New Tax Regime under Section 115BAC was introduced in Budget 2020 to reduce Tax burden from individuals. We will see New Tax Regime Slabs, Deductions available, features and benefits, which is better between Old and New Tax Regime and few examples in this article.
New Tax Regime has multiple benefits including reduced tax slab rates, simple calculation of income tax (you can also use this online income tax calculator), few deductions available, same tax slab rates for all individuals irrespective of age groups, some exemptions and deductions allowed in new tax regime etc.
- Budget 2025 Latest Updates for FY 2025-26 (New Tax Regime)
- What is New Tax Regime u/s 115BAC?
- New Tax Regime Slabs FY 2025-26
- Old Tax Regime Slabs
- Exemptions and Deductions not available in New Tax Regime
- Exemptions and Deductions available in New Tax Regime
- Marginal Relief with New Tax Regime 2025-26
- Which is better New vs Old Tax Regime?
- Income Tax Calculation Examples 2025-26 Video
- Is 80C available in New Tax Regime?
- How to change from New Tax Regime to Old Tax Regime or vice versa?
- Conclusion
Budget 2025 Latest Updates for FY 2025-26 (New Tax Regime)
- Standard Deduction of Rs. 75,000 will be available with New Tax Regime from FY 2025-26
- New Tax Regime will be default tax regime selected, you also have the option to choose Old Tax Regime
- Tax Rebate limit has been increased from Rs. 7 Lakh to Rs. 12 Lakh in New Tax Regime. Which means no income tax if your taxable income is up to Rs. 12 Lakh with new tax regime
- Tax exemption limit with new tax regime is Rs. 4 lakh. Below are the new tax slabs for 2025-26 for all age groups:
| SLABS | TAX RATE |
|---|---|
| Rs. 0 – Rs. 4,00,000 | 0% |
| Rs. 4,00,000 – Rs. 8,00,000 | 5% |
| Rs. 8,00,000 – Rs. 12,00,000 | 10% |
| Rs. 12,00,000 – Rs. 16,00,000 | 15% |
| Rs. 16,00,000 – Rs. 20,00,000 | 20% |
| Rs. 20,00,000 – Rs. 24,00,000 | 25% |
| More than Rs. 24,00,000 | 30% |
What is New Tax Regime u/s 115BAC?
New Tax Regime under Section 115BAC has reduced Tax slab rates compared to Old Tax Regime. It was introduced in Budget 2020 to help us reduce our tax liability, with a condition that we have to forgo all deductions and investment options, except some of them that are discussed below.
Which means, unlike Old Tax Regime with high rates and deductions benefits, New Tax Regime will not provide you maximum of the benefits of deductions in case you want to make investments to reduce your taxable income. But standard deduction of Rs. 75,000 is available in new tax regime for salaried employees.
Tax payers can enjoy the reduced tax slab rates compared to Old Tax Regime. For example, if your income is Rs. 12.75 Lakhs in financial year (Salaried employee) and you don’t have any deductions except Standard Deduction of Rs. 75,000, with New Tax Regime your income tax will be Rs. 0, due to tax rebate under section 87A. But with Old Tax Regime you have to pay Rs. 1,87,200 as income tax
Which means you’ll save Rs. 1,87,200 just by opting for New Tax Regime in FY 2025-26.
You also have the option of choosing between Old and New Tax Regime. So based on your income tax calculation and in which regime you will pay less income tax, you can choose the Tax Regime based on your convenience. New tax regime will be selected by default.
New Tax Regime Slabs FY 2025-26
| SLABS | TAX RATE |
|---|---|
| Rs. 0 – Rs. 4,00,000 | 0% |
| Rs. 4,00,000 – Rs. 8,00,000 | 5% |
| Rs. 8,00,000 – Rs. 12,00,000 | 10% |
| Rs. 12,00,000 – Rs. 16,00,000 | 15% |
| Rs. 16,00,000 – Rs. 20,00,000 | 20% |
| Rs. 20,00,000 – Rs. 24,00,000 | 25% |
| More than Rs. 24,00,000 | 30% |
- So based on your income tax bracket, your income tax will be calculated on above mentioned rates.
