Old Tax Regime vs New Tax Regime (Union Budget 2026)
1. Structure and Tax Rates
2. Key DifferencesFlexibility with investmentsOld regime benefits those who can fully utilize tax-saving instruments (like 80C, 80D, NPS, home loan interest).New regime offers lower rates but no exemptions, so savings don’t reduce taxable income.Income levelsFor income <₹10–12 lakh per year, the new regime can be better if you have few deductions.For income >₹12–15 lakh with multiple deductions, the old regime may save more tax.SimplicityNew regime is simpler: fewer calculations, less paperwork, and easy online filing.Retirement & long-term savingsOld regime encourages long-term investments through deductions.New regime may discourage tax-saving investments as deductions are removed.
3. Practical Example (Individual below 60)Assume annual taxable salary ₹12 lakh:
4. Which is Better?
Disclaimer:The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of any agency, organization, employer, or company. All information provided is for general informational purposes only. While every effort has been made to ensure accuracy, we make no representations or warranties of any kind, express or implied, about the completeness, reliability, or suitability of the information contained herein. Readers are advised to verify facts and seek professional advice where necessary. Any reliance placed on such information is strictly at the reader’s own risk.
| Feature | Old Tax Regime | New Tax Regime |
| Tax slabs (for individuals <60 yrs) | ₹0–₹2.5L: Nil ₹2.5–5L: 5% ₹5–10L: 20% >₹10L: 30% | ₹0–₹3L: Nil ₹3–6L: 5% ₹6–9L: 10% ₹9–12L: 15% ₹12–15L: 20% >₹15L: 30% |
| Deductions & exemptions | Available: HRA, LTA, 80C, 80D, etc. | Mostly removed; only standard deduction of ₹50,000 remains |
| Tax simplicity | Moderate complexity due to exemptions | Simple, straightforward |
| Effective for | Individuals with investments, home loans, and other deductions | Individuals with low or no deductions; salaried without many investments |
2. Key DifferencesFlexibility with investmentsOld regime benefits those who can fully utilize tax-saving instruments (like 80C, 80D, NPS, home loan interest).New regime offers lower rates but no exemptions, so savings don’t reduce taxable income.Income levelsFor income <₹10–12 lakh per year, the new regime can be better if you have few deductions.For income >₹12–15 lakh with multiple deductions, the old regime may save more tax.SimplicityNew regime is simpler: fewer calculations, less paperwork, and easy online filing.Retirement & long-term savingsOld regime encourages long-term investments through deductions.New regime may discourage tax-saving investments as deductions are removed.
3. Practical Example (Individual below 60)Assume annual taxable salary ₹12 lakh:
- Old Regime:
- Claiming ₹1.5 lakh under 80C + ₹25,000 under 80D + standard deduction ₹50,000
- Net taxable income: ₹10.25 lakh
- Tax: ~₹1.25 lakh (after rebates)
- New Regime:
- No exemptions, taxable income = ₹12 lakh
- Tax (using new slabs): ~₹1.35 lakh
4. Which is Better?
- Choose Old Tax Regime if:
- You have home loan, 80C/80D investments, or other exemptions
- You want to save on taxes via investments
- Choose New Tax Regime if:
- You have few or no deductions
- You prefer simplicity and easier tax calculation
Disclaimer:The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of any agency, organization, employer, or company. All information provided is for general informational purposes only. While every effort has been made to ensure accuracy, we make no representations or warranties of any kind, express or implied, about the completeness, reliability, or suitability of the information contained herein. Readers are advised to verify facts and seek professional advice where necessary. Any reliance placed on such information is strictly at the reader’s own risk.