With the beginning of the new financial year 2025-26, income taxpayers once again face the question—should they go with the old tax regime or choose the new one?
While the new tax system offers reduced rates and simpler structure, it also takes away the power of most deductions. On the other hand, the old system keeps all deductions but comes with higher tax slabs. So, which one is better?
Let’s understand in simple terms, especially for people whose annual income is more than Rs 12 lakh and up to Rs 15 lakh.
What Changed in the New Tax Regime for FY 2025-26?
Finance Minister Nirmala Sitharaman, in her Union Budget 2025-26, gave big relief to the salaried middle class. The standard deduction for salaried employees was raised to Rs 75,000.
Now, in the new tax regime, if your income is up to Rs 12.75 lakh (including standard deduction), you won’t have to pay any tax. This is a major attraction for people who don’t claim many deductions or investments under the Income Tax Act.
However, the situation starts to change once the income goes above Rs 12 lakh. That’s where the old tax regime might actually give better savings—especially if the taxpayer uses all deduction options smartly.
How Deductions Make the Old Tax Regime More Useful
According to tax expert Vivek Jalan, if a person can claim deductions worth around Rs 5.5 lakh, the old tax regime becomes more beneficial. These deductions may include:
- Rs 1.5 lakh under Section 80C (Investments in PPF, LIC, ELSS, etc.)
- Rs 2 lakh under Section 24(b) (Housing loan interest)
- Around Rs 2 lakh under other sections like:
- 80D: Medical insurance
- 80G: Donations
- 80E: Education loan interest
This combination works well for someone who actively invests or spends in these categories.
For example, if your gross income is Rs 14.5 lakh and you claim Rs 5.5 lakh in deductions, your taxable income reduces to Rs 9 lakh. This leads to significant tax savings.
Comparison of Tax Payable Under Both Systems
Let’s look at a few examples to see how both systems differ:
✅ When You Claim Full Deductions (Rs 5.5 Lakh)
| Annual Income | Old Regime Tax | New Regime Tax |
| Rs 13 lakh | Rs 54,600 | Rs 66,300 |
| Rs 14 lakh | Rs 75,400 | Rs 81,900 |
| Rs 15 lakh | Rs 96,200 | Rs 97,500 |
In these cases, old regime wins, giving lower tax amounts.
❌ When You Don’t Claim Deductions
If you’re not saving or investing much and can’t claim deductions, then:
| Annual Income | Old Regime Tax | New Regime Tax |
| Rs 13 lakh | Rs 78,000 | Rs 65,000 |
| Rs 14 lakh | Rs 93,600 | Rs 85,800 |
| Rs 15 lakh | Rs 1,09,200 | Rs 1,06,600 |
| Rs 16 lakh | Rs 1,32,600 | Rs 1,24,800 |
Here, the new regime saves more, especially if no deductions are being used.
Tax Slabs in the New Regime (FY 2025-26)
If you opt for the new tax system, here are the income tax slab rates:
- Up to Rs 3 lakh: No tax
- Rs 3 lakh to Rs 6 lakh: 5%
- Rs 6 lakh to Rs 9 lakh: 10%
- Rs 9 lakh to Rs 12 lakh: 15%
- Rs 12 lakh to Rs 15 lakh: 20%
- Rs 15 lakh to Rs 18 lakh: 25%
- Above Rs 18 lakh: 30%
These rates are uniform for all taxpayers—whether salaried, professionals, or self-employed.
Who Should Choose the Old Tax Regime?
The old tax system is better for you if:
- You invest or spend smartly to claim deductions
- Your total annual income is between Rs 12 to 15 lakh
- You pay home loan EMIs
- You have medical or education expenses that qualify for deductions
- You donate to registered charities or institutions
Who Should Pick the New Tax Regime?
The new tax system suits people who:
- Don’t make tax-saving investments
- Want a simple tax structure
- Have income below Rs 12 lakh
- Are not interested in tracking deductions or exemptions
Important Tip Before Choosing
Once you file the tax under either system, switching options later is not easy. Salaried employees can choose every year, but business owners must stick to one regime unless specific conditions are met.
So, use a tax calculator or consult a tax advisor to see which option suits your financial habits best. Don’t just look at the tax rates—look at your investment behavior, loan EMI, insurance premiums, and donations too.
