New vs Old Tax Regime FY 2026-27: Which Should You Choose?
Salary up to ₹12.75 lakh is tax-free in the new regime. But if your deductions are big, the old regime can still win. Here’s the break-even for your salary.
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Every salaried Indian faces this choice each year: new tax regime or old? For FY 2026-27, the new regime is the default and makes salary up to ₹12.75 lakh completely tax-free. The old regime only wins if you claim large deductions — and we’ll show you exactly how large.
Key takeaways
- Salary up to ₹12.75 lakh pays zero tax in the new regime (₹75,000 standard deduction + ₹12 lakh rebate limit).
- Budget 2026 kept the slabs unchanged; the new Income Tax Act, 2025 applies from 1 April 2026.
- At ₹15 lakh salary you need about ₹5.4 lakh of deductions for the old regime to win.
Tax slabs at a glance
| Income slab | New regime | Old regime (below 60) |
|---|---|---|
| Up to ₹2.5 lakh | Nil | Nil |
| ₹2.5 – 4 lakh | Nil | 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% |
What each regime gives you
New regime
- ₹75,000 standard deduction for salaried people
- Rebate under 87A up to ₹60,000 — no tax if taxable income is up to ₹12 lakh
- Employer’s NPS contribution (80CCD(2)) still allowed
- Most other deductions — 80C, 80D, HRA, home loan interest on self-occupied property — are not allowed
Old regime
- ₹50,000 standard deduction
- 80C up to ₹1.5 lakh, 80D health insurance, HRA, home loan interest up to ₹2 lakh, NPS 80CCD(1B) up to ₹50,000 and more
- Rebate only up to ₹5 lakh taxable income
The break-even: how much deduction makes the old regime worth it?
We calculated the total deductions (beyond the standard deduction) you’d need for the old regime to match the new one:
| Gross salary | Tax in new regime | Deductions needed for old regime to win |
|---|---|---|
| ₹12.75 lakh | ₹0 | Old regime can’t win |
| ₹15 lakh | ₹97,500 | ≈ ₹5.4 lakh |
| ₹20 lakh | ₹1,92,400 | ≈ ₹7.1 lakh |
Note: Most people can’t reach ₹5 lakh+ of deductions without a home loan and high rent. If you don’t have both, the new regime is very likely better for you.
Check your exact tax
Free calculatorCompare both regimes for your salaryNew vs Old regime for FY 2026-27 — see which one saves you more, instantly.How to choose in 3 steps
- Add up your deductions — 80C, 80D, HRA exemption (use our HRA calculator), home loan interest and NPS.
- Compare both regimes in the income tax calculator with your real numbers.
- Tell your employer your choice for TDS. Salaried people without business income can still switch while filing the return.
Frequently asked questions
Is ₹12 lakh income tax-free in FY 2026-27?
Yes, in the new regime the 87A rebate makes taxable income up to ₹12 lakh tax-free. For salaried people, the ₹75,000 standard deduction takes that to ₹12.75 lakh of salary.
Did Budget 2026 change the tax slabs?
No. Budget 2026 kept the slabs, standard deduction and rebate unchanged. The new Income Tax Act, 2025 takes effect from 1 April 2026 with new section numbers.
Can I switch between regimes every year?
Salaried individuals without business income can choose the regime every year while filing their return. Those with business income have limited switching options.
Is HRA allowed in the new regime?
No. HRA exemption, 80C, 80D and home loan interest on a self-occupied house are only available in the old regime.
The bottom line
For most salaried people earning up to ₹15 lakh, the new regime is simpler and cheaper. The old regime is worth it only if you have big deductions — typically a home loan plus high rent or large investments.
This guide is for information only and isn’t financial advice. Rates, fees and rules change — always confirm on the official website before you decide. Read our disclaimer.