New vs Old Tax Regime 2026-27 Compared
Complete comparison of India's new vs old tax regime for FY 2026-27. See updated tax slabs, deductions, breakeven points, and how to choose the right regime for your salary.
Every financial year, every salaried employee in India faces the same choice: new tax regime or old? After Union Budget 2026-27 retained current slabs and the new Income Tax Act 2025 took effect from April 1, 2026, let’s work through which regime actually saves more — and for whom.
The short version: for most people under ₹15 lakh, the new regime wins. Above ₹20 lakh with significant deductions, the old regime can pull ahead. In between, you need to calculate.
Quick Summary
| Aspect | New Regime (Default) | Old Regime |
|---|---|---|
| Standard deduction | ₹75,000 | ₹50,000 |
| Tax-free income | Up to ₹12,75,000 | Up to ₹2,50,000 |
| 80C deduction | Not allowed | Up to ₹1,50,000 |
| 80D health insurance | Not allowed | Up to ₹75,000 |
| HRA exemption | Not allowed | Allowed |
| Home loan interest | Not allowed | Up to ₹2,00,000 |
| NPS additional 80CCD(1B) | Not allowed | Up to ₹50,000 |
| Best for | Most salaried employees | High earners with real deductions |
New Tax Regime Slabs FY 2026-27
| Annual Income | 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% |
Key detail: Section 87A provides a rebate of up to ₹60,000 if taxable income is at or below ₹12 lakh. Combined with the ₹75,000 standard deduction, income up to ₹12,75,000 is effectively tax-free.
Old Tax Regime Slabs FY 2026-27
| Annual Income | 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% |
Fewer slabs, but steeper rates. The old regime’s advantage is entirely about how much you can deduct from taxable income. Without meaningful deductions, the old regime loses every time.
Real-World Comparison Examples
Example 1: ₹8 LPA Salary (Fresh Engineer)
New Regime:
- Gross income: ₹8,00,000
- Standard deduction: ₹75,000
- Taxable: ₹7,25,000
- Tax (after 87A rebate): ₹0
Old Regime (assuming ₹1.5L 80C + ₹25K 80D):
- Gross income: ₹8,00,000
- Standard deduction: ₹50,000
- 80C: ₹1,50,000
- 80D: ₹25,000
- Taxable: ₹5,75,000
- Tax: ₹27,500 + cess = ₹28,600
Winner: New regime saves ₹28,600/year. Even with full 80C invested.
Example 2: ₹15 LPA Salary (Mid-Level Manager)
New Regime:
- Gross income: ₹15,00,000
- Standard deduction: ₹75,000
- Taxable: ₹14,25,000
- Tax: ₹1,33,750 + cess = ₹1,39,100
Old Regime (₹1.5L 80C + ₹25K 80D + ₹50K NPS + ₹2L HRA exemption):
- Gross income: ₹15,00,000
- Standard deduction: ₹50,000
- Total deductions: ₹4,25,000
- Taxable: ₹10,75,000
- Tax: ₹1,35,000 + cess = ₹1,40,400
Winner: New regime — by just ₹1,300/year. Practically equivalent at this level. The old regime requires ₹4.25L in actual deductions and only saves ₹1,300 more.
Example 3: ₹25 LPA Salary (Senior with Maximum Deductions)
New Regime:
- Gross income: ₹25,00,000
- Standard deduction: ₹75,000
- Taxable: ₹24,25,000
- Tax: ₹3,38,750 + cess = ₹3,52,300
Old Regime (max deductions: ₹1.5L 80C + ₹50K NPS + ₹25K 80D + ₹2L home loan + ₹3L HRA):
- Gross income: ₹25,00,000
- Standard deduction: ₹50,000
- Total deductions: ₹7,25,000
- Taxable: ₹17,75,000
- Tax: ₹3,32,500 + cess = ₹3,45,800
Winner: Old regime saves ₹6,500/year. Only when you’re actually using all those deductions.
