Income Tax Slab Rates: Breakeven Analysis between Old and New Regime for the Financial Year 2025-26
Introduction
With the new tax regime becoming the default option from FY 2023–24 onwards, taxpayers are increasingly evaluating which regime works best for their financial profile. As we step into FY 2025–26, many salaried individuals and professionals are asking: Should I stick to the old regime with exemptions or opt for the lower rates under the new regime?
This article provides an updated break-even tax comparison for FY 2025–26, helping taxpayers decide the optimal route based on their deductions and taxable income.
Overview of the Two Regimes
New Regime (u/s 115BAC)
– Offers a standard deduction of Rs 75,000/- for salaried income.
– No additional deductions (like 80C, 80D, Interest on housing loan, HRA, etc.).
– Slab rates are lower than those in the old regime.
Tax Slab in new regime
| Upto 4 lakh | Nil |
| 4 to 8 lakh | 5% |
| 8 to 12 lakh | 10% |
| 12 to 16 lakh | 15% |
| 16 to 20 lakh | 20% |
| 20 to 24 Lakh | 25% |
| Above 24 lakh | 30% |
Old Regime
– Offers a standard deduction of Rs 50,000/- for salaried income.
– Allows various deductions such as 80C (Rs 1.5 lakh), 80D (health insurance), Interest on housing loan, HRA, and others.
– Tax in higher, but these can be offset by deductions.
Tax Slab under old regime
| Upto 2.5 lakh | 0% |
| 2.5 to 5 lakh | 5% |
| 5 to 10 lakh | 20% |
| Above 10 lakh | 30% |
Breakeven Tax Calculation
The following table compares tax liabilities under both regimes for the financial year 2025-26 and shows how much investment in deductions is needed under the old regime to match the tax liability under the new regime.
Marginal Relief under New Regime
Due to rebate under section 87A, there is no tax liability until net total income is Rs 12,00,000/-. In order to help taxpayers to avoid sudden jump in tax liability when their net taxable income crosses Rs 12,00,000/- the Income Tax Act has inserted marginal relief. Marginal relief ensures that the excess tax liability is limited to the excess income over and above Rs 12,00,000/-. Marginal relief under the new regime is available until the net taxable income reaches Rs 12,70,588/-
How to read the table
Column A shows the net taxable income under the new regime. Column B displays the corresponding tax liability under the new regime. Column C indicates the net total income under the old regime that would result in the same tax liability mentioned in Column B. Column D shows the minimum additional deductions (excluding the standard deduction) that need to be claimed under the old regime to make it more beneficial than the new regime.
| A | B | C | D | E |
| Net Taxable income after STD deduction New Regime | Break even Tax | Net total income under old regime for same tax in column B | Exemption other than Std deduction for Old Regime | Remark |
| 7,50,000 | 0 | 5,00,000 | 2,75,000 | Winner – New regime |
| 8,00,000 | 0 | 5,00,000 | 3,25,000 | “ |
| 8,50,000 | 0 | 5,00,000 | 3,75,000 | “ |
| 9,00,000 | 0 | 5,00,000 | 4,25,000 | “ |
| 9,50,000 | 0 | 5,00,000 | 4,75,000 | “ |
| 10,00,000 | 0 | 5,00,000 | 5,25,000 | “ |
| 10,50,000 | 0 | 5,00,000 | 5,75,000 | “ |
| 11,00,000 | 0 | 5,00,000 | 6,25,000 | “ |
| 11,50,000 | 0 | 5,00,000 | 6,75,000 | “ |
| 12,00,000 | 0 | 5,00,000 | 7,25,000 | “ |
| 12,50,000 | 50,000 | 6,87,500 | 5,87,500 | One should invest more than Rs 5,87,500 to reduce tax through old scheme |
| 12,70,588 | 70,588 | 7,90,441 | 5,05,147 | One should invest more than Rs 5,05,147 to reduce tax through old scheme |
| 13,00,000 | 75,000 | 8,12,500 | 5,12,500 | “ |
| 13,50,000 | 82,500 | 8,50,000 | 5,25,000 | “ |
| 14,00,000 | 90,000 | 8,87,500 | 5,37,500 | “ |
| 14,50,000 | 97,500 | 9,25,000 | 5,50,000 | “ |
| 15,00,000 | 1,05,000 | 9,62,500 | 5,62,500 | “ |
| 15,50,000 | 1,12,500 | 10,00,000 | 5,75,000 | “ |
| 16,00,000 | 1,20,000 | 10,25,000 | 6,00,000 | “ |
| 16,50,000 | 1,30,000 | 10,58,333 | 6,16,667 | “ |
| 17,00,000 | 1,40,000 | 10,91,667 | 6,33,333 | “ |
| 17,50,000 | 1,50,000 | 11,25,000 | 6,50,000 | “ |
| 18,00,000 | 1,60,000 | 11,58,333 | 6,66,667 | “ |
| 18,50,000 | 1,70,000 | 11,91,667 | 6,83,333 | “ |
| 19,00,000 | 1,80,000 | 12,25,000 | 7,00,000 | “ |
| 19,50,000 | 1,90,000 | 12,58,333 | 7,16,667 | “ |
| 20,00,000 | 2,00,000 | 12,91,667 | 7,33,333 | “ |
| 20,50,000 | 2,12,500 | 13,33,333 | 7,41,667 | “ |
| 21,00,000 | 2,25,000 | 13,75,000 | 7,50,000 | “ |
| 21,50,000 | 2,37,500 | 14,16,667 | 7,58,333 | “ |
| 22,00,000 | 2,50,000 | 14,58,333 | 7,66,667 | “ |
| 22,50,000 | 2,62,500 | 15,00,000 | 7,75,000 | “ |
| 23,00,000 | 2,75,000 | 15,41,667 | 7,83,333 | “ |
| 23,50,000 | 2,87,500 | 15,83,333 | 7,91,667 | “ |
| 24,00,000 | 3,00,000 | 16,25,000 | 8,00,000 | “ |
| 24,50,000 | 3,15,000 | 16,75,000 | 8,00,000 | “ |
| 25,00,000 | 3,30,000 | 17,25,000 | 8,00,000 | “ |
| 25,50,000 | 3,45,000 | 17,75,000 | 8,00,000 | “ |
| 26,00,000 | 3,60,000 | 18,25,000 | 8,00,000 | “ |
| 26,50,000 | 3,75,000 | 18,75,000 | 8,00,000 | “ |
Conclusion
The decision between the old and new regime depends on available deductions and exemptions. If the assesse has deductions and exemptions exceeding the amount in the column D, then old regime is more beneficial. Otherwise, the new regime is beneficial.
Taxpayers should calculate their tax liability under both regimes before making a choice.
Note
This article is an updated version of my previous break-even analysis for FY 2024–25, incorporating revised figures and continued relevance for FY 2025-26 also. I welcome suggestions and feedback to improve future updates.
https://taxguru.in/income-tax/breakeven-tax-analysis-old-vs-new-tax-regime-fy-2024-25.html
Author Bio
