The Income-tax Act, 2025 has completely changed the tax planning game from 1 April 2026.
The New Tax Regime under Section 202 is now the DEFAULT regime for salaried taxpayers unless you specifically opt for the Old Regime.
But the real question is
❓ Lower tax rates with fewer deductions
OR
❓ Higher deductions with more tax planning opportunities Let’s decode it practically
The Comparison: 2026 Slab Structures
| Income Slab | Section 202 (New/Default) | Old Regime (Optional) |
| Up to ₹4 Lakh | Nil | Nil (up to ₹2.5L / ₹3L for Seniors) |
| ₹4L – ₹8 Lakh | 5% | 5% (up to ₹5L) |
| ₹8L – ₹12 Lakh | 10% | 20% |
| ₹12L – ₹16 Lakh | 15% | 30% |
| ₹16L – ₹20 Lakh | 20% | 30% |
| ₹20L – ₹24 Lakh | 25% | 30% |
| Above ₹24 Lakh | 30% | 30% |
Senior citizen exemption limits continue separately.
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WHY SECTION 202 IS BECOMING POPULAR
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- Default tax regime
- Higher Standard Deduction – ₹75,000
- Lower tax burden for many salaried employees
- Effective NIL tax possible up to approx. ₹12.75L*
- Minimal documentation & compliance
- No need to rush for tax-saving investments in March
BUT OLD REGIME STILL HAS POWERFUL BENEFITS
| Deduction / Exemption | Old Regime | Section 202 |
| HRA Exemption | ✅ | ❌ |
| LTA | ✅ | ❌ |
| 80C Deduction | ✅ | ❌ |
| 80D Mediclaim | ✅ | ❌ |
| Home Loan Interest | ✅ | ❌ |
| Employee NPS u/s 80CCD(1B) | ✅ | ❌ |
| Employer NPS u/s 80CCD(2) | ✅ | ✅ |
BIG HRA UPDATE IN 2026
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Under the Income-tax Rules, 2026, the 50% HRA metro benefit reportedly now applies to:
📍 Mumbai
📍 Delhi
📍 Kolkata
📍 Chennai
📍 Bengaluru
📍 Hyderabad
📍 Pune
📍 Ahmedabad
👉 This can significantly increase HRA exemption for salaried professionals residing in major cities.
For many employees paying high rent, the Old Regime may still result in LOWER tax liability.
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WHO SHOULD CHOOSE SECTION 202?
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✔️ Young professionals
✔️ Employees without home loan
✔️ Taxpayers with limited deductions
✔️ Individuals preferring simple compliance
✔️ People avoiding locked-in tax-saving investments
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WHO SHOULD CHOOSE OLD REGIME?
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✔️ High HRA claims
✔️ Home loan borrowers
✔️ Individuals maximizing 80C + 80D
✔️ Families with substantial deductions
✔️ Professionals heavily investing in NPS
Frequently Asked Questions (FAQs)
- Is Section 202 mandatory?
No. It is the default regime, but you may opt for the Old Regime. - Can I change regime while filing ITR?
Yes, salaried taxpayers can change while filing return (subject to conditions). - Is HRA available in Section 202?
No. - Is 80C / 80D available in Section 202?
No. - Is home loan interest deduction allowed?
Generally not for self-occupied property under Section 202.
Final Thought
There is NO universal “best” regime.
Section 202 = Simplicity + Lower Compliance
Old Regime = Better for high deductions & exemptions
The correct choice depends on:
• Salary structure
• HRA
• Home loan
• Insurance
• Investments
• NPS contributions
• Rent paid
A personalized tax computation is the smartest approach before selecting your regime for FY 2026-27.
Written by
Asha Ahuja Sethi (Head Admin at Jatin Sethi & Co.., Chartered Accountants)
Shilpa Khata (Works at Jatin Sethi & Co.., Chartered Accountants)
About the Author
cajatinsethi
Professional Chartered Accountant with expertise in taxation, financial planning, and business advisory services. Committed to helping businesses and individuals achieve their financial goals through personalized solutions and expert guidance.
