Act 2025 Explained

New Tax Regime Is the Default

Section 202 of the Income Tax Act 2025 makes the new tax regime the default for every taxpayer. Here is what that means, who can opt out, and what the 2026-27 slabs look like.

The Income Tax Act 2025 changed how the new tax regime works. From tax year 2026-27 onwards, the new regime is the default — meaning the tax department will calculate your tax under the new regime unless you actively choose the old one. The change is in Section 202 of the new Act.

The new regime uses lower slab rates but fewer deductions. The old regime uses higher slab rates but allows more deductions such as HRA, Section 80C, 80D, and home loan interest. The right choice depends on your total deductions.

Key facts

Default for every taxpayer

Section 202 of the Income Tax Act 2025 makes the new regime the default for all taxpayers — individuals, HUFs, firms, and companies alike.

Opt-out still available

Taxpayers who prefer the old regime can opt out. The choice is made at the time of filing your ITR and can be changed in subsequent years.

Simpler deductions under the new regime

The new regime allows fewer deductions than the old regime but uses lower slab rates to compensate. The standard deduction of ₹75,000 for salaried individuals is built into the slab structure.

New regime slabs for tax year 2026-27

Up to ₹4 lakh: nil · ₹4–8 lakh: 5% · ₹8–12 lakh: 10% · ₹12–16 lakh: 15% · ₹16–20 lakh: 20% · ₹20–24 lakh: 25% · Above ₹24 lakh: 30%. Rates verified 2026-10-07 against the Income Tax Department tax-rates page.

New vs old regime at a glance

Feature	New regime	Old regime
Default status	Default from 2026-27	Must elect at filing
Standard deduction	₹75,000 (built into slabs)	₹75,000 for salaried
HRA deduction	Not available	Available
Section 80C items	Not available	Available (up to ₹1.5 lakh)
Section 80D health insurance	Not available	Available
Home loan interest	Restricted	Fully available
Tax rates	Lower slabs, fewer exemptions	Higher slabs, more deductions

Frequently asked questions

What does 'new regime is the default' mean for me?

It means the Income Tax Department will process your return under the new regime unless you actively choose the old regime when filing. If you do nothing, you are on the new regime for tax year 2026-27.

Can I switch back to the old regime after choosing the new one?

Yes. You can opt out of the new regime and choose the old regime when you file your ITR for any subsequent year. There is no lock-in period preventing switches between regimes.

Is the new regime better for everyone?

Not necessarily. If you have large housing loan interest, HRA claims, or other old-regime deductions worth more than the tax you save under the new regime's lower slabs, the old regime may work out cheaper. Use a tax calculator to compare both before filing.

Where can I read the official explanation of the new regime?

The Income Tax Department's new-act guidance page at incometax.gov.in explains the new regime in plain English. Your filing utility (or a tax professional) will also show both regime calculations side by side.

Sources: Income Tax Act 2025 (Section 202) · Income Tax Department new-act guidance and tax-rates page (verified 2026-10-07). Last reviewed by FinWiz24 Research Desk.

Introduction