Two Tax Regimes: What You Need to Know

Taxpayers continue to have the option to choose between:

• Lower tax rates
• Fewer exemptions and deductions
• Higher standard deduction

Income Tax Slabs and Rates: FY 2025–26

New Tax Regime (Applicable by Default)

Key Benefits Under New Regime:

• Standard deduction of ₹75,000 for salaried/pensioners
• Rebate under Section 87A up to ₹60,000 (for taxable income up to ₹12 lakh)
• No need to submit investment proofs (except for employer NPS or HRA, if applicable)

Old Tax Regime (Optional)

Key Deductions Available Under Old Regime:

• Section 80C: ₹1.5 lakh (LIC, PPF, ELSS, etc.)
• Section 24(b): ₹2 lakh (home loan interest)
• Section 80D: ₹25,000 to ₹1 lakh (health insurance)
• HRA, LTA, education loan interest, and more

Section 87A Rebate (FY 2025–26)

Under New Tax Regime:

• Individuals with taxable income up to ₹12 lakh are eligible
• Rebate amount: Up to ₹60,000
• Effective tax: Nil (if net income ≤ ₹12 lakh after standard deduction)

Under Old Tax Regime:

• Individuals with income up to ₹5 lakh
• Rebate: ₹12,500
• Effective tax: Nil (for income ≤ ₹5 lakh)

Applicability by Taxpayer Type

In this article, we break down the applicable Note: In the New Regime, the same slab applies to all individuals, regardless of age.

Tax Planning: Which Regime Should You Choose?

You can opt between the two regimes every financial year (for non-business individuals). Here's a quick guide:

Choose the New Regime if:

• You do not claim large deductions
• You prefer simplified tax filing
• You want lower tax liability on income up to ₹12 lakh

Choose the Old Regime if:

• You claim deductions under 80C, 80D, HRA, and home loan interest
• Your total deductions exceed ₹3–4 lakh
• You prefer traditional saving methods

Important Points to Remember

• New regime is the default – If you don’t choose, your employer or the tax portal will apply the new regime.
• Declare your choice to your employer at the beginning of the financial year for accurate TDS.
• Tax filing portals will allow regime selectionwhile submitting the return, even if different from employer declaration.
• Businesses and professionals opting for the new regime must stick with it for future years unless they opt out formally.

Final Thoughts

The Income Tax framework for FY 2025–26 is aimed at reducing complexity and making compliance easier. With the tax-free threshold extended up to ₹12 lakh under the new regime, many middle-class taxpayers will enjoy lower or even zero tax liabilities. However, those with significant deductions under the old regime may still benefit by carefully evaluating both options.

The key is regime selection and smart planning.

Need Help Deciding the Right Tax Regime?

Choosing between the old and new tax regimes isn’t just about comparing tax rates—it’s about aligning your financial habits, deductions, and future goals with the structure that gives you the best advantage.

At AK Consulting, we help individuals make informed, data-backed decisions through:

Make your tax planning smarter—not harder

Let AK Consulting help you minimize your tax outgo and maximize your financial clarity.