OLD VS NEW REGIME FAQ – INCOME TAX ACT FY 25-26
FAQs on Exemptions, Tax Slabs & Deductions for Individuals, Partnership Firms & Companies
A. INDIVIDUAL TAXPAYERS (FAQs)
Answer: Yes. Under the Income-tax Act, 1961, the New Tax Regime is the default tax regime for FY 2025-26. An individual may opt for the Old Tax Regime to claim eligible exemptions and deductions (such as Sections 80C, 80D, HRA, and LTA).
Conditions:
Conditions:
- Individuals without business or professional income: Can choose between the New and Old Tax Regime every financial year while filing the Income Tax Return.
- Individuals having business or professional income: Can opt out of the New Tax Regime and choose the Old Tax Regime, but the option is subject to the conditions prescribed under Section 115BAC and cannot be changed every year freely.
Answer: Compare your total income, eligible exemptions, deductions, tax liability, and compliance requirements before selecting the appropriate regime.
Answer:
| Taxable Income | Tax Rate |
|---|---|
| Up to ₹4,00,000 | Nil |
| ₹4,00,001 – ₹8,00,000 | 5% |
| ₹8,00,001 – ₹12,00,000 | 10% |
| ₹12,00,001 – ₹16,00,000 | 15% |
| ₹16,00,001 – ₹20,00,000 | 20% |
| ₹20,00,001 – ₹24,00,000 | 25% |
| Above ₹24,00,000 | 30% |
Answer:
Note:
| Taxable Income | Tax Rate |
|---|---|
| Up to ₹2,50,000 | Nil |
| ₹2,50,001 – ₹5,00,000 | 5% |
| ₹5,00,001 – ₹10,00,000 | 20% |
| Above ₹10,00,000 | 30% |
- Resident Senior Citizens (60–79 years): Basic exemption limit is ₹3,00,000.
- Resident Super Senior Citizens (80 years & above): Basic exemption limit is ₹5,00,000.
- Section 87A Rebate: Resident individuals with taxable income up to ₹5,00,000 can claim a rebate of up to ₹12,500, subject to the prescribed conditions.
Answer: Yes. Standard Deduction is available to salaried employees and pensioners under both tax regimes.
- New Tax Regime: Standard Deduction of ₹75,000 is available.
- Old Tax Regime: Standard Deduction of ₹50,000 is available.
- Available only to salaried employees and pensioners.
- Not available to individuals having only business or professional income.
- The deduction is allowed automatically from salary/pension income while computing taxable income.
Answer: No. Deductions under Section 80C are generally not available under the New Tax Regime.
Answer: Yes, only under the Old Tax Regime. No deduction is available under the New Tax Regime.
Old Tax Regime – Deduction Limits:
Old Tax Regime – Deduction Limits:
- Self, Spouse & Dependent Children: Up to ₹25,000 (₹50,000 if the insured person is a senior citizen).
- Parents: Additional ₹25,000 (₹50,000 if the parent is a senior citizen).
- Maximum Deduction: Up to ₹1,00,000 (if both self/family and parents are senior citizens).
- Preventive Health Check-up: Up to ₹5,000, included within the above limits.
- Health insurance premium must generally be paid through non-cash modes (except preventive health check-ups, which may be paid in cash).
- The policy must cover the taxpayer, spouse, dependent children, or parents, as applicable.
Answer: The New Tax Regime allows only specified deductions such as:
- Standard Deduction
- Employer's contribution to NPS [eligible provisions]
- Deduction under specified sections such as 80CCH and 80JJAA (where applicable).
Answer:
- Section 80C
- Section 80CCC
- Section 80CCD(1)
- Section 80CCD(1B)
- Section 80D
- Section 80E
- Section 80G
- Section 80TTA
- Section 80TTB
- Section 80U
- Section 80DD
- Section 80DDB
- Section 80GGA
- Section 80GG
- and other eligible Chapter VI-A deductions.
Answer: No. HRA exemption is generally not available under the New Tax Regime.
Answer:
- Old Tax Regime: Yes. LTA exemption under Section 10(5) can be claimed for domestic travel undertaken by the employee and family. The exemption is limited to the actual eligible travel fare (air, rail, or recognized public transport) and is available for 2 journeys in a block of 4 calendar years. Expenses on hotel, food, local conveyance, or sightseeing are not exempt.
- New Tax Regime: No. LTA exemption is not available under the New Tax Regime.
Answer:
- Old Tax Regime: Yes. A deduction of up to ₹2,00,000 per financial year under Section 24(b) is allowed for interest on a self-occupied house property, provided:
- The loan is taken for purchase or construction of the house.
- The construction/acquisition is completed within 5 years from the end of the financial year in which the loan was taken.
- The taxpayer is the owner of the property and is liable to pay the interest.
- New Tax Regime: No. Deduction for interest on a self-occupied home loan under Section 24(b) is not available under the New Tax Regime.
Answer: Yes. Under the New Tax Regime, a resident individual can claim a rebate under Section 87A if the total taxable income does not exceed ₹12,0,000. The maximum rebate available is ₹60,000. If the income exceeds ₹12,0,000, marginal relief may be available where applicable. The rebate is not available on tax payable on special rate incomes, such as certain capital gains taxable under special provisions and winnings from lotteries or online games.
