🧾 Tax PlanningOld vs new tax regime: which saves more in FY 2026-27?
Since the new regime became the default and picked up a bigger standard deduction and a ₹12 lakh rebate threshold, most salaried Indians pay less tax under it — but not everyone. Here's how the two regimes actually compare, and how to tell which one is better for you.
📖 6 min readThe slabs, side by side
The new regime has more, narrower slabs and a lower top rate reached later. For FY 2026-27, the new regime slabs are: nil up to ₹4,00,000; 5% from ₹4,00,001–₹8,00,000; 10% from ₹8,00,001–₹12,00,000; 15% from ₹12,00,001–₹16,00,000; 20% from ₹16,00,001–₹20,00,000; 25% from ₹20,00,001–₹24,00,000; and 30% above ₹24,00,000.
The old regime (for taxpayers below 60) is simpler but reaches 30% much sooner: nil up to ₹2,50,000; 5% from ₹2,50,001–₹5,00,000; 20% from ₹5,00,001–₹10,00,000; 30% above ₹10,00,000. Senior and super senior citizens get a higher nil band under the old regime only.
Both regimes add a 4% health and education cess on top of the tax computed from the slabs.
Standard deduction and rebate — the part people miss
The new regime's standard deduction is ₹75,000 (versus ₹50,000 under the old regime), and — this is the big one — a full tax rebate applies if your taxable income is up to ₹12,00,000 under the new regime. Combined with the standard deduction, a salaried individual can effectively earn up to roughly ₹12.75 lakh a year and pay zero income tax under the new regime.
The old regime's rebate only goes up to ₹5,00,000 of taxable income, so it doesn't help anyone above that unless their deductions bring taxable income back down under that threshold.
What you give up in the new regime
The new regime's lower rates come at a cost: you lose most deductions and exemptions available under the old regime, including Section 80C (up to ₹1,50,000 for PPF, ELSS, life insurance, EPF and more), Section 80D health insurance premium, HRA exemption, and home loan interest on a self-occupied property (up to ₹2,00,000 under Section 24(b)).
The old regime keeps all of these available, which is why it can still win for someone with large, legitimate deductions — typically someone paying significant home loan interest, maximizing 80C, and claiming HRA in a metro city all at once.
A rule of thumb (and why you should still calculate it)
As a rough guide: if your total eligible deductions (80C + 80D + HRA + home loan interest + NPS under 80CCD(1B)) add up to somewhere around ₹4–4.5 lakh or more, the old regime starts to become competitive or better, especially at higher income levels. Below that, the new regime's lower slabs plus bigger standard deduction usually win.
That said, this is a rule of thumb, not a substitute for arithmetic — the crossover point moves with your exact income and deduction mix. The only reliable way to know is to compute both regimes on your real numbers.
Frequently Asked Questions
Is the new tax regime compulsory now?
The new regime is the default regime. You can still opt for the old regime when filing your return (salaried individuals can switch every year; those with business income have more restricted switching rules), so you're not locked in — but you do have to actively choose the old regime if it's better for you.
Can I claim HRA under the new tax regime?
No. HRA exemption under Section 10(13A) is only available under the old regime. If HRA is a large part of your deductions, that alone can tip the decision toward the old regime — run both numbers before deciding.
Which regime is better for someone with no home loan or 80C investments?
Almost always the new regime, because you get the full benefit of the lower slabs and the ₹75,000 standard deduction without giving up any deductions you weren't using anyway.
