Is income up to Rs 12 lakh really tax-free now?

Under the new tax regime for FY 2025-26, a resident individual with taxable income up to Rs. 12 lakh pays no tax thanks to the enhanced Section 87A rebate. For salaried individuals, the Rs. 75,000 standard deduction effectively extends this to around Rs. 12.75 lakh of gross salary.

What are the new tax regime slabs for FY 2025-26?

Nil up to Rs. 4 lakh; 5% from Rs. 4-8 lakh; 10% from Rs. 8-12 lakh; 15% from Rs. 12-16 lakh; 20% from Rs. 16-20 lakh; 25% from Rs. 20-24 lakh; and 30% above Rs. 24 lakh. Budget 2026 kept these unchanged for FY 2026-27.

Which regime should I choose?

The new regime suits most people, especially those without large deductions, and offers zero tax up to Rs. 12 lakh. The old regime can still win if you have substantial deductions like 80C, 80D, HRA and home-loan interest. The right choice depends on your numbers.

Tax & ITR

New vs Old Tax Regime in 2026: Which Should Delhi Founders & Salaried Choose?

Q: Is the new regime the default?

Yes. The new tax regime is the default. You must specifically opt for the old regime when filing if you want its deductions and exemptions, subject to conditions.

By CA Anuj Negi, ACAUpdated May 20267 min read

In short

The new regime is the default and now offers zero tax up to Rs. 12 lakh of income (about Rs. 12.75 lakh for salaried, after the Rs. 75,000 standard deduction) thanks to the enhanced 87A rebate. It has lower rates but few deductions. The old regime still allows 80C, 80D, HRA and home-loan interest — so it can win if you have large deductions. Budget 2026 left both unchanged for FY 2026-27. The right pick depends entirely on your numbers.

Since Budget 2025 made the new regime far more attractive, most people are better off there — but not everyone. Here's a clear comparison so you can decide.

New regime slabs (FY 2025-26 & FY 2026-27)

Income slab	Rate
Up to Rs. 4,00,000	Nil
Rs. 4,00,001 – 8,00,000	5%
Rs. 8,00,001 – 12,00,000	10%
Rs. 12,00,001 – 16,00,000	15%
Rs. 16,00,001 – 20,00,000	20%
Rs. 20,00,001 – 24,00,000	25%
Above Rs. 24,00,000	30%

With the Section 87A rebate, a resident with taxable income up to Rs. 12 lakh pays no tax. Salaried individuals get a Rs. 75,000 standard deduction, effectively extending this to about Rs. 12.75 lakh of gross salary. Budget 2026 made no changes, so these apply for FY 2026-27 too.

What the new regime gives up

Lower rates come at a cost: most popular deductions and exemptions are not available under the new regime — including 80C (investments), 80D (health insurance), HRA, and many others (the standard deduction for salaried remains).

Where the old regime still wins

If you claim substantial deductions, the old regime can produce a lower tax bill. It's worth comparing if you have:

Full 80C (Rs. 1.5 lakh) via PF, ELSS, insurance, etc.
80D health-insurance premiums
Significant HRA (renters in Delhi NCR often do)
Home-loan interest deduction

How to decide

Add up your deductions

Total your likely 80C, 80D, HRA, home-loan interest and others.

Compute tax both ways

Calculate your liability under each regime for your income level.

Pick the lower one

Choose the regime that gives you the smaller bill — and remember the new one is the default.

Rule of thumb

If your deductions are modest, the new regime almost always wins — especially with zero tax up to Rs. 12 lakh. If you're a heavy saver with a home loan and high rent, run the old-regime numbers before deciding. Our Saket team will compute both and file the optimal one for you — see ITR Advisory. For founders, also see tax planning for startups.

General information, not tax advice. Slabs, rebates and conditions are set by law and can change; confirm for your situation.

How Startup Advisory Can Help

Startup Advisory is a CA-led firm in Saket, New Delhi that files income tax returns for salaried individuals, professionals and businesses across Delhi NCR. Instead of guessing which regime is cheaper, let our Chartered Accountants run the numbers and file the one that genuinely saves you the most:

A side-by-side old-vs-new regime computation for your exact income and deductions.
Accurate ITR filing and tax advisory with every eligible deduction claimed.
Year-round bookkeeping and TDS support so filing season is never a scramble.
A named CA who reviews your return — not a self-serve portal.

Call 9311972982 or book a free consultation and we will file the regime that costs you less.

Frequently Asked Questions

Under the new regime for FY 2025-26, a resident with taxable income up to Rs. 12 lakh pays no tax via the enhanced 87A rebate. Salaried individuals get to about Rs. 12.75 lakh with the Rs. 75,000 standard deduction.

Nil up to Rs. 4 lakh; 5% (4-8L); 10% (8-12L); 15% (12-16L); 20% (16-20L); 25% (20-24L); 30% above Rs. 24 lakh. Budget 2026 kept these unchanged for FY 2026-27.

The new regime suits most people, especially without large deductions, with zero tax up to Rs. 12 lakh. The old regime can win with substantial 80C/80D/HRA/home-loan deductions. Compare your numbers.

Yes. You must specifically opt for the old regime when filing if you want its deductions and exemptions, subject to conditions.

Few. The new regime keeps the Rs. 75,000 standard deduction for salaried individuals, the employer's NPS contribution under 80CCD(2), the family-pension deduction and a handful of others – but not 80C, 80D, HRA or home-loan interest on a self-occupied house.

Salaried and other non-business taxpayers can choose afresh every year. Those with business or professional income who opt for the old regime can switch back to the new regime only once, after which they cannot return to the old regime.

Salaried and non-business taxpayers simply select the opt-out option in the ITR. Anyone with business or professional income must file Form 10-IEA on or before the due date to use the old regime.

Yes, but at a lower level. Under the old regime the Section 87A rebate makes taxable income up to Rs. 5 lakh tax-free, whereas under the new regime it extends to Rs. 12 lakh for FY 2025-26.

Under the old regime: nil up to Rs. 2.5 lakh; 5% from Rs. 2.5-5 lakh; 20% from Rs. 5-10 lakh; and 30% above Rs. 10 lakh. The basic exemption is higher for senior citizens (Rs. 3 lakh) and super-senior citizens (Rs. 5 lakh).

It depends. The old regime gives senior citizens a higher basic exemption plus benefits like the 80TTB interest deduction and higher 80D limits, which can outweigh the new regime's lower rates. Seniors with significant deductions should compare both.

Marginal relief ensures that if your income is just above Rs. 12 lakh, the extra tax does not exceed the income above Rs. 12 lakh. It smooths the jump so crossing the threshold by a small amount does not create a disproportionate tax.

Yes. The new regime caps the highest surcharge at 25%, compared with 37% under the old regime, which lowers the effective top rate for very high earners and is an added reason high-income taxpayers often prefer it.

It depends on your deductions and how you pay yourself. Founders with few deductions who reinvest usually do better under the new regime, while those claiming HRA, 80C and home-loan interest may prefer the old one. Note that business income limits how often you can switch.

About the author: CA Anuj Negi, ACA

Chartered Accountant, Startup Advisory — Saket, New Delhi

CA Anuj Negi is an Associate Chartered Accountant (ACA) at Startup Advisory who focuses on accounting, bookkeeping and ongoing tax compliance — cloud bookkeeping, GST and TDS, income-tax audit and compliance for Delhi NCR businesses.

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