Income Tax Schedule 1: 2025 vs 1961 Tax Slabs Comparison | Namratha & Co
Income Tax Schedule 1: 2025 vs 1961 Tax Slabs Comparison
Quick Answer: Schedule 1 of the Income Tax Act lists tax rates (slabs). The old regime (1961 Act) has steeper rates starting at ₹2.5 lakh, while the new regime (2025 Act, effective 2026-27) offers lower rates with tax-free income up to ₹4 lakh and gradual slabs up to ₹24 lakh.
Hey reader! If you're new to taxes and just want the straight facts on Schedule 1 (the part that lists the actual tax rates or "slabs"), this post is for you. No long stories — just clear tables, side-by-side comparison, and simple analysis.
What is Schedule 1?
Schedule 1 is the section of the Income Tax Act that contains the actual tax rate tables. Think of it as the "price list" for taxes — it tells you exactly what percentage you pay based on your income level.
Quick Context: Two Tax Regimes in 2026
The Income Tax Act, 1961 is the original law (still the base). Its Schedule 1 outlines tax rates, mainly for the old regime (with lots of deductions).
The Income Tax Act, 2025 (effective from April 1, 2026 for FY 2026-27) has updated Schedule 1 with the new regime structure — more generous slabs with the new regime (default since recent years) having a higher tax-free limit.
Important: No major slab changes happened in Budget 2026 — the rates from FY 2025-26 (AY 2026-27) continue for the next year too.
Old Regime Tax Slabs (Income Tax Act 1961 – Traditional Schedule 1)
These are the classic rates — higher brackets start earlier, but you get deductions (80C, HRA, home loan interest, etc.).
| Taxable Income (₹) | Tax Rate | Tax Amount |
|---|---|---|
| Up to 2,50,000 | 0% (Nil) | ₹0 |
| 2,50,001 – 5,00,000 | 5% | 5% on amount above ₹2.5 lakh |
| 5,00,001 – 10,00,000 | 20% | ₹12,500 + 20% on amount above ₹5 lakh |
| Above 10,00,000 | 30% | ₹1,12,500 + 30% on amount above ₹10 lakh |
Key Features:
- Rebate u/s 87A: Up to ₹12,500 (makes income up to ₹5 lakh effectively tax-free if eligible)
- Standard Deduction: ₹50,000 for salaried individuals
- Higher exemption for seniors: ₹3 lakh (60-80 years) / ₹5 lakh (above 80 years)
- Deductions Available: 80C, 80D, HRA, home loan interest, and more
New Regime Tax Slabs (Income Tax Act 2025 – Default Option)
These are the simplified, lower-rate slabs in the new regime (u/s 115BAC). Fewer deductions, but much higher tax-free limit.
| Taxable Income (₹) | Tax Rate | Tax Amount |
|---|---|---|
| Up to 4,00,000 | 0% (Nil) | ₹0 |
| 4,00,001 – 8,00,000 | 5% | 5% on amount above ₹4 lakh |
| 8,00,001 – 12,00,000 | 10% | ₹20,000 + 10% on amount above ₹8 lakh |
| 12,00,001 – 16,00,000 | 15% | ₹60,000 + 15% on amount above ₹12 lakh |
| 16,00,001 – 20,00,000 | 20% | ₹1,20,000 + 20% on amount above ₹16 lakh |
| 20,00,001 – 24,00,000 | 25% | ₹2,00,000 + 25% on amount above ₹20 lakh |
| Above 24,00,000 | 30% | ₹3,00,000 + 30% on amount above ₹24 lakh |
Key Features:
- Rebate u/s 87A: Up to ₹60,000 (makes income up to ₹12 lakh effectively tax-free after rebate)
- Standard Deduction: ₹75,000 (higher than old regime)
- No age-based difference: Same slabs for everyone
- Limited Deductions: Only standard deduction and employer NPS contribution allowed
Side-by-Side Comparison: Old vs New Regime
| Income Level (₹) | Old Regime Rate | New Regime Rate | Key Difference |
|---|---|---|---|
| Up to 2.5–4 lakh | 0% / 5% | 0% | New starts tax-free higher |
| 4–8 lakh | 5% / 20% | 5% | New keeps 5% longer |
| 8–12 lakh | 20% | 10% | New much lower |
| 12–16 lakh | 30% (after 10L) | 15% | New way gentler |
| 16–20 lakh | 30% | 20% | New lower rate |
| 20–24 lakh | 30% | 25% | New introduces 25% buffer |
| Above 24 lakh | 30% | 30% | Same max rate, but starts later in new |
Real-World Examples: Which Regime Saves More?
Example 1: Income ₹8 Lakh (Salaried, No Major Deductions)
Old Regime:
- Taxable income after ₹50,000 standard deduction: ₹7,50,000
- Tax: ₹12,500 + 20% of ₹2,50,000 = ₹62,500
- Less rebate: ₹12,500
- Final Tax: ₹50,000
New Regime:
- Taxable income after ₹75,000 standard deduction: ₹7,25,000
- Tax: 5% of ₹3,25,000 = ₹16,250
- Final Tax: ₹16,250
Winner: New Regime saves ₹33,750!