Answer: Under the Old Tax Regime, a resident individual can claim a rebate under Section 87A if the total taxable income does not exceed ₹5,00,000. The maximum rebate available is ₹12,500 or the amount of income tax payable, whichever is lower. This rebate is not available to NRIs, firms, LLPs, or companies.
Answer: If you claim substantial deductions and exemptions, the Old Tax Regime may be beneficial. If you have fewer deductions, the New Tax Regime may result in lower tax liability.
Answer: Yes, subject to the provisions applicable to salaried taxpayers. Salaried individuals without business or professional income can choose between the New Tax Regime and the Old Tax Regime every financial year while filing their Income Tax Return. The option can be changed each year by selecting the preferred tax regime in the ITR. However, individuals having business or professional income cannot switch every year and are subject to the conditions prescribed under Section 115BAC.
Answer: No. Individuals and HUFs having business or professional income cannot switch between the New and Old Tax Regime every year. Once they opt out of the New Tax Regime (Section 115BAC), they can generally opt back in only once during their lifetime, provided they continue to have business income. If the business income ceases, they may choose the tax regime every year like other individual taxpayers.
Answer: Yes. Under both the New Tax Regime and the Old Tax Regime, a deduction for family pension is available under Section 57(iia). The deduction is lower of ₹25,000 or one-third (1/3rd) of the family pension received during the financial year (FY 2025-26). This deduction is available only to the recipient of family pension, not to a retired employee receiving his/her own pension.
Answer: Under both the New and Old Regimes, the employer's contribution to the National Pension System (NPS) is deductible under Section 80CCD(2).
- Central/State Government employees: Deduction up to 14% of salary (Basic + Dearness Allowance).
- Other employees: Deduction up to 14% of salary (Basic + Dearness Allowance) for FY 2025-26.
Answer: The Old Tax Regime is generally beneficial if you claim substantial deductions and exemptions. The New Tax Regime may be beneficial if you have fewer deductions.
Answer:
- Section 80TTB (Old Tax Regime): A resident senior citizen (aged 60 years or above) can claim a deduction of up to ₹50,000 on interest income from savings accounts, fixed deposits (FDs), recurring deposits (RDs), and post office deposits.
- Section 80TTA (Old Tax Regime): Senior citizens cannot claim deduction under Section 80TTA. This section is available only to individuals (other than senior citizens) and HUFs, up to ₹10,000 on savings account interest.
- New Tax Regime: Neither Section 80TTA nor Section 80TTB deduction is available.
B. PARTNERSHIP FIRM (FAQs)
Answer: No. The concept of the New and Old Tax Regime does not apply to partnership firms.
Answer: Partnership firms are generally taxed at 30% plus applicable surcharge and cess.
Answer: No.
Answer: Yes, as per the prescribed provisions.
Answer: Yes. A partnership firm can claim a deduction for remuneration (salary, bonus, commission, or other payments) paid to working partners, provided it is authorized by the partnership deed. The deduction is allowed only up to the limits prescribed under Section 40(b) of the Income-tax Act, 1961:
- On the first ₹6,00,000 of Book Profit or in case of a loss: Higher of ₹3,00,000 or 90% of Book Profit.
- On the balance Book Profit: 60% of the balance Book Profit.
Answer: Yes. A partnership firm can claim a deduction for interest paid to partners, provided it is authorized by the partnership deed. The deduction is allowed up to 12% per annum. Any interest paid in excess of 12% p.a. is not deductible under the Income-tax Act, 1961 (FY 2025-26).
Answer: No.
Answer: Yes. Eligible business expenses incurred wholly and exclusively for business purposes are deductible.
Answer: No.
Answer: No. Section 87A rebate is available only to eligible resident individuals.
C. COMPANY (FAQs)
Answer: No. The individual New/Old Tax Regime does not apply to companies.
For FY 2025-26 (AY 2026-27) under the Income-tax Act, 1961, companies are not covered by the "Old Tax Regime vs New Tax Regime" in the same way as individuals. Instead, domestic companies can either be taxed under the normal provisions or opt for the concessional tax regimes under Sections 115BA, 115BAA, or 115BAB, subject to eligibility and conditions.
What tax rate applies to companies under the Income-tax Act, 1961 for FY 2025-26?
Answer:
For FY 2025-26 (AY 2026-27), the applicable income tax rates for domestic companies are as follows (excluding surcharge and Health & Education Cess):
Additional Taxes:
What tax rate applies to companies under the Income-tax Act, 1961 for FY 2025-26?
Answer:
For FY 2025-26 (AY 2026-27), the applicable income tax rates for domestic companies are as follows (excluding surcharge and Health & Education Cess):
| Category of Domestic Company | Income Tax Rate |
|---|---|
| Company with turnover/gross receipts up to ₹400 crore (subject to prescribed conditions) | 25% |
| Company opting under Section 115BA | 25% |
| Company opting under Section 115BAA (Concessional Tax Regime) | 22% |
| New Manufacturing Company opting under Section 115BAB | 15% |
| Any other Domestic Company | 30% |
- Surcharge: Applicable as per the provisions of the Income-tax Act. Companies opting under Sections 115BAA or 115BAB are subject to a flat 10% surcharge.
- Health & Education Cess: 4% on the amount of income tax plus surcharge.
Answer: Yes. Eligible business expenses are deductible.
Answer: Yes.
Answer: Companies are taxed under the provisions applicable to domestic or foreign companies, including concessional tax regimes where eligible. The individual Old/New Tax Regime concept does not apply to companies.
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