What is the new tax regime?
Reviewed by Ranga & Company
New tax regime: The new tax regime is the default way individuals and HUFs are taxed: lower slab rates in exchange for giving up most deductions and exemptions such as 80C, 80D and HRA.
At a glance
- Law
- Section 115BAC of the 1961 Act (carried into the Income-tax Act, 2025)
- Default since
- FY 2023-24
- Tax-free up to
- ₹12 lakh with the 87A rebate (₹12.75 lakh for salaried), FY 2025-26
- Allowed deductions
- ₹75,000 standard deduction, employer's NPS contribution, family pension deduction
- Switching
- Salaried: choose every year when filing. Business income: switch back to old regime only once
Slab rates
| Taxable income (FY 2025-26) | New regime rate |
|---|---|
| Up to ₹4 lakh | Nil |
| ₹4 lakh – ₹8 lakh | 5% |
| ₹8 lakh – ₹12 lakh | 10% |
| ₹12 lakh – ₹16 lakh | 15% |
| ₹16 lakh – ₹20 lakh | 20% |
| ₹20 lakh – ₹24 lakh | 25% |
| Above ₹24 lakh | 30% |
What you give up
- Section 80C (PPF, ELSS, life insurance, home-loan principal) and 80D (health insurance)
- House rent allowance and leave travel allowance exemptions
- Interest on a home loan for a self-occupied house
- Most other Chapter VI-A deductions
Which regime is better?
Compare the tax under both. As a rough guide, the old regime only wins when your deductions are large, for example full 80C and 80D plus a big HRA claim or home-loan interest. For most people earning up to ₹12–13 lakh, the new regime is cheaper.
If you file a belated return, you are taxed under the new regime: the old regime can only be chosen in a return filed by the due date.
Common mistakes
- Declaring investments to the employer under the old regime and then filing under the new regime, or the reverse, without checking the tax difference
- Business owners switching regimes without filing Form 10-IEA by the due date
- Assuming the regime choice is permanent for salaried people; it can change every year
Frequently asked questions
Is the new tax regime compulsory?
No. It is the default, but individuals can opt for the old regime. Salaried people choose each year when filing; people with business income must file Form 10-IEA and can switch back only once.
Can I switch between the old and new tax regime every year?
Salaried people without business income can choose either regime every year when they file. People with business income can switch back to the old regime only once, through Form 10-IEA.
Which tax regime is better for a salary of ₹15 lakh?
It depends on your deductions. Without large claims (80C, 80D, HRA, home loan), the new regime is usually lower. Calculate both before you file.
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