Every financial year, salaried Indians face the same question: old regime or new regime? The old regime taxes you at higher slab rates but lets you reduce your taxable income with deductions — 80C investments like EPF and ELSS, HRA exemption, 80D health insurance premiums, home loan interest and more. The new regime offers lower slab rates and a simpler structure, but takes away almost all those deductions. Picking the wrong one can cost you tens of thousands of rupees, yet most people choose based on guesswork or what a colleague did.
For FY 2025-26, the choice got more interesting. The new regime now effectively makes salaried income up to ₹12.75 lakh tax-free, thanks to a higher rebate under Section 87A combined with the ₹75,000 standard deduction. That makes the new regime the better deal for a large share of taxpayers — but not everyone. If you claim heavy deductions, especially HRA in a metro city plus full 80C and home loan interest, the old regime can still win.
This calculator puts both regimes side by side using your actual numbers. Enter your income and deductions, and it applies the FY 2025-26 slabs, the standard deduction, the rebate and the 4% health and education cess to show which regime leaves more money in your pocket.
How it works
Under the new regime for FY 2025-26, income is taxed in slabs: nothing on the first ₹4 lakh, 5% on ₹4–8 lakh, 10% on ₹8–12 lakh, 15% on ₹12–16 lakh, 20% on ₹16–20 lakh, 25% on ₹20–24 lakh and 30% above ₹24 lakh. Salaried taxpayers get a ₹75,000 standard deduction off the top. Then comes the big relief: if your taxable income is ₹12 lakh or less, a rebate under Section 87A wipes your tax out completely — which, with the standard deduction, means salary income up to ₹12.75 lakh pays zero tax. A 4% health and education cess is added on top of whatever tax remains.
The old regime works differently. Its slabs are steeper — nil up to ₹2.5 lakh, 5% to ₹5 lakh, 20% to ₹10 lakh and 30% beyond — but you first subtract everything you can: the ₹50,000 standard deduction, up to ₹1.5 lakh under 80C, HRA exemption, 80D premiums, home loan interest up to ₹2 lakh and so on. Its rebate covers taxable income only up to ₹5 lakh. The calculator runs your numbers through both systems, adds the 4% cess to each, and compares the final bills. Tax slabs, rebates and deduction limits change with nearly every budget, so always verify the current year’s rules before filing.
How to use this tool
- Enter your gross annual income, including salary, bonuses and allowances.
- Enter the deductions you actually claim — 80C, 80D, HRA exemption and any others.
- Check that the financial year shown is 2025-26.
- Click Calculate to see your estimated tax under both regimes, including cess.
- Pick the lower-tax regime when you file — salaried taxpayers can choose afresh every year.
Practical tips
- Don't guess your deductions — add up your actual 80C, 80D and HRA figures; the answer flips on surprisingly small amounts.
- Remember the new regime's ₹12.75 lakh zero-tax limit already includes the ₹75,000 standard deduction; don't subtract it twice.
- If you have a home loan, run the numbers carefully — the old regime's interest deduction often keeps it competitive despite higher slabs.
- Salaried employees can switch regimes every year, so re-check each financial year instead of sticking with last year's choice out of habit.
Frequently asked questions
Which regime is better for FY 2025-26?
It depends entirely on your deductions. As a rough rule, if your total deductions cross roughly ₹4–5 lakh — common with HRA in a metro plus full 80C and 80D — the old regime often wins. Below that, the new regime's lower rates and the rebate up to ₹12.75 lakh of salary usually win. There is no universal answer, which is exactly why running your own numbers matters.
What are the new regime slabs for FY 2025-26?
Nil up to ₹4 lakh, 5% on ₹4–8 lakh, 10% on ₹8–12 lakh, 15% on ₹12–16 lakh, 20% on ₹16–20 lakh, 25% on ₹20–24 lakh and 30% above ₹24 lakh, plus 4% health and education cess. Salaried taxpayers also get a ₹75,000 standard deduction, and a Section 87A rebate makes taxable income up to ₹12 lakh effectively tax-free.
What is the Section 87A rebate?
Section 87A wipes your tax to zero when taxable income is within the limit — ₹12 lakh under the new regime for FY 2025-26 (₹12.75 lakh of salary with the standard deduction), and ₹5 lakh under the old regime. Earn just above the limit and slab tax applies in full, though marginal relief softens the jump immediately above the threshold.
Can I switch regimes every year?
Salaried individuals can choose between the old and new regimes every financial year at the time of filing. People with business income face restrictions — once they opt out of the new regime, switching back is limited. For most salaried taxpayers, the practical approach is simple: compare both regimes each year and pick the cheaper one.
Should I choose the old regime if I have a home loan?
Quite possibly. The old regime allows up to ₹2 lakh yearly interest deduction on a self-occupied home plus principal under 80C — often enough to make it win. Enter your actual interest figure rather than assuming; the new regime offers no such deduction.
Does the calculator include surcharge and cess?
It includes the 4% health and education cess on your tax. Surcharge on very high incomes (above ₹50 lakh) and special-rate incomes like capital gains are not modelled — this tool is designed for typical salary income. If your income crosses surcharge thresholds or includes large capital gains, consult a tax professional for an exact figure.
Note: Estimates for planning only. Tax slabs, rebates and deduction limits change with each budget — verify the current year's rates before filing. This tool is not tax or financial advice; consult a qualified professional for your specific situation.