The Indian income tax system requires taxpayers to pay tax based on their income. While filing their Income Tax Return (ITR), eligible taxpayers can choose between New Tax Regime and Old Tax Regime. The New Regime has now become the default tax system. It provides lower tax rates.
But it doesn’t allow taxpayers to claim most of the tax deductions and exemptions like the ones u/s 80C or House Rent Allowance (HRA). On the other hand, the Old Regime has higher tax rates but at the same time, it helps the taxpayers to reduce their taxable income by claiming various exemptions and deductions. So which tax regime is actually better?
Well, the answer totally depends on factors such as your income, eligible deductions and financial situation. In this article, we shall compare the New Regime and the Old Regime to help you understand the key differences between them, so you can choose the one that suits you best.
The New Tax Regime was introduced by Government of India on 1 April 2020 through Section 115BAC of Income Tax Act, 1961. Now, this regime is considered to be the default tax regime. This means taxpayers are automatically taxed under this regime unless they specifically choose the Old Tax Regime (subject to applicable rules).
Under the New Tax Regime, taxpayers benefit from lower tax rates. However, they cannot claim most deductions and exemptions available under the Old Regime, such as House Rent Allowance (HRA), Leave Travel Allowance (LTA), deductions under Section 80C, Section 80D and several others.
As a result, the New Regime is generally more beneficial for taxpayers who do not claim many deductions. However, those who regularly claim tax-saving deductions may find the Old Regime to be a better option. It is noteworthy to mention that, in the New Regime, the income-tax slabs are the same for all individuals, regardless of their age.
The Old Tax Regime is the traditional income tax system that has been in place for many years. Under this regime, taxpayers can claim approx. 70 tax exemptions and deductions so as to reduce their taxable income. These include benefits such as House Rent Allowance (HRA), Leave Travel Allowance (LTA), deductions under Section 80C, Section 80D and many others. Section 80C of the Income Tax Act is one of the most popular deductions available under the Old Tax Regime.
It allows the taxpayers to claim deductions of up to Rs. 1.5 lakh per financial year on their eligible investments and expenses like Public Provident Fund (PPF), Employees' Provident Fund (EPF), Equity Linked Savings Scheme (ELSS), National Savings Certificate (NSC), tax-saving fixed deposits, life insurance premiums, tuition fees for children and repayment of principal amount of a home loan. By claiming these exemptions and deductions, many taxpayers can significantly reduce their taxable income and lower their overall tax liability.
For taxpayers who regularly claim multiple deductions and exemptions, the Old Regime is generally more beneficial. It must be noted that unlike the New Regime, under the Old Tax Regime, the income-tax slabs vary based on the taxpayer's age, with higher basic exemption limits available for senior citizens and super senior citizens.
The tax slabs for the new regime for FY 2025-26 (AY 2026-27) are as follows:-
| Income Range | Income Tax Rate (in %) |
|---|---|
| Up to Rs. 4,00,000 | Nil |
| Rs. 4,00,001 to Rs. 8,00,000 | 5% |
| Rs. 8,00,001 to Rs. 12,00,000 | 10% |
| Rs. 12,00,001 to Rs. 16,00,000 | 15% |
| Rs. 16,00,001 to Rs. 20,00,000 | 20% |
| Rs. 20,00,001 to Rs. 24,00,000 | 25% |
| Above Rs. 24,00,000 | 30% |
The income-tax slabs for the new regime for FY 2026-27 (AY 2027-28) are as follows:-
| Income Range | Income Tax Rate (in %) |
|---|---|
| Up to Rs. 4,00,000 | Nil |
| Rs. 4,00,001 to Rs. 8,00,000 | 5% |
| Rs. 8,00,001 to Rs. 12,00,000 | 10% |
| Rs. 12,00,001 to Rs. 16,00,000 | 15% |
| Rs. 16,00,001 to Rs. 20,00,000 | 20% |
| Rs. 20,00,001 to Rs. 24,00,000 | 25% |
| Above Rs. 24,00,000 | 30% |
The income-tax slabs for individuals below 60 years for the FY 2025-26 (AY 2026-27) under the old regime are as follows:-
| Income Range (in Rs.) | Income Tax Rate (in %) |
|---|---|
| Up to Rs. 2,50,000 | Nil |
| Rs. 2,50,001 to Rs. 5,00,000 | 5% |
