> **This article covers AY 2025-26 (FY 2024-25).** For the current year (FY 2025-26 / AY 2026-27) — new-regime nil band up to ₹4,00,000 and Section 87A rebate up to ₹60,000 for total income up to ₹12,00,000 — read [New vs Old Tax Regime — Which Is Better for You in FY 2025-26?](/blog/new-vs-old-tax-regime-fy-2025-26).

## Old vs New Tax Regime: AY 2025-26

The **new tax regime became the default** under Section 115BAC(1A) of the Income Tax Act from AY 2024-25 onwards. For AY 2025-26 (FY 2024-25), if you do not explicitly opt for the old regime when filing your ITR, the new regime applies automatically.

## New Tax Regime Slabs (AY 2025-26)

| Income Range | Tax Rate |
|---|---|
| Up to ₹3,00,000 | NIL |
| ₹3,00,001 – ₹7,00,000 | 5% |
| ₹7,00,001 – ₹10,00,000 | 10% |
| ₹10,00,001 – ₹12,00,000 | 15% |
| ₹12,00,001 – ₹15,00,000 | 20% |
| Above ₹15,00,000 | 30% |

**Section 87A rebate**: For new regime — full rebate up to ₹25,000 if total income does not exceed ₹7,00,000. This effectively means **zero tax for income up to ₹7 lakh**.

**Standard deduction**: ₹75,000 is available under the new regime for salaried persons (enhanced in Budget 2024).

## Old Tax Regime Slabs (AY 2025-26)

| Income Range | Tax Rate |
|---|---|
| Up to ₹2,50,000 | NIL |
| ₹2,50,001 – ₹5,00,000 | 5% |
| ₹5,00,001 – ₹10,00,000 | 20% |
| Above ₹10,00,000 | 30% |

Section 87A rebate under old regime: up to ₹12,500 if total income does not exceed ₹5,00,000.

## When Does the Old Regime Still Win?

The old regime benefits those with **high deductions and exemptions**:

- **Section 80C** deductions (PPF, ELSS, LIC, home loan principal) up to ₹1.5 lakh
- **Section 80D** (health insurance premium) up to ₹25,000 (₹50,000 for senior citizens)
- **HRA exemption** for those living in rented accommodation
- **Home loan interest** under Section 24(b) up to ₹2 lakh
- **LTA, leave encashment, gratuity** exemptions
- **Section 80CCD(1B)** additional NPS contribution up to ₹50,000

**Rule of thumb**: If your total deductions and exemptions exceed approximately ₹3.75 lakh (at 30% slab), the old regime saves more. Below that, the new regime is usually better.

## Quick Comparison Scenario

**Scenario: Salaried person, income ₹12 lakh, HRA ₹1.8L, 80C ₹1.5L, 80D ₹25,000**

| | Old Regime | New Regime |
|---|---|---|
| Gross Income | ₹12,00,000 | ₹12,00,000 |
| Standard Deduction | ₹50,000 | ₹75,000 |
| HRA Exempt | ₹1,80,000 | — |
| 80C | ₹1,50,000 | — |
| 80D | ₹25,000 | — |
| Taxable Income | ₹7,95,000 | ₹11,25,000 |
| Tax (approx.) | ₹82,500 | ₹1,05,000 |
| **Winner** | **Old Regime** | |

## How to Switch Regimes

- **Salaried employees**: Declare your choice to your employer at the start of the financial year. You can change at the time of filing the ITR if needed.
- **Business/profession income**: You can switch to old regime only once. After opting out of new regime, switching back is not allowed (Section 115BAC(6)).
- **[ITR filing](https://www.harunraaj.com/services/itr-filing)**: Select regime at the time of filing — the ITR software computes tax under both and lets you choose.

*Our team runs the comparison for every client and recommends the regime that minimises tax legally. [Start your ITR filing →](https://app.harunraaj.com)*

## Frequently Asked Questions

### Which tax regime is default for AY 2025-26 — old or new?

The new tax regime under Section 115BAC(1A) is the default from AY 2024-25 onwards. If you do not explicitly opt for the old regime when filing your ITR for AY 2025-26, the new regime applies automatically.

### Is there zero tax up to ₹7 lakh under the new regime?

Yes. Under Section 87A, the new regime offers a full rebate of up to ₹25,000 for taxable income not exceeding ₹7,00,000. Combined with the ₹75,000 standard deduction for salaried persons, effective zero tax applies for gross salary income up to approximately ₹7.75 lakh.

### When is the old tax regime better than the new regime?

The old regime is generally better when your total deductions and exemptions — including Section 80C (₹1.5 lakh), Section 80D, HRA exemption, and home loan interest under Section 24(b) — exceed approximately ₹3.75 lakh. Below that threshold, the new regime's lower slab rates usually save more.

### Can I switch between old and new tax regime every year?

Salaried employees can switch between regimes each year at the time of filing their ITR. However, individuals with business or professional income face a restriction under Section 115BAC(6) — once they opt out of the new regime, they cannot switch back.

### Does the new tax regime allow any deductions at all?

The new regime allows a standard deduction of ₹75,000 for salaried persons (enhanced in Budget 2024) and employer's NPS contribution under Section 80CCD(2). However, most other deductions — Section 80C, 80D, HRA, home loan interest under Section 24(b) — are not available under the new regime.

I'm CA Harun Raaj, Visakhapatnam. If any of this affects you or your business, reach out — I'd be glad to help.

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## See Also

- [Your RSUs Are Not Just Salary: The Two Separate Disclosures Required in AY 2026-27 ITR](https://www.harunraaj.com/blog/schedule-fa-rsu-foreign-assets-itr-2-ay-2026-27)
- [ESOP Tax Deferral for Startup Employees: The 48-Month Mechanism Most Tax Advisors Misexplain](https://www.harunraaj.com/blog/esop-tax-deferral-80-iac-startup-employees)
- [Section 80-IAC Tax Holiday: How Startups Actually Get the IMB Certificate](https://www.harunraaj.com/blog/section-80-iac-imb-certificate-startup-tax-holiday)

Canonical: https://www.harunraaj.com/blog/old-regime-vs-new-regime-2025-26