- Important: Above mentioned Tax Rates in New Tax Regime is applicable to all age groups – Non Senior citizens and Senior Citizens
- You cannot claim any deductions based on above New Tax Regime Slabs except standard deduction and few more deductions mentioned below
- These rates are reduced tax slab rates compared to Old Tax Regime, rates for which are mentioned below
Old Tax Regime Slabs
Below is the table of Old Tax Regime Slabs for individuals below 60 years of age:
| SLABS | TAX RATE |
|---|---|
| Rs. 0 – Rs. 2,50,000 | 0% |
| Rs. 2,50,000 – Rs. 5,00,000 | 5% |
| Rs. 5,00,000 – Rs. 10,00,000 | 20% |
| More than Rs. 10,00,000 | 30% |
- As seen above, Old Tax regime slabs are higher compared to New Tax Regime Slabs
- Important: Tax Rebate under Section 87A is applicable for both Old and New Tax Regime, due to which you get tax rebate of maximum Rs. 12,500 if your taxable income is below Rs. 5,00,000 with old tax regime
- New tax regime provides you maximum tax rebate of Rs. 60,000 on taxable income up to Rs. 12 Lakh
WATCH: Income Tax Calculation Examples 2025-26
Exemptions and Deductions not available in New Tax Regime
There are multiple deductions and exemptions not available under New Tax Regime:
- NPS (National Pension Scheme) under Section 80CCD(1B) which allows maximum of Rs. 50,000 deduction is not available in New Tax Regime
- All other Deductions available under Chapter VI A is not available under New Tax Regime
Apart from these, there are some selected deductions available in New Tax Regime. Let us check them:
Exemptions and Deductions available in New Tax Regime
- Standard Deduction of Rs. 75,000 available for salaried employees
- Deduction for employer’s contribution in NPS Account under Section 80CCD(2)
- Home Loan Interest amount under Section 24 in case of let-out property
- Deduction of amount paid or deposited in Agniveer Corpus Fund under Section 80CCH(2)
- Transport allowance can be claimed in case of specially-abled person
- Conveyance allowance for employees received to meet conveyance expenditures
- Compensation received for cost of travel or tour
- Daily Allowance received as compensation for cost of living in some other place compared to regular place of working
- Gifts up to Rs. 5000
- Exemption on voluntary retirement 10(10C), gratuity u/s 10(10) and Leave encashment u/s 10(10AA)
Marginal Relief with New Tax Regime 2025-26
Based on above video, you don’t have to pay 5% and 10% tax with new tax regime when your taxable income is marginally above Rs. 12 lakh in financial year.
Which is better New vs Old Tax Regime?
With annual income up to Rs. 12.75 lakh, your tax liability will be Rs. 0 with new tax regime and will be Rs. 1,87,200 with old tax regime considering standard deduction of Rs. 75,000 and 50,000 respectively. This makes it clear that new tax regime will be better from FY 2025-26.
Even if you claim deductions with old tax regime, it seems practically impossible to claim all deductions and get your taxable income below Rs. 5 lakh to pay zero income tax with old tax regime.
So new tax regime is clear winner from FY 2025-26, and it will be selected by default while you file Income Tax Return (ITR).
Below is the video on Income Tax Calculation Examples.
Income Tax Calculation Examples 2025-26 Video
Watch more Videos on YouTube Channel
You can use the online income tax calculator from here:
Is 80C available in New Tax Regime?
No. Section 80C investment options are not available in New Tax Regime. It is only available in old tax regime with maximum limit of Rs. 1.5 Lakhs in financial year.
How to change from New Tax Regime to Old Tax Regime or vice versa?
If you have already chosen tax regime at the start of the financial year and informed your employer, you cannot change it during the year.
The only option to change from new tax regime to old tax regime or vice versa is to do it while filing your ITR (Income Tax Return)
Conclusion
We have seen New Tax Regime Slabs, along with examples with calculations on which one is better between Old and New Tax Regime.
New tax regime is better compared to old tax regime considering no income tax on income up to 12.75 lakh with standard deduction of Rs. 75,000. Even if your income is above 12 lakh, the tax liability with new tax regime will be very less compared to old tax regime tax liability even if you claim deductions on the investments you make.
Also, you can change the tax regime you have chosen at the start of the financial year as a salaried employee. You can select the Tax regime while filing ITR based on your tax calculations and you’ll get the tax refund if applicable.
Some more Reading:
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Income Tax Calculator App – FinCalC
For Income Tax Calculation on your mobile device, you can Download my Android App “FinCalC” which I have developed for you to make your income tax calculation easy.
What you can do with this mobile App?
- Calculate Income Tax for new FY 2024-25 and previous FY 2023-24
- Enter estimated Investments to check income tax with Old and New Tax Regime
- Save income tax details and track regularly
- Know how much to invest more to save income tax
- More calculators including PPF, SIP returns, Savings account interest and lot more
Use Popular Calculators:
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- Senior Citizen Savings Calculator
- NSC Calculator
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- CAGR Calculator
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