| Rs. 5,00,001 to Rs. 10,00,000 | 20% |
| Above Rs. 10,00,000 | 30% |
The old regime income tax slabs for individuals below 60 years for FY 2026-27 (AY 2027-28) are as follows:-
| Income Range (in Rs.) | Income Tax Rate (in %) |
|---|---|
| Up to Rs. 2,50,000 | Nil |
| Rs. 2,50,001 to Rs. 5,00,000 | 5% |
| Rs. 5,00,001 to Rs. 10,00,000 | 20% |
| Above Rs. 10,00,000 | 30% |
The Old Regime Income-Tax Slabs for FY 2025-26 (AY 2026-27) for Senior Citizens aged between 60 - 79 years are as follows:-
| Income Range (in Rs.) | Income Tax Rate (in %) |
|---|---|
| Up to Rs. 3,00,000 | Nil |
| Rs. 3,00,001 to Rs. 5,00,000 | 5% |
| Rs. 5,00,001 to Rs. 10,00,000 | 20% |
| Above Rs. 10,00,000 | 30% |
The Old Regime Income Tax Slabs for FY 2026-27 (AY 2027-28) for Senior Citizens aged between 60 - 79 years are as follows:-
| Income Range (in Rs.) | Income Tax Rate (in %) |
|---|---|
| Up to Rs. 3,00,000 | Nil |
| Rs. 3,00,001 to Rs. 5,00,000 | 5% |
| Rs. 5,00,001 to Rs. 10,00,000 | 20% |
| Above Rs. 10,00,000 | 30% |
The Old Regime Tax Slabs for FY 2025-26 (AY 2026-27) for Super Senior Citizens who are 80 years & above are as follows:-
| Income Range (in Rs.) | Income Tax Rate (in %) |
|---|---|
| Up to Rs. 5,00,000 | Nil |
| Rs. 5,00,001 to Rs. 10,00,000 | 20% |
| Above Rs. 10,00,000 | 30% |
The Old Regime Tax Slabs for FY 2026-27 (AY 2027-28) for Super Senior Citizens who are 80 years & above are as follows:-
| Income Range (in Rs.) | Tax Rate (in %) |
|---|---|
| Up to Rs. 5,00,000 | Nil |
| Rs. 5,00,001 to Rs. 10,00,000 | 20% |
| Above Rs. 10,00,000 | 30% |
Here are a few points to help you choose between the Old Regime and the New Regime:-
You want to claim several tax deductions and exemptions.
You invest u/s 80C, Section 80D or pay interest on home loan.
Your tax liability is lower under Old Regime after claiming deductions.
You do not claim many tax deductions or exemptions.
You prefer a simple tax system having lower tax rates.
Your tax liability is lower under New Regime compared to the Old one.
After going through this blog post, we’re sure you have understood that there is no single tax regime that is better for everyone. The right choice ultimately depends on your income, eligible tax deductions and overall financial situation. If you claim several deductions and exemptions, the Old Tax Regime may help you save up more on tax. On the other hand, if you do not claim many deductions and prefer a simpler tax system having lower tax rates, then the New Regime may be a much better option. Before filing your Income Tax Return, we recommend that you compare your tax liability under both regimes. Accordingly, you can choose the regime that offers you the maximum tax benefit.
Q1. For super senior citizens, is the old tax regime better than the new tax regime?
A. Yes, in many cases but not all. The Old Regime is generally better for super senior citizens if they claim several tax deductions. However, if they do not claim many deductions, the New Regime may be a better option. The better choice depends on their income as well as tax-saving deductions.
Q2. Are the income-tax slabs under the New Regime the same for all ages?
A. Yes. Under the New Regime, the income-tax slabs are the same for all individuals, regardless of their age. Unlike the Old Regime, there are no separate tax slabs or higher basic exemption limits for senior citizens or super senior citizens.
Q3. Does 4% Health and Education Cess apply under both Old and New Regime?
A. Yes, it does. A 4% Health and Education Cess is applicable under both tax regimes. It is calculated on amount of income tax payable after adding surcharge, if applicable. This means that the cess has to be paid regardless of whether you choose the Old or New Regime.
Hi, I'm Sachin Chawla. I’m a commerce graduate from Agra University and a Chartered Accountant (2015) with DISA certification. I focus on helping businesses with formation, management, tax and FEMA matters, business licenses and regulatory compliance, IP advisory, risk management and auditing among others. Through my articles, I aim to share my expertise and provide practical guidance in these areas.
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