Old vs New Tax Regime FY 2026-27: Which Saves You More?
For most salaried Indians, the new tax regime saves more tax in FY 2026-27. Income up to ₹12 lakh is tax-free under it after the Section 87A rebate, and salaried taxpayers get a ₹75,000 standard deduction on top, so a salary of up to ₹12.75 lakh pays no tax. The old regime wins only when your total deductions are very large — roughly ₹5 lakh or more at a ₹15 lakh salary. This guide gives the slabs, the rules and a break-even table so you can check your own case.
Short answer: compare both with your real numbers. If your deductions (80C, 80D, NPS, home loan interest, HRA) add up to less than the break-even in the table below, stay on the new regime.
What Has Changed for FY 2026-27?
Less than you might expect:
- No change in slabs or rates. Budget 2026 left the income tax slabs and rates unchanged. The slabs from Budget 2025 continue for FY 2026-27 under both regimes.
- New regime is still the default. If you do nothing, you are taxed under the new regime. You have to opt for the old regime to use its deductions.
- New law, new vocabulary. The Income-tax Act, 2025 replaces the 1961 Act from 1 April 2026. “Previous year” and “assessment year” are replaced by a single “tax year”, so FY 2026-27 is Tax Year 2026-27. The slab maths for taxpayers stays the same.
New Tax Regime Slabs FY 2026-27
| Taxable 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% |
- Standard deduction: ₹75,000 for salaried taxpayers and pensioners
- Section 87A rebate: up to ₹60,000, which makes taxable income up to ₹12,00,000 tax-free
- Cess: 4% on the tax payable
Marginal relief just above ₹12 lakh
The rebate disappears once taxable income crosses ₹12 lakh, but marginal relief stops the tax from jumping suddenly. Your tax cannot be more than the income above ₹12 lakh. For example, at a taxable income of ₹12,10,000 the tax is about ₹10,000 plus cess (₹10,400), not ₹61,500 plus cess.
Old Tax Regime Slabs FY 2026-27 (Below 60 Years)
| Taxable 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% |
- Standard deduction: ₹50,000
- Section 87A rebate: up to ₹12,500, which makes taxable income up to ₹5,00,000 tax-free
- Cess: 4% on the tax payable
- Senior citizens (60+) and super senior citizens (80+) have higher basic exemption limits in the old regime.
Deductions: What You Can Claim in Each Regime
This is the real difference. The old regime has higher slab rates, but it lets you reduce taxable income with deductions. The new regime has lower rates and almost no deductions.
| Deduction | Old regime | New regime |
|---|---|---|
| Standard deduction | ₹50,000 | ₹75,000 |
| Section 80C (PPF, ELSS, EPF, LIC, tuition fees) | Up to ₹1.5 lakh | Not allowed |
| Section 80D (health insurance) | Yes, with higher limits for parents and seniors | Not allowed |
| NPS, own contribution (80CCD(1B)) | Extra ₹50,000 | Not allowed |
| NPS, employer contribution (80CCD(2)) | Up to 10% of basic + DA (14% for government employees) | Up to 14% of basic + DA |
| Home loan interest (self-occupied) | Up to ₹2 lakh | Not allowed |
| HRA and LTA exemptions | Yes | Not allowed |
The employer NPS deduction is worth asking your HR about, because it is one of the few deductions that works in the new regime too.
Which Regime Saves More? Tax at Different Salaries
The table compares the tax (including 4% cess) for a salaried individual under 60. It assumes salary is the only income. The old-regime columns show total deductions of ₹2.5 lakh and ₹4.5 lakh, in addition to the ₹50,000 standard deduction.
| Gross salary | New regime tax | Old regime (₹2.5L deductions) | Old regime (₹4.5L deductions) |
|---|---|---|---|
| ₹8,00,000 | ₹0 | ₹0 | ₹0 |
| ₹10,00,000 | ₹0 | ₹54,600 | ₹0 |
| ₹12,75,000 | ₹0 | ₹1,11,800 | ₹70,200 |
| ₹15,00,000 | ₹97,500 | ₹1,79,400 | ₹1,17,000 |
| ₹20,00,000 | ₹1,92,400 | ₹3,35,400 | ₹2,73,000 |
| ₹30,00,000 | ₹4,75,800 | ₹6,47,400 | ₹5,85,000 |
Even with ₹4.5 lakh of deductions, the new regime is cheaper or equal at every salary shown. Where does the old regime start to win?