Example 2: Income ₹15 Lakh (With ₹2 Lakh Deductions)
Old Regime:
- Taxable income after deductions: ₹13,00,000
- Tax: ₹1,12,500 + 30% of ₹3,00,000 = ₹2,02,500
- Final Tax: ₹2,02,500
New Regime:
- Taxable income after ₹75,000 standard deduction: ₹14,25,000
- Tax: ₹60,000 + 15% of ₹2,25,000 = ₹93,750
- Final Tax: ₹93,750
Winner: New Regime saves ₹1,08,750!
Example 3: Income ₹30 Lakh (With ₹5 Lakh Deductions)
Old Regime:
- Taxable income after deductions: ₹25,00,000
- Tax: ₹1,12,500 + 30% of ₹15,00,000 = ₹5,62,500
- Final Tax: ₹5,62,500
New Regime:
- Taxable income after ₹75,000 standard deduction: ₹29,25,000
- Tax: ₹3,00,000 + 30% of ₹5,25,000 = ₹4,57,500
- Final Tax: ₹4,57,500
Winner: New Regime saves ₹1,05,000!
Simple Analysis: What Does This Mean for You?
If Your Income is ₹12 Lakh or Less
New regime wins big — often zero or minimal tax thanks to the high rebate and lower rates. Old regime needs substantial deductions to match.
Mid-Income (₹12–20 Lakh)
New regime usually saves more due to gradual slabs (15%, 20%) and lower rates in middle brackets. Old regime jumps straight to 30% after ₹10 lakh.
High Income (Above ₹24 Lakh)
Both hit 30%, but new regime delays the 30% rate (starts at ₹24 lakh vs ₹10 lakh in old). This means significant savings in the ₹10-24 lakh range.
Break-Even Point
If you claim ₹3.5–5 lakh+ in deductions (80C, home loan interest, 80D, etc.), old regime might save more. Otherwise, new regime is simpler and cheaper.
Key Differences in Schedule 1 Structure
| Aspect | Old Regime (1961) | New Regime (2026) |
|---|---|---|
| Number of Slabs | 4 slabs | 7 slabs |
| Tax-Free Limit | ₹2.5 lakh (₹5 lakh with rebate) | ₹4 lakh (₹12 lakh with rebate) |
| Highest Rate Starts | ₹10 lakh | ₹24 lakh |
| Standard Deduction | ₹50,000 | ₹75,000 |
| Other Deductions | Many (80C, 80D, HRA, etc.) | Very limited |
| Complexity | High (need to track deductions) | Low (straightforward) |
| Best For | High deduction claimers | Most salaried individuals |
Frequently Asked Questions
Can I switch between old and new regime every year?
Yes! You can choose your preferred regime each financial year when filing your ITR. Salaried individuals can switch annually, while business owners need to be more careful with timing.
Which regime is default in 2026?
The new regime is the default. If you want to use the old regime, you must explicitly opt for it while filing your return.
Do senior citizens have different slabs?
In the old regime, yes — seniors get higher basic exemption (₹3 lakh or ₹5 lakh). In the new regime, everyone has the same slabs regardless of age.
What if I have rental income or capital gains?
Both regimes apply to all types of income. However, the deduction availability differs. Calculate tax under both scenarios to see which saves more.
Is the rebate automatic?
Yes, if your taxable income is within the rebate limit (₹5 lakh for old, ₹12 lakh for new), the rebate is automatically applied when you file your return.
How to Choose the Right Regime
Follow this simple decision tree:
- Calculate your total income (salary + other sources)
- List all available deductions (80C investments, HRA, home loan, etc.)
- Calculate tax under both regimes using an online calculator
- Compare final tax liability
- Choose the regime with lower tax
Pro Tip: Most online tax calculators (including the official Income Tax e-filing portal) show both options side-by-side.
Bottom Line: Schedule 1 Simplified
Schedule 1 in the "1961 style" (old regime) has fewer, steeper slabs starting early. It rewards those who invest heavily in tax-saving instruments.
The "2026 vibe" (new regime) has more slabs, lower rates for most income levels, and a much higher tax-free zone. It's designed for simplicity and benefits the majority of taxpayers.
For 90% of salaried individuals, the new regime offers better savings with zero hassle. Only those with significant deductions (₹4+ lakh) should consider the old regime.
How Namratha & Co. Can Help
Our tax planning services include:
- Regime Comparison Analysis: Detailed calculation for your specific income and deductions
- Tax Optimization: Identify the best regime and maximize savings
- Deduction Planning: Strategic advice on investments for old regime benefits
- ITR Filing: Accurate filing with optimal regime selection
- Year-Round Advisory: Proactive tax planning throughout the financial year
Quick Action Checklist
- ✓ Calculate your gross total income
- ✓ List all deductions you can claim
- ✓ Use a tax calculator to compare both regimes
- ✓ Choose the regime with lower tax liability
- ✓ Inform your employer for correct TDS deduction
- ✓ File ITR with selected regime
- ✓ Review annually as income/deductions change
About the Author: CA Namratha is a practicing Chartered Accountant based in Bengaluru, Karnataka, specializing in tax planning and compliance. She helps individuals and businesses optimize their tax liability through strategic regime selection and investment planning.
Last Updated: February 20, 2026 | Reading Time: 10 minutes | Expertise Level: Beginner
Confused about which tax regime to choose? Contact Namratha & Co. for personalized tax planning and regime comparison analysis tailored to your financial situation.
About the Author
CA Namratha
CA Namratha is a Chartered Accountant at Namratha & Co., specializing in taxation, compliance, and business advisory services.