Example 4: ₹50 LPA Salary (Senior Executive)
New Regime:
- Gross income: ₹50,00,000
- Standard deduction: ₹75,000
- Taxable: ₹49,25,000
- Tax: ₹10,90,000 + cess = ₹11,33,600
Old Regime (max deductions: ₹1.5L 80C + ₹50K NPS + ₹75K 80D + ₹2L home loan + ₹6L HRA):
- Gross income: ₹50,00,000
- Standard deduction: ₹50,000
- Total deductions: ₹10,75,000
- Taxable: ₹39,25,000
- Tax: ₹10,02,500 + cess = ₹10,42,600
Winner: Old regime saves ₹91,000/year. At this level, with genuine deductions, the old regime becomes meaningfully better.
When Does the Old Regime Win?
The breakeven depends entirely on your deductions:
- Income < ₹12 lakh → New regime almost always wins (zero tax)
- Income ₹12–15 lakh → New regime usually wins unless deductions exceed ₹3.5L
- Income ₹15–20 lakh → Comparable; run both calculations
- Income > ₹20 lakh → Old regime wins when deductions exceed ₹4–5L
Use our Tax Regime Comparison Calculator to find the exact breakeven for your numbers.
Deductions Available in Old Regime Only
| Section | Description | Max Limit |
|---|---|---|
| 80C | PPF, ELSS, LIC, EPF, home loan principal | ₹1,50,000 |
| 80D | Health insurance premium | ₹25K self + ₹25K parents |
| 80CCD(1B) | NPS additional contribution | ₹50,000 |
| 24(b) | Home loan interest | ₹2,00,000 |
| 10(13A) | HRA exemption | Min of 3 conditions |
| 80E | Education loan interest | No limit |
| 80G | Donations to charitable institutions | Varies |
| 80TTA | Savings account interest | ₹10,000 |
How to Choose
Pick New Regime if:
- Your income is under ₹12 lakh
- You have minimal or no investments in PPF, ELSS, or LIC
- You don’t pay rent or have no HRA component
- You want simpler tax filing
- You haven’t done the calculation yet (it’s the default, and it’s usually better)
Pick Old Regime if:
- You have meaningful 80C investments (full ₹1.5L)
- You pay substantial rent and have an HRA component
- You have a home loan with interest above ₹1L/year
- You contribute to NPS
- Your total deductions genuinely exceed ₹3–4 lakh
Can You Switch Regimes Year to Year?
Yes — salaried employees can switch every year. When filing your ITR, select the regime that saves more for that financial year. You’re not locked in.
That said, if you have business income, the rules are stricter: you can switch from old to new only once. After that, you must stay in the new regime.
How to Inform Your Employer
At the start of each financial year (April), your employer asks which regime you want for TDS deduction purposes. Options:
- New regime (default — if you don’t respond, this is what they’ll use)
- Old regime — opt in by submitting Form 12BB with your investment and rent declarations
Even if your employer deducts TDS under one regime, you can switch when filing your ITR in July. The final liability and refund get settled then.
Final Recommendation
For most Indian salaried employees in FY 2026-27:
- Income < ₹15 lakh: New regime is simpler and usually cheaper
- Income > ₹15 lakh with significant deductions: Old regime may save more — but run the math first
- Always calculate both before deciding — the answer is specific to your salary structure
Use our free Tax Regime Comparison Calculator to see which saves more for your exact income and deductions — including standard deduction, 87A rebate, surcharge, and 4% cess.
For your full salary picture including take-home under both regimes, use our CTC Salary Calculator.
Tax laws can change with future budgets. This article reflects FY 2026-27 rules as per Union Budget 2026-27 and the Income Tax Act 2025.
Related Reading
- CTC vs In-Hand Salary Guide 2026-27 — understand every deduction between CTC and take-home
- HRA Exemption 2026: How to Calculate — the biggest old-regime-only deduction
- Section 87A Marginal Relief — the ₹12 lakh cliff explained