New vs Old Tax Regime: Which Should You Choose in Tax Year 2026-27?
✓ For Tax Year 2026-27 (Income-tax Act, 2025) · Reviewed 19 Oct 2026
The short answer: for most salaried people the new regime now costs less. The old regime wins only if your deductions are large: at an ₹18 lakh salary you'd need more than ₹6.4 lakh of them. Use the table below, then check your own numbers in the calculator.
1. Tax Year 2026-27 slabs
Budget 2026 left the slabs unchanged. The new regime is the default; you have to choose the old one.
| New regime (default) | Rate | Old regime (below 60) | Rate | |
|---|---|---|---|---|
| Up to ₹4 lakh | Nil | Up to ₹2.5 lakh | Nil | |
| ₹4–8 lakh | 5% | ₹2.5–5 lakh | 5% | |
| ₹8–12 lakh | 10% | ₹5–10 lakh | 20% | |
| ₹12–16 lakh | 15% | Above ₹10 lakh | 30% | |
| ₹16–20 lakh | 20% | |||
| ₹20–24 lakh | 25% | |||
| Above ₹24 lakh | 30% |
In the old regime, the nil slab is ₹3 lakh for ages 60–79 and ₹5 lakh for 80 and above. Add 4% cess in both regimes, plus surcharge above ₹50 lakh of income (capped at 25% in the new regime).
2. The ₹12 lakh rebate
- New regime: no tax if your total income is up to ₹12 lakh (a rebate of up to ₹60,000, Sec 156, old 87A). With the ₹75,000 standard deduction, a salary of up to ₹12.75 lakh is tax-free.
- Marginal relief: just above ₹12 lakh, your tax can't exceed the amount by which your income crosses ₹12 lakh. So ₹12.10 lakh of income means tax of ₹10,000 (₹10,400 with cess), not ₹61,500.
- Old regime: the rebate is only ₹12,500, for income up to ₹5 lakh.
- The rebate doesn't apply to income taxed at special rates, such as capital gains on shares.
3. What each regime allows
| Deduction | New regime | Old regime |
|---|---|---|
| Standard deduction (salary or pension) | ₹75,000 | ₹50,000 |
| HRA exemption | ✗ | ✓ |
| Investments: PPF, ELSS, EPF, life insurance (s.123, old 80C) | ✗ | Up to ₹1.5 lakh |
| Health insurance (s.126, old 80D) | ✗ | ✓ |
| Home loan interest, self-occupied (s.22, old 24(b)) | ✗ | Up to ₹2 lakh |
| Your own NPS (old 80CCD(1B)) | ✗ | Up to ₹50,000 |
| Employer's NPS contribution (old 80CCD(2)) | ✓ up to 14% of salary | ✓ up to 10% of salary |
| Professional tax | ✗ | ✓ |
4. Break-even: when does the old regime win?
For a salaried person below 60 with no other income: this is how much in total old-regime deductions you need (HRA, professional tax, investments, health insurance, home loan interest, NPS) before the old regime costs less.
| Gross salary | Tax under new regime | Old regime wins only if deductions exceed |
|---|---|---|
| ₹10 lakh | Nil | ₹4.50 lakh |
| ₹12 lakh | Nil | ₹6.50 lakh |
| ₹15 lakh | ₹97,500 | ₹5.44 lakh |
| ₹18 lakh | ₹1,50,800 | ₹6.42 lakh |
| ₹20 lakh | ₹1,92,400 | ₹7.08 lakh |
| ₹25 lakh | ₹3,19,800 | ₹8.00 lakh |
| ₹30 lakh and above | ₹4,75,800 at ₹30 lakh | ₹8.00 lakh |
Tax includes 4% cess. Worked out with the Wealth Kitchen regime calculator.
Why does the bar stop at ₹8 lakh? Above about ₹24 lakh, both regimes tax every extra rupee at 30%, so the gap between them stays the same however much more you earn.
Example
A salary of ₹18 lakh with ₹50,000 of interest, HRA exemption of ₹1.8 lakh, a full ₹1.5 lakh under 80C, ₹25,000 of health insurance and ₹50,000 of NPS adds up to about ₹4 lakh of deductions. That's well short of the ₹6.4 lakh break-even, so the new regime saves about ₹78,000. Open this exact example in the calculator.
5. Who might still prefer the old regime
- People paying high rent in a metro, with a large HRA exemption
- People paying home loan interest on a self-occupied house (up to ₹2 lakh)
- People who max out 80C, 80D and NPS anyway
Even then, add up your actual numbers. Two or three deductions rarely cross the break-even.
6. Switching between regimes
- Salaried, with no business income: you can choose either regime every year when you file your ITR. The choice you give your employer only affects TDS.
- With business or professional income: opting out of the new regime needs a form filed by the due date, and you can switch back only once.
General education, not personal tax or investment advice. Laws and rates change, so verify against current law before acting. Disclaimer