New vs Old Tax Regime for Salaried Freshers in India

Last updated: 8 October 2026 · By the Asuraa Team

Quick answer: For most salaried freshers, the new tax regime is the better choice. Under its slabs, which Budget 2026-27 left unchanged, the Income Tax Department allows a rebate of up to Rs 60,000 when taxable income is Rs 12 lakh or less, and salaried people also get a Rs 75,000 standard deduction, so salaries up to Rs 12.75 lakh pay no income tax. The old regime wins only with large deductions such as HRA and home loan interest.

Key takeaways

• The new tax regime is the default, and an employer deducts TDS under it unless the employee chooses the old regime.
• Under the new regime, income up to Rs 4 lakh is untaxed and rates rise in steps to 30% above Rs 24 lakh, and Budget 2026-27 left these slabs unchanged.
• The new regime gives a rebate of up to Rs 60,000 when taxable income is Rs 12 lakh or less, so a salaried person with the Rs 75,000 standard deduction pays no tax up to Rs 12.75 lakh.
• HRA exemption, section 80C, section 80D and self-occupied home loan interest are not available in the new regime, but the employer NPS deduction under section 80CCD(2) is.
• Salaried taxpayers without business income can switch between the old and new regimes every year when filing their return.

For most salaried freshers in India, the new tax regime results in lower tax, or zero tax, than the old regime. The old regime only pulls ahead when you can claim large deductions such as HRA, home loan interest and full investment-linked deductions, which few first-year employees have. This guide shows the current slabs, the standard deduction, and how to compare the two regimes for your own salary.

This is general information, not tax advice. Rules change with each Budget, so confirm details on the Income Tax Department website before you file.

Which tax regime is the default for salaried employees?

The new tax regime is the default; you get the old regime only if you actively choose it. The Income Tax Department's regime FAQs state that if you do not tell your employer which regime you want, the employer deducts tax (TDS) under the new regime.

Telling your employer is not the final decision. According to the same FAQs, salaried people make the actual choice in their income tax return, filed by the due date. People with only salary and other non-business income can switch between regimes every year.

What are the new tax regime slabs?

Under the new regime, income up to Rs 4 lakh is not taxed, and rates then rise in Rs 4 lakh steps from 5% up to 30% above Rs 24 lakh. These slabs were introduced in Budget 2025, as Business Standard reported in February 2025, and were left unchanged in the Union Budget presented on 1 February 2026, according to Storyboard18.

Source: Income Tax Department slab page. A 4% health and education cess is added to the tax amount in both regimes.

How much salary is tax-free under the new regime?

A salaried person pays no income tax under the new regime if salary minus the standard deduction is Rs 12 lakh or less. That works out to a gross taxable salary of up to Rs 12.75 lakh. Two rules combine to create this:

• Rebate: The Income Tax Department lists a rebate of up to Rs 60,000 under the new regime when taxable income does not exceed Rs 12 lakh. That rebate cancels the entire tax on income up to that level.
• Standard deduction: Salaried individuals and pensioners get a flat Rs 75,000 standard deduction under the new regime, as Business Standard reported when it was introduced. Storyboard18 reported in February 2026 that it stayed at Rs 75,000 in Budget 2026-27 (Storyboard18).

Under the old regime, the rebate is up to Rs 12,500 and applies only when taxable income is at most Rs 5 lakh (Income Tax Department). The old regime's standard deduction is Rs 50,000, as listed in the department's regime FAQs.

Which deductions do you lose in the new regime?

You give up most popular deductions and exemptions, including those under section 80C, section 80D, HRA exemption and home loan interest on a self-occupied house. The Income Tax Department FAQs list these as unavailable under the new regime.

A few items remain available in the new regime. The most relevant for employees is the deduction under section 80CCD(2) for the employer's contribution to your NPS account, which the same FAQs list as allowed. If your employer offers NPS through payroll, it is worth asking about.

How do you compare the two regimes for your salary?

Calculate your tax both ways using your actual numbers, then pick the lower figure. Follow these steps:

1. Start with gross taxable salary. Take your annual salary from your offer letter or Form 16, excluding items that are not taxable. Our guide to CTC vs in-hand salary explains which parts of CTC actually reach you.
2. New regime: subtract Rs 75,000 standard deduction. If the result is Rs 12 lakh or less, your tax is zero. Otherwise, apply the new slabs and add 4% cess.
3. Old regime: subtract Rs 50,000 standard deduction, then subtract every deduction and exemption you can actually prove: HRA exemption (only if you pay rent), your eligible investments and premiums, home loan interest and so on.
4. Apply old slabs to what remains, apply the old regime rebate if taxable income is Rs 5 lakh or less, and add 4% cess.
5. Compare and tell your employer your chosen regime, so the right TDS is deducted every month.
6. Confirm the choice in your ITR by the due date.

What does this look like for a typical fresher salary?

