The Two Tax Regimes
Since 2020, Indian taxpayers have had a choice between two income tax regimes. The new tax regime, updated significantly in Budget 2023 and 2024, offers lower tax rates but removes most deductions. The old regime allows various deductions but has higher tax slabs.
New Tax Regime: Slabs for FY 2025-26
Under the new regime, income up to ₹3 lakh is exempt. From ₹3-7 lakh: 5%, ₹7-10 lakh: 10%, ₹10-12 lakh: 15%, ₹12-15 lakh: 20%, above ₹15 lakh: 30%. If your income is ₹7 lakh or less, you pay zero tax due to the Section 87A rebate.
Who Should Choose the New Regime?
The new regime benefits taxpayers with fewer deductions. If your deductions (80C + HRA + 80D + others) are less than ₹3-3.5 lakh, the new regime typically saves more tax. Use our Income Tax Calculator to compare both regimes instantly.
Who Should Stick with the Old Regime?
If you are maximizing deductions — ₹1.5L in 80C (ELSS, PPF, home loan principal), ₹25,000+ in 80D (health insurance), claiming HRA, and have a home loan — the old regime can save significantly more tax, especially at higher income levels.