Old vs New Tax Regime: Which One Saves You More Money in 2025-26?

📅 January 18, 2026 ⏱️ 7 min read ✍️ Tax Planning

Tax filing season is here, and the biggest question everyone's asking - old regime or new regime? The government made the new regime default from FY 2023-24, but does that mean it's better for you? Let's find out.

The Big Change in FY 2025-26

Budget 2025 brought some major updates to the new tax regime. The basic exemption limit jumped from ₹3 lakhs to ₹4 lakhs, and there's a new 25% slab for income between ₹20-24 lakhs. Plus, standard deduction increased to ₹75,000. Sounds good, but is it enough?

Quick Fact: Under the new FY 2025-26 regime, you can earn up to ₹12.75 lakhs without paying any tax (thanks to rebate under Section 87A). That's a game-changer for many salaried folks.

Old Tax Regime: The Classic Choice

The old regime has been around forever. Here's what you get:

Tax Slabs (Old Regime)

The Deductions Advantage

This is where old regime shines. You can claim:

If you're maxing out these deductions, old regime can save you serious money.

New Tax Regime FY 2025-26: The Simplified Option

The new regime is all about simplicity. Lower tax rates, but you give up most deductions.

Tax Slabs (New Regime 2025-26)

What You Keep

Only standard deduction of ₹75,000 and employer's NPS contribution. That's it. No 80C, no HRA, no home loan benefits.

Real Examples: Who Wins Where?

Case 1: Fresh Graduate (₹8L CTC)

Profile: Living in a rented flat, no investments yet, paying ₹15,000 monthly rent.

Old Regime:

New Regime 2025-26:

Winner: New regime saves ₹15,600. No hassle of maintaining rent receipts or investment proofs.

Case 2: Mid-Career Professional (₹15L CTC)

Profile: Paying home loan EMI, maxing out 80C, health insurance for family.

Old Regime:

New Regime 2025-26:

Winner: Old regime saves ₹23,400. The deductions make a real difference here.

Case 3: Senior Professional (₹25L CTC)

Profile: High income, some investments, but not maxing out all deductions.

Old Regime:

New Regime 2025-26:

Winner: New regime saves ₹38,600. At higher incomes, the lower tax slabs start making sense even without deductions.

Pro Tip: Calculate both ways before deciding. Your situation is unique - what works for your colleague might not work for you.

When Old Regime Makes Sense

When New Regime Makes Sense

Common Mistakes People Make

Mistake 1: Choosing based on what others are doing
Your CA friend chose old regime? Good for them. Your situation is different. Do your own math.

Mistake 2: Not switching when circumstances change
Got married, bought a house, or started investing? Time to recalculate. You can switch regimes every year.

Mistake 3: Forgetting about cess
All tax calculations have 4% health and education cess on top. Factor that in.

Mistake 4: Not considering future investments
Planning to buy a house next year? Old regime might be better long-term even if new regime saves money now.

Important: Once you choose a regime for business income, you can't switch back to old regime. For salaried folks, you can switch every year. Choose wisely if you have business income.

How to Decide: Simple 3-Step Process

Step 1: List all your deductions and exemptions (80C, HRA, home loan, etc.)

Step 2: Calculate tax under both regimes using our calculator

Step 3: Choose the one with lower tax. Simple as that.

The Bottom Line

There's no one-size-fits-all answer. The new regime's higher exemption limit and simpler structure work great for many people. But if you're someone who invests regularly and has a home loan, old regime might still be your best friend.

The good news? You're not locked in. Calculate both ways every year and pick what saves you more. That's the smart way to handle taxes.

Compare Old vs New Tax Regime Instantly

Use our tax calculator to see which regime saves you more money

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