New Tax Regime vs. Old Tax Regime: Which is Better in 2025-26?
January 2026
The Union Budget has introduced significant changes, making the New Tax Regime more attractive for the middle class. The biggest highlight is the increase in the tax-free limit. Under the New Regime for FY 2025-26, individuals with a taxable income of up to ₹7 Lakhs now pay zero tax thanks to the enhanced Section 87A rebate.
Furthermore, a standard deduction of ₹50,000 is now available under the New Regime for salaried employees. This means a gross salary of up to ₹7.5 Lakhs can effectively become tax-free if you have no other income.
### Which should you choose?
**Choose the New Regime if:** You want lower tax rates and don't want the hassle of tracking investments like LIC, PPF, or ELSS. It is now the default and most beneficial for those without home loans or high HRA.
**Choose the Old Regime if:** You have significant deductions exceeding ₹4 Lakhs (including 80C, 80D, HRA, and Home Loan Interest).
Use our Income Tax Calculator to see your exact savings side-by-side.