For a fresher earning Rs 6 lakh or Rs 10 lakh a year, the new regime gives zero tax, while the old regime can still leave a tax bill unless deductions are large. These illustrations use only the slabs and rebate rules above and assume a simple, fully taxable salary with no other income. Old-regime figures deduct the Rs 50,000 standard deduction plus the assumed extra deductions shown.

How the Rs 18 lakh new-regime figure is built: Rs 20,000 on the Rs 4-8 lakh band, Rs 40,000 on the Rs 8-12 lakh band, Rs 60,000 on the Rs 12-16 lakh band and Rs 25,000 on the Rs 1.25 lakh above Rs 16 lakh, which totals Rs 1,45,000 before cess.

At low salaries both regimes may produce zero tax. The difference shows up as salaries rise into the Rs 8-12 lakh range, where the new regime's wider rebate gives it a clear advantage for most freshers.

When should a fresher still choose the old regime?

Choose the old regime only when your total proven deductions and exemptions are large enough to beat the new regime's lower rates. That typically means a combination of:

• high rent in a metro such as Mumbai, Delhi or Bengaluru, giving a large HRA exemption
• a home loan on a self-occupied house
• full use of investment-linked deductions you would make anyway

For salaries up to Rs 12.75 lakh, the new regime already produces zero tax, so the old regime cannot do better. Above that, run both calculations each year. Because salaried taxpayers can switch annually (Income Tax Department), your choice this year does not lock you in.

What do most guides on the new vs old tax regime get wrong?

Most guides say "the new regime has no deductions", which is not quite right. You still get the Rs 75,000 standard deduction, and the employer NPS deduction under section 80CCD(2) remains available (Income Tax Department FAQs).

Two other common mistakes:

• Treating the employer declaration as final. It only decides monthly TDS. Your final choice is made in your return, and the FAQs confirm this.
• Ignoring the change in tax law. The Income-tax Act, 2025 came into force on 1 April 2026, replacing the 1961 Act and introducing a single "tax year" in place of the previous year and assessment year pair (Outlook Money, April 2026). Section numbers you see in older articles may differ under the new Act, even where the underlying benefit is the same. Check current forms and your Form 16 rather than relying on old section references.

How do you tell your employer which regime you want?

Submit your regime choice through your company's HR or payroll portal, usually at joining and again at the start of each financial year. Many employers also ask for investment declarations if you pick the old regime, followed by proofs near the end of the year.

If you have just received an offer, our guide to reading your salary slip shows where TDS appears each month, and the post on PF and gratuity for freshers explains the other deductions you will see. Freshers comparing offers should also read about how to negotiate salary as a fresher, since post-tax pay is what matters.

FAQ

Is the new tax regime better for freshers?

For most freshers, yes. Salaried individuals get a Rs 75,000 standard deduction and a rebate that removes tax entirely when taxable income is Rs 12 lakh or less, so salaries up to Rs 12.75 lakh pay no income tax under the new regime. The old regime only helps if you have large deductions such as high rent, a home loan and full investment claims.

Is a Rs 12 lakh salary tax-free in India?

Under the new regime, yes for salaried individuals. After the Rs 75,000 standard deduction, a Rs 12 lakh salary leaves taxable income of Rs 11.25 lakh, which is within the Rs 12 lakh rebate limit listed by the Income Tax Department. The tax works out to zero, though other income such as interest or capital gains can change the result.

Can I switch from the new to the old tax regime every year?

Yes, if you have no business or professional income. The Income Tax Department FAQs say salaried and other non-business taxpayers can choose either regime each year in their return, filed by the due date. People with business income face stricter limits and must use Form 10-IEA to opt out of the new regime.

What happens if I do not tell my employer which tax regime I want?

Your employer will deduct TDS under the new regime, because it is the default. This does not stop you from choosing the old regime later. According to the Income Tax Department, the final choice for salaried people is made in the income tax return, so you can still opt for the old regime when filing if it suits you better.

Can I claim HRA in the new tax regime?

No. The Income Tax Department lists the HRA exemption among the benefits not available under the new regime, along with deductions such as section 80C and 80D and interest on a home loan for a self-occupied house. If you pay high rent in a metro city and claim other deductions, calculate tax under both regimes before deciding.

What standard deduction does a salaried fresher get?

Under the new regime, salaried individuals get a flat Rs 75,000 standard deduction, which Budget 2026-27 kept unchanged according to February 2026 reports. Under the old regime the standard deduction is Rs 50,000. You do not need to submit any proof; your employer applies it automatically when calculating monthly TDS.

Final thoughts

For a salaried fresher earning up to Rs 12.75 lakh, the new regime usually means zero income tax and no paperwork for proofs, so it is the sensible default. Recheck the choice each year as your salary and deductions grow, and if you are planning your next move up the pay ladder, map it out with the Asuraa career path planner.