Introduction

As the new financial year 2025-26 began on April 1, 2025, the income tax slab and rate changes announced in Budget 2025 officially came into effect. Therefore, salaried employees now face an important decision—choosing between the old tax regime and the new tax regime. Since HR departments will soon ask employees to declare their preference, the choice you make will directly affect how your employer deducts advance tax from your monthly salary.

Understanding the Difference Between Old and New Tax Regimes

Old Tax Regime

• To begin with, the old regime allows you to claim a wide range of tax deductions.
• You can claim deductions for investments in schemes like NPS, PPF, SCSS, ELSS, and tax-saver FDs.
• Additionally, you can claim deductions for health insurance premiums, donations, and children’s tuition fees.
• Moreover, the old regime permits a deduction of up to ₹2 lakh on home loan interest.
• Finally, exemptions like HRA and the standard deduction are also available, making this regime beneficial for taxpayers with multiple investments.

New Tax Regime

• In contrast, the new regime simplifies the process by removing most deductions.
• However, salaried persons can still claim exemptions for employer contributions to NPS and EPF.
• In addition, the new tax regime provides a standard deduction of ₹75,000, ensuring some level of tax relief.
• Therefore, this regime is ideal for employees who do not want to track multiple deductions and prefer a simpler tax structure.

Choosing the Right Tax Regime

• So, if you rely heavily on deductions and exemptions, the old regime may suit you better.
• On the other hand, if you do not have many deductions to claim, the new regime becomes the default and often the more practical choice.

New Regime Advantage for Salaried Individuals Earning Up to ₹12 Lakh

• Interestingly, the new tax regime offers a huge advantage for individuals earning up to ₹12 lakh.
• If your taxable salary in FY 2025-26 is ₹12 lakh, you may not need to pay any tax.
• To calculate this, you should deduct the standard deduction of ₹75,000 and employer contributions to NPS and EPF from your total salary.
• The balance amount becomes your taxable income. If this figure is ₹12 lakh or slightly above, the new regime can help you pay zero tax.
• Furthermore, calculations show that even a salary package of up to ₹15 lakh or higher may result in little or no tax under the new regime, provided certain conditions apply.

Choosing a Tax Regime for Salaries Above ₹12 Lakh

• If your income exceeds ₹12 lakh, you must compare both regimes carefully.
• Therefore, you should use an Automatic Income Tax Calculator in Excel to calculate your tax liability under both regimes.
• Once you compare the results, you can confidently choose the option that minimises your tax outgo.
• In most cases, the new regime is expected to be more advantageous in FY 2025-26.
• However, if you earn income from multiple sources beyond salary, your case may be more complex. In such situations, it is wise to consult a tax expert for proper guidance.

Conclusion

To sum up, salaried employees must make a careful choice between the old and new tax regimes in FY 2025-26. The new regime is simpler and often better for incomes around ₹12 lakh, while the old regime benefits those with multiple deductions and exemptions.

Download the Automatic Income Tax Calculator All-in-One in Excel with Form 10E for both Government and Non-Government Employees for the F.Y. 2025-26.

This tool helps you compare regimes instantly and ensures you make the best decision for your finances.

Features of the Automatic Income Tax Calculator All-in-One Excel Software (F.Y. 2025-26)

• First of all, this Excel Calculator instantly prepares your Tax Computed Sheet as per the Budget 2025.
• Moreover, it includes an inbuilt Salary Structure designed for both Government and Non-Government Employees.
• In addition, the software automatically generates a detailed Salary Sheet.
• Furthermore, it automatically calculates the R.A. Exemption under Section 10(13A).
• Not only that, it also automatically computes the Income Tax Arrears Relief Calculation under Section 89(1) along with Form 10E.
• Next, it automatically prepares Form 16 Part A and Part B without any manual effort.
• Finally, it generates the Income Tax Form 16 Part B automatically for quick and accurate reporting.