"Old regime or new regime?" is the single most-asked income-tax question in India — and for FY 2025-26 the answer changed again. Here is a plain-English guide to how the two regimes actually differ, who tends to win under each, and how to get your own answer in two minutes.
The new regime is now the default
Since Budget 2025, the new regime is the default for FY 2025-26 (AY 2026-27). Its headline: lower slab rates and a much bigger Section 87A rebate — zero tax up to ₹12 lakh of taxable income for most salaried taxpayers (₹12.75 lakh including the ₹75,000 standard deduction) — in exchange for giving up most deductions: 80C, 80D, HRA, home-loan interest on self-occupied property, and so on.
The old regime keeps those deductions and exemptions, but at higher slab rates. Salaried taxpayers who want it must actively opt for it; business owners must file Form 10-IEA and get limited chances to switch back.
Who tends to win where
- New regime usually wins if your deductions are thin: no HRA claim, modest 80C, no home loan. With income up to ~₹12.75 lakh, the rebate often takes your tax to zero.
- Old regime can still win if you stack deductions hard: full ₹1.5L in 80C, meaningful HRA in a metro, 80D health premiums, NPS, and home-loan interest. The break-even level of deductions rises with income — at higher incomes you need a substantial pile of deductions for the old regime to beat the new one.
- Capital gains change the math. Equity LTCG above the ₹1.25 lakh exemption is taxed at the same special rates in both regimes, but where your other income sits relative to slabs and rebate thresholds can tip the comparison either way.
The mistakes we see most often
- Assuming the 87A rebate applies to capital-gains income under the new regime — special-rate gains are excluded, and marginal relief near ₹12 lakh is widely misunderstood.
- Comparing regimes on salary alone and forgetting employer NPS (80CCD(2)) — one of the few deductions the new regime keeps, and one most salary structures underuse.
- Choosing a regime in July and discovering in March that a bonus, ESOP sale or side income flipped the answer months earlier.
Stop guessing — compute it
The honest answer to "which regime?" is always "it depends on your exact numbers" — so use your exact numbers. TaxSense AI, our income-tax copilot, computes both regimes side by side from a plain-language description of how you earn — section-cited, with the deductions you're missing quantified in rupees — and gives you a filing-ready PDF. It's free to try, right in your browser: taxsense-ai.vercel.app. Learn more on the TaxSense AI product page.
This article is general information, not tax advice. Computations referenced are per the Income-tax Act, 1961 (Finance Act 2025). Consult a professional for your specific situation.
Old vs New Tax Regime for FY 2025-26: which one actually saves you more?