Old vs new tax regime for FY 2026-27: how to choose in five minutes
Short answer. For FY 2026-27 the new regime is cheaper for most salaried people. The old regime wins only if your deductions — 80C, 80D, HRA, home-loan interest, NPS — are large: about ₹5.4 lakh at a salary of ₹15 lakh, rising to ₹8 lakh at ₹30 lakh. Budget 2026 changed nothing, so last year's logic still holds.
The slabs, side by side
| New regime (default) | Rate | Old regime | Rate |
|---|---|---|---|
| Up to ₹4 lakh | Nil | Up to ₹2.5 lakh* | 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% |
*₹3 lakh from age 60 and ₹5 lakh from age 80. Add 4% cess to all tax, and surcharge above ₹50 lakh.
What each regime lets you deduct
- New regime: standard deduction of ₹75,000 for salaried people and pensioners, and your employer's NPS contribution. Almost nothing else.
- Old regime: standard deduction of ₹50,000, plus 80C (up to ₹1.5 lakh), 80D health insurance, HRA, home-loan interest (up to ₹2 lakh for a self-occupied home), NPS 80CCD(1B) (₹50,000) and more.
The rebate that makes ₹12 lakh tax-free
In the new regime, a rebate under Section 87A cancels your tax when taxable income is ₹12 lakh or less. For a salaried person that means up to ₹12.75 lakh of salary with no tax. Just above the limit, marginal relief ensures you never pay more extra tax than the extra income you earned. The rebate does not apply to capital gains taxed at special rates.
The break-even: how much deduction makes the old regime win?
| Gross salary | New-regime tax | Deductions needed for old regime to win* |
|---|---|---|
| ₹10 lakh | Nil | Old regime cannot do better than nil |
| ₹15 lakh | ₹97,500 | about ₹5.4 lakh |
| ₹20 lakh | ₹1,92,400 | about ₹7.1 lakh |
| ₹30 lakh | ₹4,75,800 | ₹8.0 lakh |
*Deductions beyond the ₹50,000 standard deduction, for a salaried person under 60. Computed with our calculator; includes 4% cess.
Three questions that settle it
- Do you pay rent and receive HRA? A large HRA exemption is the single biggest reason the old regime still wins.
- Do you have a home loan on the house you live in? Up to ₹2 lakh of interest is deductible only in the old regime.
- Do 80C, 80D and NPS together reach ₹2.25 lakh? If the answer to all three is no, choose the new regime and move on. If yes to two or more, run the numbers.
Can you change your mind?
Salaried people can choose afresh every year when filing the return — whatever you told your employer only affects monthly TDS. If you have business or professional income, you may leave the new regime and return to it only once, so decide carefully.
FAQ
Did Budget 2026 change income-tax slabs?
Which regime applies if I do nothing?
Is the new regime always better below ₹12.75 lakh of salary?
Sources: Income-tax Act, 2025 and Finance Acts 2025 and 2026 (rates as summarised by the Income Tax Department and ClearTax, checked 19 Sep 2026). This article is education, not tax advice for your situation.
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