Old Tax Regime vs New Tax Regime – Salary Tax Computation for FY 2025–26
Choosing between the Old Tax Regime and the New Tax Regime is one of the most common questions faced by salaried individuals. This article provides a practical salary tax computation for Financial Year 2025–26 (Assessment Year 2026–27), using real-life salary figures and commonly claimed deductions, to help taxpayers understand which regime is more beneficial.
Salary Profile Considered (FY 2025–26)
The below comparison is based on a salaried individual earning a fixed monthly salary with standard employer and employee contributions.
- Monthly Gross Salary: ₹1,50,000
- Annual Gross Salary: ₹18,00,000
- Employer NPS Contribution: ₹5,000 per month (₹60,000 per annum)
- Employee PF Contribution: ₹2,500 per month (₹30,000 per annum)
- Professional Tax: ₹2,500 per annum
Investments & Benefits Assumed
To make the comparison realistic, the following common tax-saving investments and expenses are considered:
- Home Loan Interest (Self-occupied house): ₹1,00,000 per annum
- Home Loan Principal Repayment: ₹1,50,000 per annum
- Medical Insurance Premium for Family: ₹20,000 per annum
Tax Computation Under Old Tax Regime (FY 2025–26)
Under the Old Tax Regime, taxpayers are allowed to claim various deductions and exemptions under the Income-tax Act.
| Particulars | Amount (₹) |
|---|---|
| Gross Salary | 18,00,000 |
| Standard Deduction | (50,000) |
| Professional Tax | (2,500) |
| Employer NPS – Section 80CCD(2) | (60,000) |
| Section 80C (PF + Home Loan Principal) | (1,50,000) |
| Medical Insurance – Section 80D | (20,000) |
| Home Loan Interest | (1,00,000) |
| Taxable Income | 14,17,500 |
Total Income Tax Payable (including 4% Health & Education Cess): ₹2,47,260
Tax Computation Under New Tax Regime (FY 2025–26)
The New Tax Regime offers lower slab rates but restricts most deductions. However, Standard Deduction and Employer’s NPS contribution under Section 80CCD(2) continue to be allowed.
| Particulars | Amount (₹) |
|---|---|
| Gross Salary | 18,00,000 |
| Standard Deduction | (75,000) |
| Professional Tax | (0) |
| Employer NPS – Section 80CCD(2) | (60,000) |
| Taxable Income | 16,65,000 |
Total Income Tax Payable (including 4% Health & Education Cess): ₹1,38,320
Old vs New Tax Regime – Final Comparison (FY 2025–26)
| Particulars | Old Regime | New Regime |
|---|---|---|
| Total Tax Payable | ₹2,47,260 | ₹1,38,320 |
Conclusion
Based on the above salary structure and investments for FY 2025–26, the New Tax Regime results in a lower tax outgo by approximately ₹1,08,940.
However, the choice between tax regimes should be reviewed every year as it depends on:
- Actual salary structure
- Housing loan details
- Medical insurance coverage
- Employer contributions and future tax planning
Disclaimer: This article is published as an educational resource. Actual tax liability may vary based on individual circumstances and changes in tax laws.