New Tax Regime FY 2025-26: Complete Guide with Examples

The new tax regime is now default and covers income up to ₹12 lakh tax-free. This guide walks through every slab, every deduction you lose, and whether it makes sense for your specific CTC.

1.The new regime tax slabs for FY 2025-26

New tax regime slabs for FY 2025-26 (Budget 2025): ₹0-3L: Nil. ₹3L-7L: 5%. ₹7L-10L: 10%. ₹10L-12L: 15%. ₹12L-15L: 20%. Above ₹15L: 30%. Additionally, incomes up to ₹12 lakh get a 100% rebate under Section 87A (making effective tax zero), and the standard deduction of ₹75,000 means income up to ₹12.75 lakh is zero tax for salaried individuals. This rebate structure makes the new regime extremely attractive for anyone earning below ₹15 lakh.

2.Deductions you give up when choosing the new regime

The new regime disallows most popular deductions: no 80C (PPF, ELSS, EPF employee contribution, home loan principal). No 80D (health insurance premium). No HRA exemption. No LTA (Leave Travel Allowance). No home loan interest (Section 24b). No professional tax deduction. The only deduction retained: standard deduction of ₹75,000 for salaried. NPS employer contribution (Section 80CCD(2)) is still allowed — this is often overlooked and can be significant at higher salaries where the employer contributes to NPS.

3.Example 1: ₹12 lakh CTC, no major deductions

CTC ₹12L, standard deduction ₹75,000 → taxable income = ₹11.25 lakh in new regime. Tax on ₹11.25L under new slabs: (₹7L-₹3L) × 5% + (₹10L-₹7L) × 10% + (₹11.25L-₹10L) × 15% = ₹20,000 + ₹30,000 + ₹18,750 = ₹68,750. But since gross taxable income is ₹11.25L < ₹12L, Section 87A rebate applies — full ₹68,750 is rebated. Tax = ₹0. Net in-hand ≈ ₹87,500/month after PF (employee EPF 12% on basic). New regime wins decisively here.

4.Example 2: ₹25 lakh CTC with home loan and HRA

CTC ₹25L, home loan interest ₹2.4L, HRA exemption ₹1.8L, 80C investments ₹1.5L. Old regime: taxable income = ₹25L - ₹50K (standard) - ₹2.4L (Section 24) - ₹1.8L (HRA) - ₹1.5L (80C) = ₹18.8L. Tax = ₹3.37L (plus cess). New regime: taxable income = ₹25L - ₹75K = ₹24.25L. Tax = ₹4.48L (plus cess). Old regime saves ₹1.11 lakh in tax here. At ₹25L+ with meaningful deductions, old regime competes. Always calculate both for your exact numbers.

5.The NPS employer contribution hack that works in both regimes

One deduction survives into the new regime: employer NPS contribution (Section 80CCD(2)) up to 10% of basic salary. At a ₹20 lakh CTC with basic ₹10L, employer NPS contribution of ₹1L (10% of basic) reduces taxable income by ₹1 lakh even in the new regime. Tax saving: ₹20,000-₹30,000 depending on bracket. If you're in a company that allows salary restructuring, ask HR to maximize the employer NPS contribution component. It's a direct tax saving that costs you nothing — the contribution is still your money, just in NPS.