ITR filing FY 2025-26: Before filing your income tax return for FY 2025-26 (Assessment Year 2026-27), it’s important to know which tax regime will result in lower tax outgo – new or old?While the government has made the new tax regime as the default regime, taxpayers should avoid a one-size-fits-all approach, say experts. The optimal choice depends on factors such as income levels and the available exemptions and deductions.The two regimes differ fundamentally in structure. The new tax regime offers lower slab rates but largely eliminates exemptions and deductions. The old tax regime, in contrast, allows taxpayers to claim a range of benefits, including House Rent Allowance (HRA), deductions under Section 80C, health insurance premiums under Section 80D, and housing loan benefits.Also Read | ITR filing: How to pay zero tax under new and old tax regime – know all about Section 87A rebateBefore making a choice, be informed of the tax slabs and also how the math to deciding the correct tax regime works:
Latest Income Tax Slabs FY 2025-26:
Let’s first take a look at the income tax slabs for FY 2025-26 under both the new and old income tax regimes:New regime
| Income Tax Slab | Income Tax Rate |
| 0-4 lakh | Nil |
| 4-8 lakh | 5% |
| 8-12 lakh | 10% |
| 12-16 lakh | 15% |
| 16-20 lakh | 20% |
| 20-24 lakh | 25% |
| Above 24 lakh | 30% |
Old regime
| Income Tax Slab | Income Tax Rate |
| 0-2.5 lakh | Nil |
| 2.5-5 lakh | 5% |
| 5-10 lakh | 20% |
| Above 10 lakh | 30% |
- The above tax slabs are eligible for resident individuals. In the case of the old regime, the basic exemption limit is higher at Rs 3 lakh and Rs 5 lakh for senior citizens and super senior citizens.
- For resident individuals up to 60 years of age, the new tax regime offers a higher basic exemption limit of Rs 4 lakh and higher standard deduction of Rs 75,000. Under the old regime, the basic exemption limit is Rs 2.5 lakh, and the standard deduction is Rs 50,000.
- Apart from income tax slabs and rates differing, one big difference is for incomes above Rs 5 crore – the surcharge rate under the new tax regime is 25%, whereas that under the old regime is 37%.
Also Read | ITR filing FY 2025-26: How to calculate taxes under old income tax regime – explained
New versus old income tax regime: What should you choose?
As Parizad Sirwalla, Partner and Head – Global Mobility Services, Tax, KPMG in India points out: for many taxpayers, the new tax regime is particularly attractive. Individuals with taxable income (including salary income) up to Rs 12.75 lakh may effectively have no tax liability after considering the standard deduction from salary income and the available rebate of tax. The new tax regime is also beneficial for taxpayers having income more than Rs 5 crore where the surcharge on income tax is capped at 25 per cent as compared to 37 per cent in case of the old tax regime.But in between these income levels, the math is dependent on the deductions and exemptions that you can claim. Taxpayers with substantial deductions and exemptions should not automatically assume that the new income tax regime is the better choice. The more the amount of deductions and exemptions you can claim, the more the chances that the old tax regime is more beneficial.Parizad Sirwalla illustrates this with an example: Consider an individual with a salary income of Rs 25 lakh. As shown in the table below, the tax liability under the old and new income tax regimes can be broadly similar when the taxpayer is eligible for deductions and exemptions aggregating approximately Rs 7.75 lakh. If the available deductions exceed this threshold, the old tax regime may become more tax effective. Conversely, where deductions are lower, the new tax regime is likely to provide a lower tax outgo.
| Particulars | New tax regime (Rs) | Old tax regime
(Rs) |
| Income (A) | 25,00,000 | 25,00,000 |
| Net Eligible deductions/exemptions (B)
(e.g. house rent allowance, Section 80C deduction of LIC, housing loan repayment etc.) |
NIL | 775,000 |
| Taxable income (A-B) | 25,00,000 | 17,25,000 |
| Tax on above (including health and education cess) | 343,200 | 343,200 |
It’s clear from the above comparison that your choice of income tax regime cannot be dependent only on your income level. Factors such as HRA, home loan benefits, insurance premiums and other eligible tax deductions play an equally important role. “As a result, a regime that works well for one taxpayer may not necessarily be the best option for another. Accordingly, taxpayers should compute their tax liability under both regimes before filing their ITR to determine the regime that works best for them and not rely on general assumptions,” Parizad tells TOI.“The main point to remember is that if you do not have business income you can make this choice every year based on facts of your case for that year,” she concludes.Finally, if the old income tax regime is your choice, then filing your tax return within the due date of July 31, 2026 is important. If you file a belated tax return after the due date, you will only be able to file ITR under the new tax regime, which is the default regime.Also Read | ITR filing FY 2025-26: What documents are required to file your income tax return? Quick checklist
