New Tax Regime Slabs FY 2025-26 (AY 2026-27)

Every salaried individual and business owner in India faces the same critical question at the start of every financial year — new tax regime vs old tax regime: which one should I choose? With the government making the new tax regime the default option from FY 2024-25 onwards, understanding the difference between the two has never been more important. This complete guide breaks down the new tax regime slabs, compares all deductions, and helps you decide which regime saves you more tax in 2026.

What is the New Tax Regime?

The new tax regime, introduced under Section 115BAC of the Income Tax Act, offers lower and simplified tax slab rates in exchange for giving up most deductions and exemptions. It was first introduced in FY 2020-21 as an optional regime, but from FY 2024-25, it has become the default tax regime for all taxpayers. If you do not actively choose the old regime, the government will automatically apply the new regime to your income.

The core philosophy of the new regime is simplicity — fewer exemptions, fewer calculations, and lower headline rates. However, whether it actually results in lower tax depends entirely on your income level and how many deductions you currently claim.

New Tax Regime Slabs 2026 – Income Tax Rates

The following are the official new tax regime slabs applicable for FY 2025-26 (Assessment Year 2026-27):

Up to ₹3,00,000: Nil — no tax applicable
₹3,00,001 to ₹7,00,000: 5% tax on income above ₹3 lakh
₹7,00,001 to ₹10,00,000: 10% tax on income in this range
₹10,00,001 to ₹12,00,000: 15% tax on income in this range
₹12,00,001 to ₹15,00,000: 20% tax on income in this range
Above ₹15,00,000: 30% tax on income above ₹15 lakh

Important: Under the new regime, individuals with net taxable income up to ₹7,00,000 pay zero tax due to the rebate under Section 87A. Additionally, a standard deduction of ₹75,000 is available to salaried employees under the new regime, effectively making income up to ₹7,75,000 completely tax-free.

Old Tax Regime Slabs 2026 – Income Tax Rates

The old tax regime has three basic slab rates and allows a wide range of deductions and exemptions that can significantly reduce your taxable income:

Up to ₹2,50,000: Nil — no tax applicable
₹2,50,001 to ₹5,00,000: 5% tax (effectively zero after Section 87A rebate)
₹5,00,001 to ₹10,00,000: 20% tax on income in this range
Above ₹10,00,000: 30% tax on income above ₹10 lakh

While the headline rates of the old regime appear higher, the ability to claim deductions under Sections 80C, 80D, HRA, LTA, home loan interest, and many others can bring your taxable income down dramatically — often making the old regime far cheaper for those with significant deductions.

Old vs New Tax Regime – Complete Side-by-Side Comparison

Standard Deduction: Old regime — ₹50,000 | New regime — ₹75,000
Section 80C (PPF, ELSS, LIC, EPF): Old regime — Up to ₹1,50,000 deduction allowed | New regime — Not allowed
Section 80D (Health Insurance Premium): Old regime — Up to ₹25,000 to ₹1,00,000 allowed | New regime — Not allowed
HRA (House Rent Allowance): Old regime — Fully exempt up to eligible limit | New regime — Not allowed
LTA (Leave Travel Allowance): Old regime — Exempt for two journeys in four years | New regime — Not allowed
Home Loan Interest (Section 24b): Old regime — Up to ₹2,00,000 deduction allowed | New regime — Not allowed for self-occupied property
NPS Employer Contribution (Section 80CCD(2)): Old regime — Allowed | New regime — Allowed (one of the few deductions permitted)
Section 80TTA (Savings Account Interest): Old regime — Up to ₹10,000 deduction allowed | New regime — Not allowed
Default regime from FY 2024-25: Old regime — Must be actively opted | New regime — Automatically applied

Is 80TTA Applicable in New Tax Regime?

No — Section 80TTA is not applicable in the new tax regime. Under the old regime, 80TTA allows a deduction of up to ₹10,000 per year on interest earned from savings bank accounts. Senior citizens can claim up to ₹50,000 under Section 80TTB. However, if you have opted for or defaulted into the new tax regime, neither 80TTA nor 80TTB deductions are available to you. This is one of several deductions that disappear entirely when you switch to the new regime.

Which Deductions Are Allowed in New Tax Regime?

