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Old vs new tax regime for government employees
After the Union Budget 2025, the new regime is cheaper for most Central Government employees. Here is how the two compare, with worked examples at three pay levels.
The slabs side by side
| New regime (default) | Rate | Old regime | Rate |
|---|---|---|---|
| Up to ₹4,00,000 | Nil | Up to ₹2,50,000 | Nil |
| ₹4–8 lakh | 5% | ₹2.5–5 lakh | 5% |
| ₹8–12 lakh | 10% | ₹5–10 lakh | 20% |
| ₹12–16 lakh | 15% | Above ₹10 lakh | 30% |
| ₹16–20 lakh | 20% | ||
| ₹20–24 lakh | 25% | ||
| Above ₹24 lakh | 30% |
Both regimes add 4% health and education cess, and surcharge on very high incomes. The old regime slabs shown are for individuals below 60.
What each regime allows
| New regime | Old regime | |
|---|---|---|
| Standard deduction | ₹75,000 | ₹50,000 |
| Rebate under section 87A | No tax up to ₹12 lakh taxable income (rebate up to ₹60,000), with marginal relief just above it | No tax up to ₹5 lakh taxable income (rebate up to ₹12,500) |
| HRA exemption | Not allowed | Allowed if you pay rent |
| 80C (your NPS/UPS, GPF, PPF, LIC, ELSS, tuition fees) | Not allowed | Up to ₹1,50,000 |
| 80CCD(1B) extra NPS | Not allowed | Up to ₹50,000 |
| 80D health insurance, home loan interest, professional tax | Not allowed | Allowed |
| Government's NPS contribution, 80CCD(2) | Allowed (14% of basic + DA) | Allowed (14% of basic + DA) |
The new regime is the default. Salaried employees can choose the old regime each year, by telling their office (DDO) for tax deducted from salary, and finally when filing the return.
Worked examples
All three use DA at 60%, transport allowance with DA, and 10% NPS on basic pay + DA. The old regime is given generous deductions: the full ₹1.5 lakh under 80C and health insurance, plus HRA exemption for the rent shown.
Level 6, basic pay ₹35,400, Class Y city
| New regime | Old regime | |
|---|---|---|
| Gross salary for the year | ₹8,33,760 | ₹8,33,760 |
| Deductions | Standard ₹75,000 | Standard ₹50,000, HRA ₹52,032 (rent ₹1.2 lakh), 80C ₹1.5 lakh, 80D ₹25,000 |
| Taxable income | ₹7,58,760 | ₹5,56,730 |
| Tax for the year | ₹0 | ₹24,800 |
Below ₹12 lakh of taxable income, the new regime's rebate wipes out the tax completely.
Level 10, basic pay ₹56,100, Class X city
| New regime | Old regime | |
|---|---|---|
| Gross salary for the year | ₹14,17,320 | ₹14,17,320 |
| Deductions | Standard ₹75,000 | Standard ₹50,000, HRA ₹1,32,288 (rent ₹2.4 lakh), 80C ₹1.5 lakh, 80CCD(1B) ₹50,000, 80D ₹25,000 |
| Taxable income | ₹13,42,320 | ₹10,10,030 |
| Tax for the year | ₹84,602 | ₹1,20,129 |
Even with HRA, 80C, extra NPS and health insurance, the old regime costs about ₹35,500 more. It only becomes cheaper here with roughly ₹1.7 lakh more in deductions, for example interest on a home loan. With ₹2 lakh of home loan interest on top, the old regime tax drops to about ₹77,500.
Level 13, basic pay ₹1,23,100, Class X city
| New regime | Old regime | |
|---|---|---|
| Gross salary for the year | ₹29,44,920 | ₹29,44,920 |
| Deductions | Standard ₹75,000 | Standard ₹50,000, HRA ₹2,43,648 (rent ₹4.8 lakh), 80C ₹1.5 lakh, 80CCD(1B) ₹50,000, 80D ₹25,000 |
| Taxable income | ₹28,69,920 | ₹24,26,270 |
| Tax for the year | ₹4,58,615 | ₹5,61,996 |
Adding ₹2 lakh of home loan interest brings the old regime down to ₹4,99,596, still about ₹41,000 more than the new regime.
So which should you choose?
- Gross salary up to about ₹12.75 lakh a year (₹12 lakh taxable after the ₹75,000 standard deduction): the new regime means zero tax.
- Above that, the old regime only wins if your deductions are large: typically HRA on high rent and home loan interest and full 80C, 80CCD(1B) and 80D.
- Your own NPS/UPS contribution counts towards 80C only in the old regime. The Government's 14% NPS contribution is deductible in both.
- You can compare both regimes with your own figures in the calculator: open Income tax and then See detailed tax breakdown.
Sources
Slab rates, the rebate and deductions are from the Income Tax Department's tax rates page and the Budget speech 2025-26 (PDF). HRA exemption rules: allowances for salaried employees. This is general information, not tax advice.
Compare both regimes with your payThe calculator shows tax under both, slab by slab.
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