped at ₹2L for self-occupied
- NPS extra deduction under 80CCD(1B): ₹50,000
If your total deductions cross roughly ₹3.5–4L, the old regime usually beats the new one at incomes above ₹15L. Below that, the new regime's higher standard deduction and 87A rebate win.
Worked example: ₹18L salaried
- Gross salary ₹18,00,000.
- New regime: ₹75,000 standard ded → ₹17.25L taxable → ₹1,72,500 tax + 4% cess = ₹1,79,400.
- Old regime with ₹3.8L deductions: ₹13.7L taxable → ₹2,16,000 tax + cess = ₹2,24,640.
- Old regime with ₹5L deductions: ₹12.5L taxable → ₹1,87,500 tax + cess = ₹1,95,000.
How to switch regimes
Salaried (no business income): you can toggle every year while filing your ITR. Just tick the regime in ITR-1/2. Business income: you must file Form 10-IEA before the due date and can switch back only once in your lifetime.