Old vs New Tax Regime (FY 2025-26): Which One Saves You More?

The one number that decides it

The new regime gives you a ₹75,000 standard deduction and almost nothing else. The old regime gives you ₹50,000 plus every deduction you can substantiate — 80C, 80D, HRA, home-loan interest, the extra NPS deduction. So the whole decision reduces to one question: are your old-regime deductions big enough to beat the new regime’s cheaper slabs? That break-even is a specific rupee figure, it depends only on your gross salary, and it is larger than most people assume.

The slabs, side by side

These are FY 2025-26 (AY 2026-27) rates, which Budget 2026 left unchanged for FY 2026-27. Read them against taxable income — gross salary minus the standard deduction, and in the old regime minus your deductions too.

The gap in the middle is what drives everything else. Between ₹5 lakh and ₹12 lakh of taxable income the old regime charges 20% or 30% where the new regime charges 5% or 10%. A 4% health and education cess sits on top of the tax in both regimes, and every rupee figure in this guide already includes it.

Up to ₹12.75 lakh, the new regime wins and nothing changes that

The Section 87A rebate cancels the tax entirely when new-regime taxable income is ₹12,00,000 or less. Add the ₹75,000 standard deduction and a salaried person owes zero income tax on a gross salary of ₹12,75,000. Put ₹12,75,000 into our income tax calculator and the new-regime tax is ₹0; raise the gross to ₹12,76,000 and it becomes ₹1,040.

The old regime cannot reach that. Its own 87A rebate stops at ₹5,00,000 of taxable income, so someone on ₹12,75,000 needs ₹7,25,000 of deductions merely to tie at zero. At a realistic ₹3,00,000 of deductions the old regime charges ₹1,01,400 on the same salary. If you earn under ₹12.75 lakh, the choice is already made.

The marginal relief band just above ₹12 lakh

Without a fix, crossing ₹12,00,000 taxable by one rupee would trigger the full slab tax on everything above ₹4 lakh. Marginal relief prevents that by capping the tax at the amount by which your income exceeds ₹12,00,000. At ₹12,25,000 taxable — a ₹13,00,000 gross salary — the slab tax would be ₹63,750, but our calculator charges ₹26,000. The cap stops binding around ₹12,70,588 taxable, where the ordinary slab tax falls below it on its own.

What counts towards the old-regime total

Before you can compare, you need an honest number for your deductions. The main ones a salaried taxpayer can stack, with their FY 2025-26 limits:

• Section 80C — ₹1,50,000. A single shared ceiling covering EPF and voluntary PF, PPF, ELSS, life insurance premiums, five-year tax-saving deposits, principal repayment on a home loan and tuition fees for up to two children. Your own EPF deduction already fills part of it before you buy anything.
• Section 80D — health insurance premiums. Separate from 80C, with a higher ceiling where you also pay for senior-citizen parents.
• Section 10(13A) — the HRA exemption. Not a deduction in form but the same in effect, and usually the biggest item for a renter. It is the least of three limbs, so it is normally well below the HRA on your payslip.
• Section 24(b) — ₹2,00,000 of home-loan interest on a self-occupied property. This is the item that most often decides the answer, because it is large and requires no additional spending once you have the loan.
• Section 80CCD(1B) — ₹50,000 into NPS, over and above the 80C ceiling.

Total those honestly, using only what you can produce proof for, then compare against the break-even for your income below. Deductions you hope to make by March are not deductions.

How much you must deduct for the old regime to win

The last column is the break-even: the total old-regime deductions (excluding the standard deduction) at which the old regime matches or beats the new one. Every figure is our calculator’s output for a salaried taxpayer with no other income.

Note what the ₹5,00,000 column shows: a taxpayer with a maxed-out 80C, a health policy, the extra NPS deduction and a decent HRA exemption — a stack most salaried people would call aggressive — is still paying more under the old regime at ₹15 lakh, ₹20 lakh and ₹30 lakh.

A worked example at ₹15 lakh gross

Take a salaried renter in Mumbai on ₹15,00,000 with an HRA exemption of ₹2,40,000, ₹1,50,000 under 80C, ₹25,000 of health premium under 80D and ₹50,000 into NPS under 80CCD(1B) — ₹4,65,000 in total.

• Old regime: taxable income ₹9,85,000, tax ₹1,13,880, effective rate 7.59%.
• New regime: taxable income ₹14,25,000, tax ₹97,500, effective rate 6.5%.

The new regime is ₹16,380 cheaper, despite ₹4.65 lakh of deductions going unused. Now give the same person a home loan with ₹2,00,000 of deductible interest under Section 24(b), taking the stack to ₹6,65,000. Old-regime taxable income drops to ₹7,85,000 and the tax to ₹72,280 — now ₹25,220 cheaper than the new regime. That single item is what flips most real cases.

Above ₹25 lakh, the target is a flat ₹8 lakh

Once your top rupee is taxed at 30% in both regimes, the difference between them stops moving and the break-even freezes. From about ₹24,75,000 gross upward it is exactly ₹8,00,000 of deductions: at ₹25,00,000 both regimes charge ₹3,19,800, at ₹30,00,000 both charge ₹4,75,800, and at ₹50,00,000 both charge ₹10,99,800. High earners therefore have a simple test — total your provable deductions, and if they clear ₹8 lakh, the old regime is worth the paperwork.

What to check beyond the arithmetic

• The new regime is the default. Under Section 115BAC you get new-regime TDS unless you actively tell payroll otherwise, so the old regime needs a declaration, not just an intention.
• Deductions must be real spending. Locking ₹1.5 lakh into an 80C product you did not want, to save tax at 30%, is a poor trade. Deductions you already generate — rent, an existing EMI, a health policy — are free; manufactured ones are not.
• Rent is the biggest lever. If you rent in Delhi, Mumbai, Kolkata or Chennai, work out your exemption with the HRA calculator before you decide; our guide to the HRA exemption explains why the three-limb rule often pays less than the HRA on your payslip.
• Your monthly cash flow changes either way. The regime you pick changes TDS, not just the annual bill. Our CTC to in-hand calculator shows the monthly difference, and the CTC vs take-home guide breaks down where the rest of the package goes.

Running it on your own numbers

The comparison takes about two minutes if you do it in this order. First, take gross salary for the year including all allowances but excluding the employer’s PF contribution — that is the figure the tax slabs apply to, and it is lower than your CTC. Second, work out your HRA exemption separately, because it is the one deduction that cannot be read off a receipt. Third, add the rest of your deductions and enter the total in the old-regime box.

Then read the two tax figures the calculator produces side by side. If they are within a few thousand rupees of each other, choose the new regime: the arithmetic is a wash and you save yourself a year of collecting proofs. The old regime only justifies itself when it wins by enough to be worth the administration, and in practice that means a home loan, a large rent bill, or both.

What our calculator models — and what it leaves out

The income tax tool applies the FY 2025-26 slabs for both regimes, the standard deduction (₹75,000 new, ₹50,000 old), the Section 87A rebate, new-regime marginal relief and the 4% cess. It takes your old-regime deductions as a single total, which you supply.

It does not model the surcharge that applies at higher income levels, the separate slabs for senior and super-senior citizens, or the special rates on capital gains. If you have listed equity gains, dividend income or a substantial surcharge exposure, treat the output as the salary part of your bill only.

These are planning estimates, not tax advice. Slabs, thresholds and deduction limits change with every Budget, and the figures here are FY 2025-26 rules as they stand in July 2026. Before you file, or before you commit money to a tax-saving product, confirm your position with a chartered accountant or against the Income Tax Department’s own site.