The start of FY 2025-26 brings significant changes for salaried taxpayers as new income tax slabs under the revised tax regime take effect. Here’s a breakdown of what’s different—and how it could impact your financial strategy.
New Tax Regime: Simpler Structure, Lower Tax Liability
For many salaried individuals, the new tax regime introduced in the Union Budget 2025 offers a straightforward alternative to the older system. According to Dhruv Chopra, Managing Partner at Dewan P. N. Chopra and Co, individuals with limited deductions or exemptions under the old system stand to gain more under the new regime.
Take, for example, a salaried person with a net taxable income of ₹12 lakh (after standard deduction). Under the new regime, they are eligible for a rebate of ₹75,000 under Section 87A of the Income Tax Act, effectively reducing their tax to zero—a big win for those without major investments or deductions.
| Income Slab (₹) | Tax Rate (New Regime) |
|---|---|
| 0 – 3,00,000 | 0% |
| 3,00,001 – 6,00,000 | 5% |
| 6,00,001 – 9,00,000 | 10% |
| 9,00,001 – 12,00,000 | 15% |
| 12,00,001 – 15,00,000 | 20% |
| Above 15,00,000 | 30% |
Old Regime: Better for Deduction-Heavy Earners
Meanwhile, the old tax regime still holds appeal for taxpayers who actively invest in tax-saving instruments. CA Manish Mishra, Founder of GenZCFO, pointed out that the old regime benefits those leveraging deductions under Section 80C (₹1.5 lakh), 80D (health insurance), interest on home loans (up to ₹2 lakh), and HRA.
This regime rewards disciplined savers—those putting money into EPF, PPF, insurance, and similar avenues. But it comes at the cost of complexity, requiring individuals to track multiple deductions and maintain investment documentation.
Key Distinctions and Strategic Choice
The primary difference between the two systems lies in the availability of deductions and the structure of tax slabs. The new tax regime skips most exemptions but compensates with reduced tax rates. It’s designed for those who prioritize liquidity and prefer a simpler tax process.
However, one notable exception in the new regime is the allowance under Section 80CCD(2)—employer contributions to an employee’s NPS account remain deductible, offering a small but meaningful benefit to salaried individuals.
Ultimately, the decision between regimes depends on your income profile, investment habits, and whether simplicity or deductions align better with your financial goals.