New Tax Regime (FY2025-26) ā The Key Numbers
Budget 2025 (presented February 1, 2025) made major changes to the new regime, making it significantly more attractive:
| Income Slab | New Regime Rate | Old Regime Rate |
|---|---|---|
| Up to ā¹4 lakh | 0% | 0% |
| ā¹4L ā ā¹8L | 5% | 5% |
| ā¹8L ā ā¹12L | 10% | 20% |
| ā¹12L ā ā¹16L | 15% | 30% |
| ā¹16L ā ā¹20L | 20% | 30% |
| ā¹20L ā ā¹24L | 25% | 30% |
| Above ā¹24L | 30% | 30% |
ā
Key new regime advantage for retirees: Sec 87A rebate ā if total income ā¤ā¹12L, zero tax payable regardless of slab. Standard deduction of ā¹75,000 also available in new regime from FY2025-26.
Side-by-Side Comparison: 3 Retiree Scenarios
Scenario 1: Low Income Retiree (ā¹8L annual)
Meena, 62, retired teacher. Annual income: ā¹8L (EPF withdrawal + pension)
New Regime: Income ā¹8L ā after standard deduction ā¹75K = ā¹7.25L taxable ā slab tax ā¹16,250 ā 87A rebate (ā¤ā¹12L) ā Tax = ā¹0
Old Regime: Income ā¹8L ā 80C ā¹1.5L + medical ā¹50K + standard deduction ā¹50K = ā¹5.5L taxable ā slab tax ā¹25,000 ā rebate ā Tax = ā¹0
Verdict: Both zero. New regime wins (simpler, no proof of investment required)
New Regime: Income ā¹8L ā after standard deduction ā¹75K = ā¹7.25L taxable ā slab tax ā¹16,250 ā 87A rebate (ā¤ā¹12L) ā Tax = ā¹0
Old Regime: Income ā¹8L ā 80C ā¹1.5L + medical ā¹50K + standard deduction ā¹50K = ā¹5.5L taxable ā slab tax ā¹25,000 ā rebate ā Tax = ā¹0
Verdict: Both zero. New regime wins (simpler, no proof of investment required)
Scenario 2: Medium Income Retiree (ā¹15L annual)
Ramesh, 63. Annual income: ā¹15L (NPS annuity ā¹3L + FD interest ā¹5L + rental ā¹7L)
New Regime: ā¹15L ā ā¹75K standard deduction = ā¹14.25L taxable
Slab: 0+20K+40K+34,125 = ā¹94,125 + 4% cess = ā¹97,890
Old Regime: ā¹15L ā 80C ā¹1.5L ā medical ins 80D ā¹50K ā standard ā¹50K = ā¹12.5L taxable
Slab: 0+10K+50K+75K = ā¹1,37,500 ā no 87A (>ā¹5L old regime) + 4% cess = ā¹1,43,000
New Regime saves ā¹45,110/year ā clear winner at ā¹15L income
New Regime: ā¹15L ā ā¹75K standard deduction = ā¹14.25L taxable
Slab: 0+20K+40K+34,125 = ā¹94,125 + 4% cess = ā¹97,890
Old Regime: ā¹15L ā 80C ā¹1.5L ā medical ins 80D ā¹50K ā standard ā¹50K = ā¹12.5L taxable
Slab: 0+10K+50K+75K = ā¹1,37,500 ā no 87A (>ā¹5L old regime) + 4% cess = ā¹1,43,000
New Regime saves ā¹45,110/year ā clear winner at ā¹15L income
Scenario 3: High Income Retiree (ā¹30L annual)
Vijay, 65. Annual income: ā¹30L (multiple FDs, rental income, NPS annuity)
New Regime: ā¹30L ā ā¹75K = ā¹29.25L taxable
Tax: 0+20K+40K+60K+80K+100K+1,57,500 = ā¹4,57,500 + surcharge 10% + 4% cess = ā¹5,23,380
Old Regime: ā¹30L ā 80C ā¹1.5L ā 80D ā¹1L ā HRA nil (own home) ā standard ā¹50K = ā¹27L
Tax: 0+10K+50K+6,30,000 = ā¹6,90,000 + surcharge 10% + 4% cess = ā¹7,89,480
New Regime saves ā¹2,66,100/year ā overwhelmingly wins at ā¹30L
New Regime: ā¹30L ā ā¹75K = ā¹29.25L taxable
Tax: 0+20K+40K+60K+80K+100K+1,57,500 = ā¹4,57,500 + surcharge 10% + 4% cess = ā¹5,23,380
Old Regime: ā¹30L ā 80C ā¹1.5L ā 80D ā¹1L ā HRA nil (own home) ā standard ā¹50K = ā¹27L
Tax: 0+10K+50K+6,30,000 = ā¹6,90,000 + surcharge 10% + 4% cess = ā¹7,89,480
New Regime saves ā¹2,66,100/year ā overwhelmingly wins at ā¹30L
When Does Old Regime Win?
The old regime only makes sense if your deductions are very large. Run the numbers ā but in most cases the new regime wins for retirees in 2026:
| Situation | Better Regime | Why |
|---|---|---|
| Income ā¤ā¹12L | New (always) | 87A rebate ā zero tax either way, new is simpler |
| Income ā¹12Lāā¹20L | New (usually) | Lower slabs save more than old regime deductions |
| Income ā¹20Lāā¹30L | New (usually) | Large standard deduction gap is hard to bridge |
| Very large home loan interest deduction | Compare carefully | 80C + 24B combo may still beat new regime |
| Multiple 80C + 80D + HRA claimable | Compute both | If deductions >ā¹4.5L, old regime may win marginally |
ā ļø Important: Retirees typically have low or zero 80C deductions (no EPF contribution, no home loan EMI). This makes the new regime almost always superior ā most of the old regime's power came from 80C deductions that retirees no longer have.
Special Case: NPS Annuity Tax in Both Regimes
NPS annuity income is taxable in both regimes. The key difference: in the old regime you could claim 80CCD(2) deduction on employer NPS contribution while working. After retirement, no such deduction is available. The new regime's lower slabs are better for annuity taxation in virtually all cases.
See your tax under both regimes
RetireWise uses New Regime FY2025-26 ā see your exact monthly income after correct tax
Can I switch between new and old regime every year? ā¼
Salaried individuals and retirees with no business income can choose their regime every year when filing ITR. Business owners cannot switch once they opt out of the new regime. For retirees, you can compute tax under both regimes each year and choose whichever is lower ā there is no penalty or lock-in.
Does the new regime affect how my EPF withdrawal is taxed? ā¼
No ā EPF withdrawal after 5 years service is tax-free (Sec 10(12)) under both regimes. The choice of regime only affects your regular income (annuity, FD interest, rental income). EPF maturity tax exemption applies regardless of which regime you are in.