Break-even: how many deductions does the old regime need?
| Gross salary | Deductions needed for old regime to match new (over and above the ₹50,000 standard deduction) |
|---|---|
| ₹10,00,000 | about ₹4.5 lakh |
| ₹12,75,000 | about ₹7.25 lakh |
| ₹15,00,000 | about ₹5.4 lakh |
| ₹20,00,000 | about ₹7.1 lakh |
| ₹30,00,000 | about ₹8 lakh |
Compare that with what a typical taxpayer can claim: ₹1.5 lakh under 80C, ₹25,000–₹50,000 under 80D, ₹50,000 for NPS and up to ₹2 lakh of home loan interest. That is roughly ₹4.25–4.75 lakh before HRA. The old regime only pulls ahead if you also have a large HRA exemption, or you claim every deduction in full.
Enter your own salary and deductions in the Income Tax Calculator India app — it shows both regimes side by side for FY 2026-27.
Who Should Still Choose the Old Regime?
The old regime can still be the better choice if you:
- Pay high rent in a metro and get HRA — the HRA exemption can be a large deduction on its own.
- Have a home loan with ₹2 lakh of interest, and also use 80C and 80D fully.
- Invest heavily in 80C and NPS — for example ₹1.5 lakh in PPF and ELSS plus ₹50,000 extra in NPS every year.
- Pay large health insurance premiums for parents who are senior citizens.
If none of these apply, the new regime is almost always simpler and cheaper. If you are unsure where to put your tax-saving money, read PPF vs ELSS and NPS vs PPF vs ELSS for retirement.
How to Choose and Switch Regimes
- Salaried: tell your employer which regime to use for TDS at the start of the year. If you do not, the employer deducts tax under the new regime.
- At filing: you can still choose the regime when you file your return, so you can correct a wrong guess made earlier in the year.
- Compare, then decide: run both regimes with your real salary breakup, rent and investments before you submit your declaration.
- Business or professional income: opting out of the new regime needs Form 10-IEA, and switching back and forth is restricted. Check with a CA before you choose.
A Simple Checklist Before You Decide
- Add up every deduction you can genuinely claim: 80C, 80D, NPS, home loan interest and HRA.
- Compare the total with the break-even for your salary in the table above. The ₹50,000 old-regime standard deduction is already built into those figures.
- Remember the new regime still gives you a bigger standard deduction (₹75,000), so you start ₹25,000 ahead.
- Do not buy investments only to save tax. A bad product costs more than the tax you save.
FAQ
Which tax regime is better for FY 2026-27? For most salaried taxpayers, the new regime. Income up to ₹12 lakh is tax-free after the 87A rebate, and salary up to ₹12.75 lakh is tax-free after the ₹75,000 standard deduction. The old regime is better only when total deductions are large.
Did Budget 2026 change the income tax slabs? No. The slabs and rates introduced in Budget 2025 continue for FY 2026-27 under both regimes.
Is income up to ₹12 lakh really tax-free? Yes, in the new regime, because the Section 87A rebate of up to ₹60,000 wipes out the tax. Salaried taxpayers also get a ₹75,000 standard deduction, so gross salary up to ₹12.75 lakh pays no tax. The rebate does not apply to special-rate income such as capital gains taxed at their own rates.
Is the new tax regime the default? Yes. Unless you opt for the old regime, you are taxed under the new one.
Can I switch between old and new regime every year? Salaried taxpayers can choose a regime each year. Taxpayers with business income can opt out of the new regime only with Form 10-IEA, and switching back is restricted.
Can I claim 80C in the new regime? No. Section 80C, 80D, HRA and home loan interest are not available in the new regime. Employer NPS contribution under 80CCD(2) and the standard deduction are.
What is a “tax year”? Under the Income-tax Act, 2025, the previous year and assessment year are replaced by one “tax year”. FY 2026-27 is Tax Year 2026-27.
Figures are estimates based on the FY 2026-27 slabs, for a resident individual below 60 whose only income is salary, and exclude surcharge. They are for planning only, not tax advice — confirm with the Income Tax Department or a qualified professional. Work out both regimes in seconds with the Income Tax Calculator India app — offline, no sign-up. More calculators for savings, loans and tax are in our complete guide to personal finance calculators for Indians.
