Old vs New tax regime (FY 2025-26): a worked example

Since the Finance Act 2023 the new regime under Section 115BAC is the default; the old regime is now an opt-in. Which one costs less tax depends almost entirely on how much deduction a taxpayer can genuinely claim under the old regime.

What each regime keeps

The new regime has lower slab rates and a standard deduction for salaried taxpayers, but disallows most Chapter VI-A deductions (80C, 80D, 80CCD(1B), etc.), HRA exemption, LTA, and the deduction for interest on a self-occupied house loan. The old regime keeps all of those but applies higher slab rates.

The break-even logic

Compare the two like this: start from gross total income, subtract the standard deduction under each. Under the old regime, subtract every deduction you can actually substantiate — 80C investments, 80D premiums, HRA, home-loan interest. Apply each regime’s slab rates plus surcharge and cess, and apply the Section 87A rebate where the taxable income qualifies. The old regime wins only when the total deduction claimed is large enough to offset its higher rates; for a taxpayer with little beyond 80C, the new regime is usually lower.

Common mistakes

• Comparing on assumed deductions rather than deductions the taxpayer will really claim and can prove.
• Forgetting the rebate: it can take the tax to nil under one regime and not the other near the threshold.
• Ignoring that the regime choice interacts with the advance-tax estimate for the year.

How Yogin AI helps

The CA workspace runs a deterministic Old vs New comparison (Section 115BAC), versioned by assessment year, with the slab rates, surcharge, cess and rebate computed in code — no LLM in the number path. It produces the comparison; the regime election and any planning advice remain the CA’s call.