The two regimes in one paragraph
Every individual can pay tax under one of two sets of rules. The new regime (section 115BAC) has lower slab rates and a higher rebate, but allows very few deductions. The old regime has higher rates but lets you reduce taxable income with deductions such as section 80C, 80D, HRA and home-loan interest. The new regime applies automatically unless you choose the old one.
This guide covers income earned in financial year 2025-26 (1 April 2025 to 31 March 2026), returns for which are filed in assessment year 2026-27. These returns are still governed by the Income-tax Act, 1961, even though the new Income-tax Act, 2025 applies from 1 April 2026.
New regime: slabs, rebate and standard deduction
| Total income (new regime) | 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% |
- Rebate under section 87A: up to ₹60,000, so a resident individual with total income up to ₹12,00,000 pays no tax. The rebate does not apply to special-rate income such as capital gains taxed under sections 111A or 112A.
- Marginal relief: if total income is a little above ₹12 lakh, the tax payable cannot be more than the income above ₹12 lakh. On ₹12,10,000, for example, the slab tax of ₹61,500 is limited to ₹10,000.
- Standard deduction for salary and pension: ₹75,000. So a salaried person with salary up to about ₹12,75,000 and no other income pays no tax.
- Still allowed in the new regime: employer's contribution to NPS under section 80CCD(2), the standard deduction, deduction for family pension, and interest on a let-out property's home loan against its rent.
- Not allowed: 80C, 80D, HRA exemption, leave travel allowance, interest on a self-occupied house's loan, 80G donations and most other Chapter VI-A deductions.
Old regime: slabs and main deductions
| Total income (old regime, below 60) | 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% |
For residents aged 60 to 79 the nil slab goes up to ₹3,00,000, and for those 80 and above up to ₹5,00,000. The rebate under 87A is up to ₹12,500, so total income up to ₹5,00,000 is tax-free. The standard deduction for salary is ₹50,000.
The deductions that most often make the old regime worthwhile are:
- Section 80C: up to ₹1,50,000 (provident fund, PPF, ELSS, life insurance premium, children's tuition fees, home-loan principal)
- Section 80CCD(1B): an extra ₹50,000 for your own NPS contribution
- Section 80D: health insurance premium, up to ₹25,000 for self and family, plus up to ₹50,000 for senior-citizen parents
- HRA exemption for salaried people paying rent
- Section 24(b): up to ₹2,00,000 of interest on a loan for a self-occupied house
Health and education cess of 4% applies to the tax under both regimes. Surcharge applies only above ₹50 lakh of income.
Worked examples
Example 1: salary ₹15 lakh with common deductions
| New regime | Old regime | |
|---|---|---|
| Salary | ₹15,00,000 | ₹15,00,000 |
| Standard deduction | − ₹75,000 | − ₹50,000 |
| Section 80C (PF, ELSS, insurance) | — | − ₹1,50,000 |
| Section 80D (health insurance) | — | − ₹25,000 |
| Home-loan interest, self-occupied (24(b)) | — | − ₹2,00,000 |
| Taxable income | ₹14,25,000 | ₹10,75,000 |
| Tax on slabs | ₹93,750 | ₹1,35,000 |
| Health and education cess (4%) | ₹3,750 | ₹5,400 |
| Total tax | ₹97,500 | ₹1,40,400 |
Even with ₹3.75 lakh of deductions, the new regime saves about ₹43,000.
Example 2: salary ₹10 lakh
New regime: ₹10,00,000 − ₹75,000 = ₹9,25,000. This is below ₹12 lakh, so the rebate wipes out the tax: nil. Old regime with 80C and 80D in full: taxable ₹7,75,000, tax ₹67,500 + cess = ₹70,200.
Example 3: salary ₹24 lakh with heavy deductions
| New regime | Old regime | |
|---|---|---|
| Salary | ₹24,00,000 | ₹24,00,000 |
| Standard deduction | − ₹75,000 | − ₹50,000 |
| HRA exemption | — | − ₹3,00,000 |
| 80C + 80CCD(1B) NPS | — | − ₹2,00,000 |
| 80D (self and senior-citizen parents) | — | − ₹75,000 |
| Home-loan interest (24(b)) | — | − ₹2,00,000 |
| Taxable income | ₹23,25,000 | ₹15,75,000 |
| Tax on slabs | ₹2,81,250 | ₹2,85,000 |
| Cess (4%) | ₹11,250 | ₹11,400 |
| Total tax | ₹2,92,500 | ₹2,96,400 |
Here the taxpayer claims ₹8.25 lakh of deductions and exemptions, and the two regimes are within about ₹4,000 of each other. This is roughly the point where the old regime starts to compete. With even larger deductions it can win, but for most salaried people in FY 2025-26 it no longer does.
These examples assume a resident individual below 60 with only salary income. Capital gains, business income, agricultural income and surcharge change the result. Always run your own figures.
How and when you choose
- Salaried, no business income: you can choose afresh every year, while filing your return. What you told your employer for TDS does not lock you in.
- Business or professional income (ITR-3, ITR-4): to use the old regime you must opt out of the new regime by filing Form 10-IEA on or before the due date of the return. You can switch back to the new regime later, but you can make the move out of the new regime only once.
- The option must be exercised in a return filed by the due date. A belated return (filed after the due date) is taxed under the new regime.
Key dates for AY 2026-27
| Who | Due date for the return |
|---|---|
| Individuals not liable to audit (ITR-1, ITR-2) | 31 July 2026 |
| ITR-3 and ITR-4 cases not liable to audit | 31 August 2026 |
| Cases liable to tax audit | 31 October 2026 |
| Belated return (any of the above) | 31 December 2026 |
A belated return attracts a late fee of ₹1,000 if total income is up to ₹5 lakh and ₹5,000 above that, plus interest at 1% a month on unpaid tax. Due dates are sometimes extended; check the e-filing portal for the latest announcements.
Frequently asked questions
Is income up to ₹12 lakh really tax-free under the new regime?
For a resident individual, yes: the 87A rebate of up to ₹60,000 covers the full slab tax on income up to ₹12 lakh. For salaried people the ₹75,000 standard deduction takes the limit to ₹12.75 lakh of salary. The rebate does not cover special-rate income like short-term or long-term capital gains on shares.
Can I claim 80C in the new regime?
No. Section 80C, 80D, HRA and most other deductions are only available in the old regime. Employer contribution to NPS under 80CCD(2) is one of the few deductions allowed in both.
I chose the new regime with my employer. Can I file under the old regime?
Yes, if you have no business income. Salaried individuals can choose either regime in the return itself, irrespective of what was declared to the employer. Any extra tax or refund is settled when you file.
What happens if I file after the due date?
You pay a late fee and interest, and the return is processed under the new regime. A taxpayer with business income who wanted the old regime loses that option for the year.
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Sources and further reading
This guide explains the law and portal procedures as they stood on the date shown above. Rates, forms and due dates change; check the official sources before filing. It is general information, not professional advice for your particular case.