Quick answer: For most salaried Indians in FY 2026-27, the new tax regime gives the lower tax bill. The old regime only wins when your old-regime-only deductions — 80C, HRA, home loan interest, 80D, NPS and similar — cross a high break-even amount. At a ₹15 lakh salary that break-even is about ₹5.44 lakh of deductions. At ₹20 lakh it is about ₹7.08 lakh. At ₹25 lakh and above it plateaus at ₹8 lakh. If your deductions are below those numbers, the new regime wins.
How the two regimes work
The new regime charges lower slab rates but lets you claim almost no deductions. The old regime charges higher slab rates but lets you subtract a long list of deductions first. The new regime is the default. You have to opt in to the old regime.
New regime slabs, FY 2026-27
| Taxable income | 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% |
Plus 4% health and education cess on the tax.
Old regime slabs, FY 2026-27
| Taxable income | 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% |
Plus 4% cess.
Notice the shape. The old regime jumps from 5% straight to 20% at ₹5 lakh, and hits 30% at ₹10 lakh. The new regime climbs in gentle ₹4 lakh steps and only reaches 30% above ₹24 lakh. That gentler climb is what the old regime’s deductions have to overcome.
Standard deduction and rebate
- Standard deduction (salaried): ₹75,000 in the new regime, ₹50,000 in the old regime.
- New regime rebate (Section 87A, now Section 156 in the Income-tax Act, 2025): up to ₹60,000. If your taxable income is ₹12 lakh or less, your tax becomes zero. For a salaried person this means a gross salary up to ₹12.75 lakh is tax-free (₹12 lakh + ₹75,000 standard deduction).
- Old regime rebate (Section 87A): up to ₹12,500, and only if your taxable income is ₹5 lakh or less.
What changed and what stayed the same
Budget 2026 left the slabs, the rebate and the standard deduction unchanged from FY 2025-26. The new regime is still the default, and the old regime still has to be opted into. What has changed is the law itself: FY 2026-27 is the first full year under the Income-tax Act, 2025, so every section has a new number. The new regime provision (old Section 115BAC) is now Section 202. The rebate (old Section 87A) is now Section 156. The deduction sections in the table below show both numbers — the old one you will still see on most blogs, and the new one in the 2025 Act.
What you can claim in each regime
| Item | Old regime | New regime |
|---|---|---|
| Standard deduction | ₹50,000 | ₹75,000 |
| 80C → Section 123 (PF, ELSS, LIC, PPF) | Up to ₹1,50,000 | No |
| 80D → Section 126 (health insurance) | ₹25,000 self and family under 60; ₹50,000 if senior citizens; plus ₹25,000/₹50,000 for parents | No |
| HRA exemption (old 10(13A) → Section 11) | Yes | No |
| Home loan interest, self-occupied (old 24(b) → Section 22) | Up to ₹2,00,000 | No |
| NPS own contribution (old 80CCD(1B) → Section 124(3)) | Extra ₹50,000 | No |
| NPS employer contribution (old 80CCD(2) → Section 124) | Yes, up to 10% of Basic + DA (14% for government staff) | Yes, up to 14% of Basic + DA |
| Agniveer Corpus (old 80CCH) | Yes | Yes |
| Family pension deduction | Yes | Yes, one-third of pension or ₹25,000, whichever is lower |
| Education loan interest (old 80E → Section 129) | Yes, no amount cap, up to 8 years | No |
| Donations (old 80G → Section 133) | Yes | No |
| Savings and FD interest (old 80TTA/80TTB → Section 153) | Yes | No |
| Rent paid without HRA (old 80GG → Section 134) | Yes, up to ₹60,000 a year | No |
In short, the new regime keeps the standard deduction, the employer’s NPS contribution, Agniveer contributions and the family pension deduction — and almost nothing else.
