Old vs New Tax Regime for FY 2026-27: How to Choose
Every salaried taxpayer in India has to pick between the new tax regime and the old one. The right answer depends almost entirely on how much you can legitimately claim as deductions. This guide explains the slabs for FY 2026-27 and a simple way to decide.
Key takeaways
- The new regime has lower slab rates and almost no deductions. The old regime has higher rates but lets you claim 80C, 80D, HRA and home loan interest.
- Under the new regime, tax is nil up to ₹12 lakh of taxable income because of the rebate, which means roughly ₹12.75 lakh of salary after the ₹75,000 standard deduction.
- The old regime usually wins only when your total deductions are very large. Run both calculations before you choose.
New regime slabs for FY 2026-27
- Up to ₹4 lakh: nil
- ₹4 lakh to ₹8 lakh: 5%
- ₹8 lakh to ₹12 lakh: 10%
- ₹12 lakh to ₹16 lakh: 15%
- ₹16 lakh to ₹20 lakh: 20%
- ₹20 lakh to ₹24 lakh: 25%
- Above ₹24 lakh: 30%
Salaried taxpayers get a standard deduction of ₹75,000. A rebate makes tax nil if taxable income is up to ₹12 lakh. Just above ₹12 lakh, marginal relief applies, so your tax does not exceed the amount by which your income crosses ₹12 lakh. Health and education cess of 4% is added to the tax.
Old regime slabs
- Up to ₹2.5 lakh (basic exemption): nil
- ₹2.5 lakh to ₹5 lakh: 5%
- ₹5 lakh to ₹10 lakh: 20%
- Above ₹10 lakh: 30%
The standard deduction is ₹50,000 and the rebate makes tax nil up to ₹5 lakh of taxable income. Cess is again 4%. The old regime lets you reduce taxable income through deductions such as Section 80C (up to ₹1.5 lakh), 80D for health insurance, HRA exemption if you pay rent, and up to ₹2 lakh of interest on a self-occupied home loan.
How to think about the break-even
The old regime has steeper rates from ₹5 lakh onwards, so it has to make up that gap through deductions. If you claim only 80C and a small insurance premium, the new regime almost always gives lower tax. The old regime starts to win when you stack several large items together, such as full 80C, a sizeable HRA exemption, health insurance and home loan interest. There is no single magic number, because it depends on your salary mix, so the reliable method is to compute both.
Worked example
Take a salary of ₹15,00,000. Assume a person who claims in the old regime: 80C of ₹1,50,000, 80D of ₹25,000 and home loan interest of ₹2,00,000, which is ₹3,75,000 of deductions, and no HRA.
New regime: taxable income = 15,00,000 − 75,000 = ₹14,25,000. Tax = 5% of 4,00,000 (₹20,000) + 10% of 4,00,000 (₹40,000) + 15% of 2,25,000 (₹33,750) = ₹93,750. Add 4% cess (₹3,750): ₹97,500.
Old regime: taxable income = 15,00,000 − 50,000 − 3,75,000 = ₹10,75,000. Tax = 5% of 2,50,000 (₹12,500) + 20% of 5,00,000 (₹1,00,000) + 30% of 75,000 (₹22,500) = ₹1,35,000. Add 4% cess (₹5,400): ₹1,40,400.
Even with ₹3.75 lakh of deductions, the new regime is cheaper by ₹42,900 in this case. Your numbers will differ, so test your own figures.
Practical tips
- If you pay significant rent, check your HRA exemption with the HRA calculator before ruling out the old regime.
- Do not buy investments only to save tax. Choose them for their own merit and liquidity.
- Salaried employees can usually switch regime every year when filing, so a choice this year is not permanent. Check the current rules for your situation.
Try the calculator
Income Tax CalculatorHRA Exemption CalculatorSalary In-Hand Calculator
Frequently asked questions
Is income up to ₹12 lakh really tax-free in the new regime?
Taxable income up to ₹12 lakh results in nil tax because of the rebate. With the ₹75,000 standard deduction, a salary of about ₹12.75 lakh can reach that level. Some income taxed at special rates may be treated differently.
Can I claim 80C in the new regime?
No. Most deductions, including 80C, 80D and HRA, are available only in the old regime. Check the latest rules for the few exceptions.
Which regime is better for a salary under ₹7 lakh?
For most people in this range the new regime gives nil or very low tax, and the old regime rarely beats it. Still, compare both if you have large deductions.
Can I change my regime every year?
Salaried individuals can generally choose each year. Rules differ for people with business income, so confirm your own case.