Income Tax New Regime: Slabs, Benefits & Comparison with Old Regime

The Income Tax New Regime, introduced to simplify tax calculations and offer lower tax rates, is now the default system for most individual taxpayers in India. Updated in Budget 2025, it features revised slab rates, a higher rebate, and a larger standard deduction for salaried individuals. Taxpayers can still opt for the old regime if they wish to claim various exemptions and deductions, making it important to compare both options before filing returns. This article offers complete information regarding the new income tax regime.

What is the Income Tax New Regime?

The Income Tax New Regime is a simplified tax system introduced by the government to provide lower and more straightforward tax rates while removing most exemptions and deductions available under the old regime. Effective from FY 2020-21 and updated in subsequent budgets, the new regime is now the default choice for individuals, Hindu Undivided Families (HUFs), and certain other taxpayers. However, taxpayers can choose to opt out and continue with the old regime if it is more beneficial for their financial situation. The new regime aims to make tax filing easier and more transparent, especially for those who do not claim many deductions.

Updated Tax Slabs Under the New Regime (FY 2025-26)

The new regime features revised income tax slabs effective from April 1, 2025. These slabs offer concessional rates and a higher rebate for lower and middle-income earners. In the table below, we have laid out the slabs and their relative income tax rates:

Income Tax Slab	Income Tax Rate
Up to ?4,00,000	NIL
?4,00,001 – ?8,00,000	5%
?8,00,001 – ?12,00,000	10%
?12,00,001 – ?16,00,000	15%
?16,00,001 – ?20,00,000	20%
?20,00,001 – ?24,00,000	25%
Above ?24,00,000	30%

Key Points:

The rebate under Section 87A has been increased to ?60,000 for FY 2025-26, effectively making income up to ?12 lakh tax-free for most individuals.
Salaried taxpayers also get a standard deduction of ?75,000, making the effective zero-tax threshold ?12.75 lakh.

Key Features & Benefits of the Income Tax New Regime

Below, we have given the key features and benefits of the income tax new regime:

Lower tax rates across multiple income slabs compared to the old regime.
Higher rebate of ?60,000 for incomes up to ?12 lakh, resulting in zero tax liability for many taxpayers.
Standard deduction of ?75,000 for salaried individuals and pensioners.
Default tax regime—taxpayers must actively opt for the old regime if desired.
Simplified tax filing process with minimal documentation.
No need to track or submit proof for most exemptions and deductions (e.g., HRA, 80C, 80D, LTA).
Suitable for taxpayers who do not claim significant deductions or exemptions.

Old vs New Tax Regime: Which One Should You Choose?

Choosing between the old and new tax regimes depends on your income structure and the deductions/exemptions you can claim.

Comparison Table:

Criteria	Old Regime	New Regime
Tax Rates	Higher, with fewer slabs	Lower, with more slabs
Deductions/Exemptions	Multiple (80C, 80D, HRA, LTA, etc.)	Mostly not allowed (except standard deduction)
Standard Deduction	?50,000 (salaried)	?75,000 (salaried)
Rebate (Section 87A)	Up to ?12,500 (income ? ?5 lakh)	Up to ?60,000 (income ? ?12 lakh)
Suitability	Best for those with high deductions	Best for those with few/no deductions
Default Regime	Optional	Default (from FY 2025-26)

When to Choose the New Regime:

If you do not claim or are unable to claim significant deductions/exemptions.
If your income is up to ?12 lakh (or ?12.75 lakh for salaried), as you may have zero tax liability.
If you prefer a simpler, hassle-free tax filing experience.

When to Choose the Old Regime:

If you can claim substantial deductions (like 80C, 80D, HRA, home loan interest, etc.).
If your total deductions bring your taxable income into a lower slab, resulting in lower overall tax.

Note: For salaried and non-business taxpayers, you can choose the regime each year while filing your ITR. For those with business/professional income, switching between regimes is allowed only once in a lifetime.

Frequently asked questions

Common questions about Income Tax New Regime: Slabs, Benefits & Comparison with Old Regime.

The Income Tax New Regime is a simplified tax system that offers lower tax rates across multiple income slabs but removes most exemptions and deductions available under the old regime. It aims to make tax filing easier and more transparent, especially for those who do not claim many deductions.

Some key benefits of the new regime include lower tax rates, a higher rebate of ₹60,000 for incomes up to ₹12 lakh, a standard deduction of ₹75,000 for salaried individuals, and a simplified tax filing process with minimal documentation.

The new regime features revised income tax slabs with concessional rates, especially for lower and middle-income earners. For example, the slab rate for income between ₹4 lakh and ₹8 lakh is 5% under the new regime, compared to 20% under the old regime.

The new regime is beneficial if you do not claim or are unable to claim significant deductions or exemptions, if your income is up to ₹12 lakh (or ₹12.75 lakh for salaried individuals), or if you prefer a simpler, hassle-free tax filing experience.

For salaried and non-business taxpayers, you can choose the regime each year while filing your ITR. For those with business or professional income, switching between regimes is allowed only once in a lifetime.

Under the new regime, salaried individuals and pensioners are eligible for a standard deduction of ₹75,000, which effectively increases the zero-tax threshold to ₹12.75 lakh.

The rebate under Section 87A has been increased to ₹60,000 for the FY 2025-26 under the new regime, effectively making income up to ₹12 lakh tax-free for most individuals. Under the old regime, the rebate was up to ₹12,500 for income up to ₹5 lakh.

No, the new regime is not mandatory. Taxpayers can choose to opt out and continue with the old regime if it is more beneficial for their financial situation, based on the deductions and exemptions they can claim.

No, most deductions and exemptions like HRA, 80C (investments and tax-saving instruments), 80D (health insurance premiums), and Leave Travel Allowance (LTA) are not allowed under the new regime. Only the standard deduction is available.

To decide between the old and new tax regimes, you should compare your tax liability under both regimes, taking into account your income structure, deductions, and exemptions. If the total deductions you can claim bring your taxable income into a lower slab under the old regime, resulting in lower overall tax, then the old regime may be more beneficial.