The break-even rule
The only question that matters: do your old-regime deductions beat the break-even number for your salary? The table below shows the total old-regime-only deductions (80C + HRA + home loan interest + 80D + NPS and similar, not counting the standard deduction) at which both regimes give exactly the same tax. Below the number, the new regime wins. Above it, the old regime wins.
| Gross salary | Old-regime deductions needed to tie with the new regime | What it means |
|---|---|---|
| ₹10,00,000 | ₹4,50,000 (only ties at zero tax) | The new regime already gives zero tax. The old regime can at best tie, never win. |
| ₹12,75,000 | ₹7,25,000 (only ties at zero tax) | Same story: new regime tax is zero, so the old regime can only tie. |
| ₹15,00,000 | About ₹5,44,000 | You need more than ₹5.44 lakh of real, claimable deductions for the old regime to win. 80C plus 80D alone (₹1.75 lakh) is nowhere near. |
| ₹20,00,000 | About ₹7,08,000 | You need a home loan, big HRA and maxed 80C/NPS together. |
| ₹25,00,000 and above | ₹8,00,000 | The break-even stops rising here. Above ₹24 lakh both regimes charge 30% on each extra rupee, so the gap stays fixed. |
These are approximate figures for a salaried person under 60 with no other income. The exact result depends on your deduction mix, but the ballpark is right: most people need ₹5–8 lakh of deductions before the old regime pays off.
Three worked examples
Example 1 — ₹10 lakh salary, modest deductions
Rahul earns ₹10,00,000. He has ₹1,50,000 in 80C (EPF + ELSS) and ₹25,000 in 80D health insurance. No home loan, no HRA.
- New regime: Taxable income after the ₹75,000 standard deduction is ₹9,25,000. Slab tax would be ₹32,500, but the rebate wipes it out. Tax: ₹0.
- Old regime: Taxable income after the ₹50,000 standard deduction and ₹1,75,000 of deductions is ₹7,75,000. Tax: ₹70,200 (including cess).
Winner: new regime, by ₹70,200. At this income the rebate makes the old regime impossible to beat.
Example 2 — ₹20 lakh salary, strong deductions
Priya earns ₹20,00,000. She claims 80C ₹1,50,000, HRA exemption ₹2,40,000, home loan interest ₹2,00,000, 80D ₹50,000 (senior-citizen parents) and NPS ₹50,000. Total deductions: ₹6,90,000.
- New regime: Taxable income ₹19,25,000. Tax: ₹1,92,400 (including cess).
- Old regime: Taxable income ₹12,60,000. Tax: ₹1,98,120 (including cess).
Winner: new regime, by ₹5,720. This surprises many people. Even ₹6.9 lakh of deductions is not enough at ₹20 lakh, because the break-even is ₹7.08 lakh. Priya falls short by about ₹18,000 of deductions. Note: there is no surcharge here — surcharge starts only above ₹50 lakh of total income.
Example 3 — ₹25 lakh salary, maxed-out deductions
Amit earns ₹25,00,000. He claims 80C ₹1,50,000, HRA exemption ₹3,50,000, home loan interest ₹2,00,000, 80D ₹75,000 (self plus senior-citizen parents), NPS ₹50,000 and education loan interest (80E) ₹25,000. Total deductions: ₹8,50,000.
- New regime: Taxable income ₹24,25,000. Tax: ₹3,19,800 (including cess).
- Old regime: Taxable income ₹16,00,000. Tax: ₹3,04,200 (including cess).
Winner: old regime, by ₹15,600. Amit clears the ₹8 lakh break-even, so the old regime finally pays off. But notice how much it took: a home loan, high metro rent, full 80C, senior-citizen parents’ health insurance, NPS and an education loan — all at once.
The pattern is clear. Unless you have a home loan plus high rent plus maxed 80C, the new regime wins.
Who should pick which regime?
Pick the new regime if:
- Your total old-regime deductions are below the break-even number for your salary.
- You have no home loan, or the interest is small.
- You live with parents or pay little rent, so your HRA exemption is small.
- You do not want to force investments into tax-saving products just to save tax.
- Your salary is ₹12.75 lakh or less — the new regime gives you zero tax with no paperwork.
