The new tax regime is now the default for FY 2025-26 (AY 2026-27). If you earn under ₹7 lakh, you pay zero tax under the new regime — no deductions needed. Freelancers with significant 80C investments, HRA, or home loan interest may still save more under the old regime. Here is how to decide.

What Changed in Budget 2025 for Freelancers?

Budget 2025 revised the new regime slabs significantly. The most important change: the zero-tax threshold effectively rises to ₹12.75 lakh once you account for the ₹75,000 standard deduction and the Section 87A rebate.

The old regime is no longer the default. If you file without specifying, you are automatically assessed under the new regime. To opt for the old regime, submit Form 10-IEA before 31 July 2026.

Tax Slabs for FY 2025-26 (AY 2026-27)

New Regime (Default)

Income Slab	Tax Rate
Up to ₹4,00,000	Nil
₹4,00,001 – ₹8,00,000	5%
₹8,00,001 – ₹12,00,000	10%
₹12,00,001 – ₹16,00,000	15%
₹16,00,001 – ₹20,00,000	20%
₹20,00,001 – ₹24,00,000	25%
Above ₹24,00,000	30%

Standard deduction: ₹75,000 (available from FY 2024-25)
87A rebate: zero tax on net income up to ₹12 lakh → effective zero-tax limit ₹12.75 lakh
No 80C, HRA, home loan interest, or other deductions

Old Regime

Income Slab	Tax Rate
Up to ₹2,50,000	Nil
₹2,50,001 – ₹5,00,000	5%
₹5,00,001 – ₹10,00,000	20%
Above ₹10,00,000	30%

87A rebate up to ₹12,500 for net income up to ₹5 lakh
All deductions available: 80C, 80D, HRA, home loan interest, NPS 80CCD(1B)
No ₹75,000 standard deduction

Deductions Only Available in the Old Regime

Deduction	Section	Maximum Limit
PPF, ELSS, LIC, tuition fees	80C	₹1,50,000
Health insurance premium	80D	₹25,000 – ₹1,00,000
House Rent Allowance	HRA / 10(13A)	Actual, formula-based
Home loan interest (self-occupied)	Section 24(b)	₹2,00,000
Additional NPS contribution	80CCD(1B)	₹50,000

A freelancer maxing 80C + NPS 80CCD(1B) + 80D can reduce taxable income by ₹2.25 lakh before HRA or home loan interest.

Which Regime Wins at ₹8L, ₹15L, and ₹25L?

All three examples use Section 44ADA (50% of gross receipts = taxable profit). Old regime assumes ₹2.25L in deductions (80C + NPS + 80D).

At ₹8 Lakh Taxable Profit

Regime	Calculation	Tax Payable
New	₹8L − ₹75K standard deduction = ₹7.25L. Within 87A rebate (applies up to ₹12L)	₹0
Old	₹8L − ₹2.25L deductions = ₹5.75L. Tax = ₹12,500 + ₹15,000	₹27,500

New regime wins by ₹27,500.

At ₹15 Lakh Taxable Profit

Regime	Calculation	Tax Payable (incl. 4% cess)
New	₹15L − ₹75K = ₹14.25L. Tax across slabs = ₹93,750	₹97,500
Old	₹15L − ₹2.25L = ₹12.75L. Tax across slabs = ₹1,95,000	₹2,02,800

New regime wins by ~₹1.05 lakh.

At ₹25 Lakh Taxable Profit

Regime	Calculation	Tax Payable (incl. 4% cess)
New	₹25L − ₹75K = ₹24.25L. Tax across slabs = ₹3,07,500	₹3,19,800
Old	₹25L − ₹2.25L = ₹22.75L. Tax = ₹4,95,000	₹5,14,800

New regime wins by ~₹1.95 lakh.

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What Is Section 44ADA and Who Qualifies?

Section 44ADA lets specified professionals declare 50% of gross receipts as taxable profit — no receipts or books required for the other 50%.

Individuals and partnership firms (not companies)
IT consultants, designers, writers, architects, engineers, legal professionals, doctors, accountants
Gross receipts under ₹75 lakh per financial year

ITR form: File ITR-4 (Sugam) if using 44ADA. If you maintain actual books (expenses > 50%), file ITR-3.

Which ITR Form Should Freelancers File?

Scenario	ITR Form
Using 44ADA presumptive taxation (receipts ≤ ₹75L)	ITR-4 (Sugam)
Maintaining actual books (expenses > 50%)	ITR-3
Freelancer with capital gains in addition to professional income	ITR-3

How to Switch to the Old Regime

For freelancers with business income, switching is not annual like it is for salaried employees:

You can switch from new to old regime only once
After switching back to the new regime, you cannot switch to old again
Deadline: Submit Form 10-IEA before the ITR due date — 31 July 2026 for AY 2026-27

If you file without Form 10-IEA, the new regime applies automatically.

When Does the Old Regime Still Make Sense?

The old regime can beat the new one if:

You pay significant metro rent with a large HRA deduction (₹2–3L)
You have an active home loan with over ₹2L in annual interest
Your total genuine deductions exceed ₹3.75 lakh

Quick rule: if your actual deductions are below ₹3.75L, the new regime almost certainly wins.

Frequently Asked Questions

Is the new tax regime compulsory for freelancers in FY 2025-26?

No — it is the default, not mandatory. File Form 10-IEA before 31 July 2026 to opt for the old regime.

Can I use Section 44ADA under both regimes?

Yes. Section 44ADA determines how profit is calculated — it works with either the old or new regime.

I earn ₹10 lakh in gross receipts. Do I pay any tax?

Under 44ADA, taxable profit = ₹5L. Under the new regime: ₹5L − ₹75K standard deduction = ₹4.25L net. Within the 87A rebate threshold — tax = ₹0.

What if my receipts exceed ₹75 lakh?

Section 44ADA no longer applies. You must maintain books, get a tax audit under Section 44AB, and file ITR-3.

Old vs New Tax Regime for Freelancers in India (2026): Which One Saves More?