Old vs New Tax Regime FY 2026-27: Which Saves You More?

Every salaried person in India faces the same question each year: stay with the new tax regime, with its lower rates, or pick the old regime, with its deductions? For FY 2026-27, the answer is “new” for most people. The old regime still wins for some, if your deductions are big enough. This guide shows exactly where the line falls.

Budget 2026 kept the slabs, rebate and standard deduction of the previous year. The new Income-tax Act, 2025 took effect on 1 April 2026 with the same figures. It renamed some sections, so the familiar “87A rebate” is now section 156.

The tax slabs for FY 2026-27

Both regimes add 4% health and education cess on the tax. Here are the rates for individuals below 60:

What each regime gives you

New regime: lower rates, few deductions

• A ₹75,000 standard deduction from salary or pension.
• A rebate of up to ₹60,000, so there's no tax on taxable income up to ₹12 lakh for resident individuals. With the standard deduction, that means a salary of up to ₹12.75 lakh is tax-free. Just above ₹12 lakh, marginal relief stops the tax from jumping.
• Your employer's contribution to your NPS account (up to 14% of salary) is still deductible.
• No 80C, 80D, HRA or home-loan interest deduction on a self-occupied home.

Old regime: higher rates, many deductions

• A ₹50,000 standard deduction, and no tax up to ₹5 lakh of taxable income (rebate up to ₹12,500).
• 80C up to ₹1.5 lakh: EPF, PPF, ELSS funds, life insurance, children's tuition fees, home-loan principal.
• 80D health insurance: ₹25,000 for yourself and family, and more for senior-citizen parents.
• HRA exemption if you pay rent. Try the HRA calculator.
• Home-loan interest up to ₹2 lakh a year on a self-occupied home (see how much of your EMI is interest), and an extra ₹50,000 for NPS under 80CCD(1B).

The new Act gives these deductions new section numbers, but the old names are still widely used and the limits are unchanged.

Worked examples: who pays less?

Here's the total tax, including cess, at different salaries. The old regime is shown twice: with ₹2.25 lakh of deductions (80C ₹1.5 lakh, 80D ₹25,000, NPS ₹50,000), and with ₹5 lakh (adding ₹2 lakh home-loan interest and ₹75,000 HRA). The lowest tax in each row is in bold.

Even with ₹5 lakh of deductions, the new regime costs the same or less at every salary in this table. That's because the new slabs are wider and the rebate covers so much more income.

How much in deductions do you need?

The old regime only wins if your deductions, on top of the standard deduction, cross a break-even point. It rises with salary, then stops at ₹8 lakh once you're in the 30% band of both regimes.

Which should you choose?

• Salary up to ₹12.75 lakh: the new regime, almost always. You pay nothing.
• No home loan and modest rent: the new regime. 80C and 80D alone rarely reach the break-even point.
• A big home loan and high rent: run both in the calculator above. The old regime can still win, especially at ₹18–25 lakh.
• Don't invest just to save tax. Choose the regime that fits the deductions you'd make anyway.

How to choose and switch

The new regime is the default. If you want the old one, tell your employer at the start of the year so they deduct TDS correctly. Your final choice is made when you file your return. If you have no business income, you can choose afresh every year. If you have business or professional income, you have to opt out before the due date, and you can come back to the new regime only once.

Want to see your take-home pay under each regime? Use the in-hand salary calculator.