Pick the old regime if:
- You claim the full ₹1.5 lakh under 80C, plus a large HRA exemption, plus home loan interest near the ₹2 lakh cap.
- You pay health insurance for senior-citizen parents and for yourself.
- You contribute ₹50,000 extra to NPS under 80CCD(1B) and have an education loan.
- Your total old-regime deductions cross the break-even for your salary — roughly ₹5.44 lakh at ₹15 lakh, ₹7.08 lakh at ₹20 lakh, ₹8 lakh at ₹25 lakh and above.
A warning about fake deductions: do not buy a policy or prepay a loan just to reach the break-even. A ₹1.5 lakh ELSS investment saves at most ₹46,800 in tax at the 30% slab — and locks your money for 3 years. If you would not make the investment anyway, the new regime is the better deal.
How to choose and switch
- Salaried, no business income: you can pick a different regime every financial year. Tell your employer your choice at the start of the year through the regime or investment declaration form, so TDS is deducted correctly. When you file your return, you confirm the choice for that year.
- Business or professional income: you opt out of the new regime by filing Form 10-IEA before the return due date. You can switch back to the new regime once after that, so use the choice carefully. Read our step-by-step guide to Form 10-IEA.
- If you do nothing: the new regime applies by default. Your income is taxed at the new slabs and only the new-regime deductions are allowed.
Frequently asked questions
Which tax regime is better for FY 2026-27?
For most salaried people, the new regime. It wins up to ₹12.75 lakh salary outright (zero tax), and it keeps winning until your old-regime deductions cross about ₹5.44 lakh at ₹15 lakh salary, ₹7.08 lakh at ₹20 lakh, or ₹8 lakh at ₹25 lakh and above.
Is income up to ₹12 lakh really tax-free in the new regime?
Yes. If your taxable income is ₹12 lakh or less, the rebate of up to ₹60,000 wipes out the tax. For a salaried person, the ₹75,000 standard deduction pushes the tax-free salary up to ₹12.75 lakh. Just above ₹12 lakh, marginal relief caps the extra tax so a small rise in income never causes a big jump in tax. Note that this rebate does not apply to special-rate incomes such as capital gains.
Can I switch between old and new tax regime every year?
If you earn only salary (no business or professional income), yes — you can choose afresh every financial year. If you have business income, switching is restricted: you opt out with Form 10-IEA and get one switch back, so plan carefully.
Are 80C deductions available in the new tax regime?
No. The new regime does not allow 80C, 80D, HRA, home loan interest, or the other common deductions. The only deductions it keeps are the standard deduction, the employer’s NPS contribution, Agniveer contributions and the family pension deduction.
Is HRA allowed in the new tax regime?
No. HRA exemption is only available in the old regime. In the new regime your full HRA is taxable. If HRA is a big part of your pay, work out your exemption with our HRA exemption guide before you decide.
What is the standard deduction for FY 2026-27?
₹75,000 in the new regime and ₹50,000 in the old regime, for salaried employees and pensioners. It is the same as FY 2025-26.
What deductions are allowed in the new tax regime?
Four things: the ₹75,000 standard deduction, your employer’s NPS contribution up to 14% of Basic + DA, Agniveer Corpus contributions, and the family pension deduction (one-third of pension or ₹25,000, whichever is lower).
What happens if I do nothing and just file my return?
The new tax regime applies by default. Your income is taxed at the new slabs and only the new-regime deductions are allowed. If the old regime would save you money, you must opt in — it will not happen on its own.
Official Sources
- Income Tax Department — e-Filing Portal
- CBDT — Income-tax Act, 2025 (new section numbers)
- Income Tax Department — New Tax Regime FAQs
Reviewed by Asuthod Rathod, CA. Last updated: 18 October 2026.
Disclaimer: This article gives general information only. It is not personal tax advice. Tax rules change with each Budget — check the current year’s rules or speak to a qualified tax professional before you act.
Editorial byline for eircicai income tax guides — covering the Income Tax Act, 2025, section renumbering, regime comparison, and deductions. Content is reviewed by Asuthod Rathod, CA.