ITR Filing FY 2025-26: How to Calculate Taxes Under the Old Regime

As the tax filing season approaches for the Assessment Year 2026-2027, Indian taxpayers face a critical decision: whether to stick with the default new tax regime or opt for the old regime. While the new regime offers lower rates and higher exemptions, the old regime remains a powerful tool for those capable of maximizing various deductions and exemptions.

The Strategic Choice: Old vs. New Tax Regime

For the Financial Year 2025-26, the new tax regime is the default option. If you fail to specifically opt for the old regime by the July 31, 2026 deadline, you will automatically be switched to the new regime.

The debate between the two hinges on your investment profile. The new regime is designed for simplicity with lower tax rates and higher basic exemptions. However, the old regime can be more financially beneficial for individuals who utilize heavy deductions under Chapter VI-A, such as life insurance, provident funds, and health insurance, which can significantly lower the overall taxable income.

Understanding the Old Regime Tax Slabs

For resident individuals under the age of 60, the tax rates under the old regime follow a progressive structure. To calculate your liability, you must apply these rates to your net taxable income:

  • ₹0 – ₹2.5 Lakh: Nil
  • ₹2.5 Lakh – ₹5 Lakh: 5%
  • ₹5 Lakh – ₹10 Lakh: 20%
  • Above ₹10 Lakh: 30%

Note that a 4% Health and Education Cess is applicable on the total calculated tax amount.

Step-by-Step Calculation Guide

To accurately determine your tax outgo, follow this structured mathematical approach:

  1. Calculate Net Salary: Start with your gross salary and subtract the ₹50,000 standard deduction.
  2. Compute Gross Total Income (GTI): Add your net salary to income from other sources, such as savings account interest, fixed deposit interest, dividends, or rental income.
  3. Apply Deductions: Subtract eligible Chapter VI-A deductions from your GTI. Common deductions include Section 80C (up to ₹1.5 lakh), Section 80CCD(1B) for NPS (up to ₹50,000), Section 80D for health insurance, and Section 80TTA for savings interest.
  4. Determine Net Taxable Income: The remaining amount after all deductions is your net taxable income, upon which the slab rates are applied.

Expert Tips for Accurate Filing

Archit Gupta, Founder and CEO of ClearTax, advises taxpayers not to rely solely on Form 16. To ensure compliance and maximize savings, professionals should:

  • Cross-Verify with AIS and Form 26AS: Use the Annual Information Statement (AIS) and Form 26AS to identify income sources like interest that might be missing from your Form 16.
  • Maintain Documentation: Ensure you have all receipts, certificates, and bank records to support every deduction claimed.
  • Verify Section Eligibility: Ensure specific deductions like 80TTA or 80TTB are claimed only if all prescribed conditions are met.

Key Takeaways

  • Deadline Alert: You must choose the old tax regime explicitly; otherwise, you will default to the new regime for AY 2026-27.
  • Deduction Power: The old regime is most effective for taxpayers who can utilize Section 80C, 80D, and NPS deductions to reduce their taxable base.
  • Verification is Vital: Always reconcile your income with Form 26AS and AIS to avoid discrepancies and ensure all interest income is reported.