Most deductions are eliminated under the new regime, but a few important ones are still permitted. Here is a complete list of deductions allowed in the new tax regime:

Standard Deduction of ₹75,000 — available to salaried employees and pensioners
Section 80CCD(2) — employer's contribution to NPS (up to 10% of basic salary for private employees, 14% for government employees)
Section 80CCH — contribution to Agnipath Scheme for Agniveers
Gratuity exemption — exempt up to statutory limit
VRS compensation — exempt up to ₹5,00,000
Transport allowance for specially-abled employees — partially exempt
Conveyance and daily allowance — to the extent actually incurred for employment duties
Interest on home loan for let-out property (Section 24) — allowed only for rented properties, not self-occupied

Everything else — 80C, 80D, 80E, 80G, HRA, LTA, professional tax deduction, and most other exemptions — is not available under the new tax regime.

Are You Opting for New Tax Regime u/s 115BAC – What Does It Mean?

When you fill out your income tax return or submit Form 12BB to your employer, you will see the question: "Are you opting for new tax regime u/s 115BAC?" This simply means: do you want your income tax to be calculated under the new simplified slab system introduced in Section 115BAC?

If you answer Yes — your tax is calculated at lower new regime rates but without most deductions
If you answer No — your tax is calculated under the old regime with higher rates but full access to all deductions
Salaried employees can switch between old and new regime every financial year
Business owners and professionals can switch back to the old regime only once after opting for the new regime

How to Save Tax in New Tax Regime

While the new regime eliminates most deductions, there are still legitimate ways to save tax in the new tax regime without violating any rules:

Maximise NPS through employer: Ask your employer to increase their contribution to your NPS account under Section 80CCD(2) — this reduces your taxable salary and is one of the most powerful tax-saving tools available in the new regime
Structure your salary smartly: Negotiate with your employer to include components like food coupons (up to ₹26,400 per year tax-free), gift vouchers, and actual conveyance reimbursements which remain partially exempt
Claim standard deduction fully: Ensure your employer applies the ₹75,000 standard deduction while computing your TDS — this alone saves ₹15,000 to ₹22,500 in tax depending on your slab
Rent out property strategically: If you have a home loan on a rented-out property, the interest deduction under Section 24 is still allowed in the new regime
Keep income below key thresholds: If your net taxable income can be kept below ₹7,75,000 (after standard deduction), you pay zero tax under the new regime due to the 87A rebate

Old vs New Tax Regime Calculator – How to Decide Which is Better for You

The simplest way to use an old vs new tax regime calculator is to follow these three steps:

Step 1 – Calculate your gross income: Add up your total annual salary, rental income, interest income, and any other sources of income
Step 2 – List all deductions you are eligible for under the old regime: Include 80C investments, health insurance premiums, HRA, home loan interest, NPS contributions, and any other applicable deductions
Step 3 – Compare tax liability: Calculate tax on (Gross Income minus all deductions) using old regime slabs, then calculate tax on Gross Income minus only ₹75,000 standard deduction using new regime slabs — whichever gives lower tax is your better option

General rule of thumb: If your total deductions under the old regime exceed ₹3,75,000 to ₹4,25,000 (including 80C, 80D, HRA, and home loan interest), the old regime will likely save you more tax. If your deductions are lower than this threshold, the new regime is almost certainly the better choice.

New Tax Regime vs Old Tax Regime – Who Should Choose Which?

Choose the New Tax Regime if: You are a young professional with few investments, you do not claim HRA (living in your own home or with family), your total deductions under 80C, 80D, and other sections are less than ₹2,00,000, or your income is below ₹7,75,000 where you pay zero tax anyway
Choose the Old Tax Regime if: You pay high rent and claim HRA exemption, you have a home loan with significant interest payments, you invest ₹1,50,000 per year in 80C instruments, you pay health insurance premiums for yourself and parents, or your total deductions and exemptions exceed ₹3,50,000 per year

Final Verdict – New Tax Regime vs Old Tax Regime in 2026

There is no single universal answer to the new vs old tax regime debate — the better option depends entirely on your individual financial situation. For most young earners, first-time jobbers, and those without major investments or a home loan, the new tax regime will result in lower tax and much simpler filing. For experienced professionals with a home loan, substantial 80C investments, and high rent payments, the old tax regime continues to offer significant savings through its comprehensive deduction framework. Use an income tax calculator for the new regime and old regime side by side every April, compare your actual liability under both, and make an informed decision before your employer locks in your TDS computation for the year.