Old vs. New Tax Regime Comparison: Which Is Better For You in FY 2025-26?

The revised tax slabs under the New Tax Regime, announced in the Union Budget 2025, have come into effect from April 1, 2025, marking the beginning of the new financial year FY 2025-26. These changes introduce fresh tax benefits, leading to potential financial savings for salaried individuals.

Key Differences: Old vs. New Tax Regime in FY 2025-26

The fundamental difference between the two regimes lies in deductions, exemptions, and tax slabs:

The Old Tax Regime allows deductions and exemptions such as 80C (₹1.5 lakh), 80D (health insurance), home loan interest (₹2 lakh), NPS contributions, and HRA.
The New Tax Regime, however, has lower tax rates but eliminates most deductions and exemptions.

Chopra explained that the New Tax Regime has multiple tax slabs with an overall lower tax burden compared to the Old Tax Regime.

Which Tax Regime Should You Choose in FY 2025-26?

CA Manish Mishra, Founder of GenZCFO, told News18 that the choice between the Old and New Tax Regimes depends on an individual's spending habits and investment patterns.

If you actively invest in tax-saving instruments such as EPF, PPF, insurance, home loan, or NPS, the Old Tax Regime may be more beneficial.

If you don't rely on tax-saving investments and prefer lower tax rates with a simpler structure, the New Tax Regime could be the better option.

New Tax Regime: Simpler Structure with Lower Tax Slabs

Mishra highlighted that the New Tax Regime simplifies tax calculations by removing the need to track multiple deductions throughout the year. This appeals to individuals who prioritize liquidity and want a hassle-free tax system.

However, Section 80CCD(2) remains an exception under the New Tax Regime, allowing salaried individuals to claim deductions on employer contributions to the National Pension Scheme (NPS).

With these changes in place, taxpayers must carefully evaluate their financial goals before selecting the most suitable tax regime for FY 2025-26.