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.
The choice between India’s new and old tax regimes is the most consequential financial decision Indian salaried employees make each year. After the Union Budget 2026-27 retained current slabs and the new Income Tax Act 2025 took effect from April 1, 2026, let’s break down which regime saves you more tax.
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 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 benefit: Section 87A rebate provides up to ₹60,000 tax rebate if income is up to ₹12 lakh, making income up to ₹12,75,000 effectively tax-free (after standard deduction of ₹75,000).
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% |
The old regime has fewer slabs but higher rates. However, it allows extensive deductions which can significantly reduce taxable income.
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.
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 saves ₹1,300/year — practically equal.
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.
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.
When Does Old Regime Beat New Regime?
The breakeven depends on how much deduction you can claim. Generally:
- Income < ₹12 lakh → New regime almost always wins (zero tax under new regime)
- Income ₹12–15 lakh → New regime usually wins unless deductions exceed ₹3.5L
- Income ₹15–20 lakh → Comparable; depends on deductions
- Income > ₹20 lakh → Old regime wins if deductions exceed ₹4–5L
The exact breakeven varies based on your specific deductions. Use our Tax Regime Comparison Calculator to see which regime saves more for your exact income and deductions.
Deductions Available in Old Regime (Not in New)
| 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 investments (no PPF, ELSS, LIC)
- You don’t pay rent or own a home
- You want simpler tax filing
- You don’t itemize deductions
Pick Old Regime if:
- You have significant 80C investments (₹1.5L+)
- You pay substantial rent and have HRA component
- You have a home loan with interest > ₹1L/year
- You contribute to NPS
- Your total deductions exceed ₹3-4 lakh
Can You Switch Regimes?
Yes, salaried employees can switch every year. When filing your ITR, simply select the regime that saves more tax for that financial year. You are not locked in.
Business income taxpayers can switch only once in their lifetime, after which they must stick with 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. You can:
- Choose new regime (default if you don’t respond)
- Choose old regime by submitting Form 12BB declaring your investments and rent
Even if your employer deducts TDS based on one regime, you can change your choice when filing your ITR in July.
Final Recommendation
For most Indian salaried employees in 2026-27:
- Income < ₹15 lakh: New regime is simpler and usually better
- Income > ₹15 lakh with significant deductions: Old regime may save more
- Always calculate both before deciding
Use our free Tax Regime Comparison Calculator to instantly see which regime saves more tax for your specific salary and deductions. The calculator handles all the math including standard deduction, 87A rebate, surcharge, and 4% cess.
For your full salary picture including take-home calculation under both regimes, try our CTC Salary Calculator.
Tax laws may change with future budgets. This article reflects FY 2026-27 rules as per Union Budget 2026-27 and 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