New vs Old Tax Regime FY 2025-26 — Which Saves More Tax?
One of the most common questions we receive at KitnaTax is: “Should I go with the old tax regime or the new one?” The honest answer is — it depends on your income level, your deductions, and your financial behaviour. There is no universal right answer. But there is a right answer for you, and this article will help you find it.
The new tax regime, introduced by the Finance Act, 2020 and significantly restructured by the Finance Act, 2023, is now the default regime under Section 115BAC of the Income Tax Act, 1961. You must actively opt for the old regime if you wish to use it.
Tax Slab Comparison — FY 2025-26
Deductions — What You Can and Cannot Claim
This is the crux of the entire decision. The old regime allows a wide array of deductions; the new regime eliminates most of them in exchange for lower tax rates.
| Deduction / Exemption | 🏛️ Old Regime | ✨ New Regime |
|---|---|---|
| Standard Deduction (Salaried) | ✅ ₹50,000 | ✅ ₹75,000 |
| Section 80C (PPF, ELSS, LIC etc.) | ✅ Up to ₹1.5 lakh | ❌ Not available |
| Section 80D (Health Insurance) | ✅ Up to ₹25,000–₹50,000 | ❌ Not available |
| HRA Exemption (House Rent) | ✅ As per formula | ❌ Not available |
| Home Loan Interest (Section 24b) | ✅ Up to ₹2 lakh | ❌ Not available (let-out property allowed) |
| LTA (Leave Travel Allowance) | ✅ Exempt as per rules | ❌ Not available |
| Section 80CCD(1B) — NPS | ✅ ₹50,000 extra | ❌ Not available |
| Employer NPS contribution (80CCD(2)) | ✅ Up to 14% of salary | ✅ Up to 14% of salary |
| Section 87A Rebate | Up to ₹5L income | ✅ Up to ₹12L income (zero tax) |
| Section 80G (Donations) | ✅ Available | ❌ Not available |
| Section 80TTA/80TTB (Interest) | ✅ Up to ₹10,000–₹50,000 | ❌ Not available |
Real Examples — Who Saves More?
Numbers make the choice clearer than theory. Here are three realistic scenarios calculated by our CA team:
Who Should Choose Which Regime?
🏛️ Old Regime is Better If…
- You pay rent and claim HRA
- You invest ₹1.5L+ under 80C
- You have a home loan (Section 24b)
- You pay health insurance premiums
- You invest in NPS (80CCD(1B))
- Total deductions exceed ₹3–4 lakh
✨ New Regime is Better If…
- Income is up to ₹12.75 lakh (zero tax)
- You have minimal investments/deductions
- You are a first-time earner or fresher
- You don’t pay rent or have a home loan
- You want simpler, hassle-free filing
- Income above ₹15L with few deductions
The ₹3.75 Lakh Deduction Threshold
Our CA team has worked out a simple rule of thumb: if your total eligible deductions (beyond the standard deduction) exceed approximately ₹3.75 lakh, the old regime generally saves more tax at salary levels between ₹10–20 lakh. Below this threshold, the new regime typically wins.
However, this is a general guideline — the actual crossover point varies based on your exact income slab and the composition of deductions. This is exactly why KitnaTax computes both regimes for every single client before filing.
Let a CA Compare Both Regimes for You
Don’t guess. Our CA will compute your exact tax under both regimes and file under whichever saves you more — guaranteed.
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