Income Tax Filing AY 2025-26: Old vs New Regime – Which Is Better for You?

Updated: NewsPoint | 7 May 2025, 1:21 pm

As income tax return (ITR) filing for Assessment Year (AY) 2025-26 is around the corner, taxpayers are once again faced with a crucial decision - stick with the new tax regime or opt for the traditional old one? With both offering unique advantages, making the right choice could mean significant savings.

Here’s a simple comparison to help you decide which regime works better for your income and investment habits.

New Tax Regime: Lower Rates, Fewer Deductions

Default Regime for AY 2025-26
The new regime offers attractive tax rates but skips most exemptions and deductions.

Income Slabs & Tax Rates:

Up to ₹3,00,000 – Nil
₹3,00,001 – ₹6,00,000 – 5%
₹6,00,001 – ₹9,00,000 – 10%
₹9,00,001 – ₹12,00,000 – 15%
₹12,00,001 – ₹15,00,000 – 20%
Above ₹15,00,000 – 30%

Key Benefits:

₹50,000 standard deduction for salaried and pensioners.
Full tax rebate up to ₹7 lakh (Section 87A).
Simplified structure, ideal for those without investments.
Fewer compliance hassles.

Limitations:

No deductions under 80C, 80D, HRA, LTA, etc.
Only select exemptions like NPS employer contributions and EPF interest are allowed.

Old Tax Regime: More Deductions, Higher Rates

Income Slabs & Tax Rates:

Up to ₹2,50,000 – Nil
₹2,50,001 – ₹5,00,000 – 5%
₹5,00,001 – ₹10,00,000 – 20%
Above ₹10,00,000 – 30%

Key Benefits:

Offers over 70 deductions and exemptions.
Popular claims include:

- ₹1.5 lakh under Section 80C (LIC, PPF, ELSS, etc.)
- Health insurance under Section 80D
- House rent, home loan interest, tuition fees, and more.

Which Tax Regime Should You Choose?

Go for the New Regime if:

You don’t make tax-saving investments.
You earn up to ₹7 lakh - zero tax due to rebate.
You’re a young earner or freelancer with fewer financial commitments.

Stick with the Old Regime if:

You regularly invest in 80C options.
You have home loans, HRA claims, or insurance premiums.
You prefer long-term financial planning.

How to Choose Your Regime for AY 2025-26

Salaried Individuals: Can switch between regimes each year while filing ITR.
Professionals/Business Owners: Switching back to the old regime after opting for the new one is allowed only once.

Note: Since Budget 2023, the new regime is the default for individual taxpayers. You must explicitly opt for the old regime while filing if that’s your preference.

Choosing between the old and new tax regime depends entirely on your income structure, lifestyle, and investment habits. While the new regime is easier and cleaner, the old one can still help you save more - if you plan well.