The Big Question Every Taxpayer Faces
Every financial year, millions of taxpayers grapple with the same question: Should I stick with the old regime or switch to the new one? With the Income Tax Act, 2025 now in effect and the new regime as the default, this decision is more important — and more nuanced — than ever.
New Tax Regime Slabs for FY 2026-27
| Income Range | Tax Rate |
|---|---|
| Up to ₹4,00,000 | Nil |
| ₹4,00,001 – ₹8,00,000 | 5% |
| ₹8,00,001 – ₹12,00,000 | 10% |
| ₹12,00,001 – ₹16,00,000 | 15% |
| ₹16,00,001 – ₹20,00,000 | 20% |
| ₹20,00,001 – ₹24,00,000 | 25% |
| Above ₹24,00,000 | 30% |
Section 87A Rebate: Up to ₹60,000 — making income up to ₹12 lakh effectively tax-free.
Standard Deduction: ₹75,000 for salaried individuals — so income up to ₹12.75 lakh is zero-tax.
What’s Allowed in the New Regime?
- ✅ Standard Deduction of ₹75,000
- ✅ Employer’s NPS contribution (Sec 80CCD(2)) up to 14% of salary
- ✅ Family pension deduction up to ₹25,000
- ❌ HRA exemption
- ❌ Section 80C (LIC, PPF, ELSS, etc.)
- ❌ Section 80D (Health Insurance Premium)
- ❌ Home loan interest (Sec 24b) for self-occupied property
- ❌ LTA, professional tax, and most other exemptions
When the Old Regime Still Wins
The old regime may be better if you have heavy deductions:
- Section 80C investments exceeding ₹1.5 lakh
- HRA exemption on high rent in metro cities
- Home loan interest on self-occupied property
- Health insurance premiums for family including senior citizen parents
Quick Decision Framework
| Your Profile | Best Regime |
|---|---|
| Income ≤ ₹12.75L, few deductions | New Regime ✅ |
| Income ₹12-20L, deductions > ₹3.75L | Old Regime ✅ |
| Income > ₹20L, no major deductions | New Regime ✅ |
| Income > ₹20L, max deductions (80C + HRA + 80D + 24b) | Calculate both 🧮 |
Not sure which regime saves you more? Book a free consultation with SmartAITax — our AI calculator compares both regimes for your exact salary structure in seconds.
