New vs old tax regime FY 2026-27: which one should you choose?
Slab rates, the ₹12 lakh zero-tax rebate, and the exact deductions you need for the old regime to win at ₹8L, ₹12L, ₹15L, ₹20L and above.
Every April your employer asks the same question: new regime or old? Choose wrong and you overpay tax for a year, or scramble for proofs in February. The good news is that the answer is arithmetic, not opinion. This guide gives you the slabs for FY 2026-27, the rule of thumb, and a break-even table so you can decide in five minutes.
The two regimes in one table
| New regime (default) | Old regime | |
|---|---|---|
| Slabs | 0–4L nil · 4–8L 5% · 8–12L 10% · 12–16L 15% · 16–20L 20% · 20–24L 25% · above 24L 30% | 0–2.5L nil · 2.5–5L 5% · 5–10L 20% · above 10L 30% |
| Standard deduction | ₹75,000 | ₹50,000 |
| Section 87A rebate | Zero tax if taxable income ≤ ₹12 lakh (with marginal relief just above) | Zero tax if taxable income ≤ ₹5 lakh |
| Deductions allowed | Almost none (employer NPS, standard deduction) | 80C, 80D, HRA, LTA, home loan interest, 80CCD(1B), 80G and more |
| Cess | 4% on tax | 4% on tax |
The new regime is the default: if you do nothing, your employer deducts TDS under it. You can still pick the old regime at filing time, and salaried people can switch every year.
The one number that decides it
Under the new regime the tax is fixed by your income. Under the old regime it falls with every rupee of deduction you can prove. So the question becomes: how many deductions do I need before the old regime beats the new one? We ran the numbers with the income tax calculator on this site. The figures below are deductions over and above the standard deduction.
| Gross salary | New regime tax | Old regime tax with no deductions | Deductions needed for old to win |
|---|---|---|---|
| ₹8 lakh | ₹0 | ₹65,000 | ₹2.5 lakh |
| ₹10 lakh | ₹0 | ₹1,06,600 | ₹4.5 lakh |
| ₹12 lakh | ₹0 | ₹1,63,800 | ₹6.5 lakh |
| ₹15 lakh | ₹97,500 | ₹2,57,400 | ₹5.44 lakh |
| ₹20 lakh | ₹1,92,400 | ₹4,13,400 | ₹7.08 lakh |
| ₹25 lakh and above | ₹3,19,800+ | ₹5,69,400+ | ₹8 lakh |
Notice the shape. Up to ₹12 lakh the new regime charges nothing at all, so the old regime needs an enormous pile of deductions just to tie. Above ₹25 lakh the gap settles at about ₹8 lakh of deductions, which is the practical ceiling for most salaried people (80C ₹1.5L + NPS ₹50,000 + 80D ₹25,000–75,000 + HRA + home loan interest ₹2L).
Who still benefits from the old regime
- High rent in a metro plus a home loan. HRA exemption of ₹2–3 lakh and ₹2 lakh of home loan interest together clear the ₹5–7 lakh hurdle quickly at ₹15–25 lakh incomes.
- Full 80C, NPS and senior-citizen parents’ health cover. ₹1.5L + ₹50,000 + ₹75,000 is ₹2.75 lakh before HRA.
- Business or professional income with large 80-series deductions, though switching rules are stricter: you can move back to the old regime only once.
If none of these apply, the new regime almost certainly wins, and you get to stop collecting rent receipts.
Two traps to avoid
Marginal relief. Under the new regime, income just above ₹12 lakh taxable (₹12.75 lakh gross for salaried) does not suddenly attract full tax. Relief caps your tax at the amount by which income exceeds the threshold, so a ₹12.85 lakh salary pays only about ₹10,400. Do not turn down a raise to stay under the line.
Deductions you cannot prove. HRA needs rent receipts and, above ₹1 lakh a year, your landlord’s PAN. 80C needs actual investments made before 31 March. Compare the regimes on deductions you will genuinely claim, not on the maximum allowed.
How to decide in five minutes
- Open the income tax calculator and enter your gross salary. It shows both regimes side by side.
- Under the old regime, enter only the deductions you are sure of. Use the HRA calculator for the exempt portion of your rent.
- Pick the lower total. If the difference is under ₹5,000, choose the new regime for the paperwork you save.
- Tell your employer through the investment declaration form so TDS matches from the first month.
Re-run the comparison whenever your rent, loan or salary changes. The slabs are for FY 2026-27 (assessment year 2027-28) and will be updated on the calculator page if the Finance Act changes them.