Old vs New Tax Regime 2026-27: Which One Saves You More?
From 1 April 2026, India's income tax runs under the new Income-tax Act, 2025, which replaced the 1961 Act. The wording changed — "previous year" and "assessment year" became a single tax year — but Budget 2026 left the slabs and the rebate untouched. So the old-versus-new decision works exactly as it did last year. This guide shows the numbers for salaried taxpayers. Everything below includes the 4% health and education cess and ignores surcharge, which applies only above ₹50 lakh.
What changed for 2026-27
Very little, in rates. The new regime is still the default: if you do nothing, your employer deducts TDS under it. You can still pick the old regime when you file your return, and salaried people can switch every year. The new Act renumbered familiar sections — the rebate formerly under section 87A now sits in section 156 — but the amounts are the same: the new regime makes income up to ₹12 lakh tax-free (₹12.75 lakh for salaried people once the ₹75,000 standard deduction is added). The old regime keeps its ₹50,000 standard deduction and a rebate up to ₹5 lakh of taxable income.
Slabs side by side
| Taxable income | New regime | Old regime (below 60) |
|---|---|---|
| Up to ₹2.5 lakh | 0% | 0% |
| ₹2.5–4 lakh | 0% | 5% |
| ₹4–5 lakh | 5% | 5% |
| ₹5–8 lakh | 5% | 20% |
| ₹8–10 lakh | 10% | 20% |
| ₹10–12 lakh | 10% | 30% |
| ₹12–16 lakh | 15% | 30% |
| ₹16–20 lakh | 20% | 30% |
| ₹20–24 lakh | 25% | 30% |
| Above ₹24 lakh | 30% | 30% |
| Standard deduction (salary) | ₹75,000 | ₹50,000 |
| Rebate | Tax-free up to ₹12 lakh taxable, with marginal relief just above | Tax-free up to ₹5 lakh taxable |
The trade-off is simple. The new regime has lower rates but allows almost no deductions — no 80C, 80D, HRA or home-loan interest on a self-occupied home. Employer NPS contributions (up to 14% of basic) are still allowed. The old regime has higher rates but lets you subtract those deductions first.
Worked examples
Annual tax including 4% cess, for a salaried person below 60. "Old, ₹1.75L" means 80C (₹1.5 lakh) plus ₹25,000 of health insurance under 80D. "Old, ₹3.75L" adds ₹2 lakh of home-loan interest.
| Gross salary | New regime | Old, no deductions | Old, ₹1.75L deductions | Old, ₹3.75L deductions |
|---|---|---|---|---|
| ₹8 lakh | ₹0 | ₹65,000 | ₹28,600 | ₹0 |
| ₹12 lakh | ₹0 | ₹1,63,800 | ₹1,11,800 | ₹70,200 |
| ₹12.75 lakh | ₹0 | ₹1,87,200 | ₹1,32,600 | ₹85,800 |
| ₹15 lakh | ₹97,500 | ₹2,57,400 | ₹2,02,800 | ₹1,40,400 |
| ₹20 lakh | ₹1,92,400 | ₹4,13,400 | ₹3,58,800 | ₹2,96,400 |
| ₹25 lakh | ₹3,19,800 | ₹5,69,400 | ₹5,14,800 | ₹4,52,400 |
| ₹30 lakh | ₹4,75,800 | ₹7,25,400 | ₹6,70,800 | ₹6,08,400 |
At every level in this table, the new regime is cheaper — even with ₹3.75 lakh of deductions. That's the headline for 2026-27: since the new slabs arrived in 2025, the old regime only pays off for people with very large deductions, usually because of HRA in a big city plus a home loan.
The break-even rule
Work out the total deductions (including HRA exemption) at which both regimes cost the same:
- ₹15 lakh salary: about ₹5.44 lakh of deductions.
- ₹20 lakh: about ₹7.08 lakh.
- ₹25 lakh and above: about ₹8 lakh.
Below those totals, choose the new regime. Above them, the old regime wins. For many people in rented homes in the eight metros where HRA is now 50% of salary — Delhi, Mumbai, Kolkata, Chennai, Bengaluru, Hyderabad, Pune and Ahmedabad, under the Income-tax Rules 2026 — HRA alone can be ₹3–5 lakh, so it's worth running your own numbers in the HRA calculator before deciding.
How to choose in five minutes
- Add up your deductions: 80C (EPF, PPF, ELSS, life insurance, children's tuition — maximum ₹1.5 lakh), 80D health insurance, 80CCD(1B) NPS (₹50,000), home-loan interest (up to ₹2 lakh) and your HRA exemption.
- Compare that total with the break-even figure for your salary above.
- Tell your employer your choice at the start of the year so the right TDS is deducted. You can still change it when you file your return.
- Check the exact figures — including surcharge and marginal relief — in the income tax calculator, which shows both regimes and your break-even deduction live.
Whatever you choose, don't buy an insurance policy or lock money away just to chase an 80C deduction under the old regime. If the new regime is cheaper for you, put that money where it fits your goals — a SIP or PPF still makes sense for its own sake. Read more in our guide to small-savings rates.
This guide is general information, not tax advice. Rules are as announced for tax year 2026-27; check with a tax professional for your situation.