Old vs New Tax Regime: The Short Answer
For FY 2026-27, most salaried individuals with taxable income up to roughly ₹12.75 lakh (after the standard deduction) end up paying zero or near-zero tax under the new regime, thanks to the ₹60,000 rebate under Section 87A. If your income is higher and you have significant deductions — a home loan, HRA, 80C investments, health insurance — the old regime can still work out cheaper. There is no universal answer; it depends entirely on your deduction total versus your income level.
New Tax Regime Slabs — FY 2026-27
| Income Slab | Tax Rate |
|---|---|
| Up to ₹4,00,000 | Nil |
| ₹4,00,000 – ₹8,00,000 | 5% |
| ₹8,00,000 – ₹12,00,000 | 10% |
| ₹12,00,000 – ₹16,00,000 | 15% |
| ₹16,00,000 – ₹20,00,000 | 20% |
| ₹20,00,000 – ₹24,00,000 | 25% |
| Above ₹24,00,000 | 30% |
Standard deduction under the new regime is ₹75,000, and Section 87A gives a rebate of ₹60,000 on tax for taxable income up to ₹12 lakh — which is what pushes the effective tax-free threshold for salaried employees up to roughly ₹12.75 lakh. The new regime is the default regime for FY 2026-27; you have to actively opt for the old regime if you want it.
Old Tax Regime Slabs — FY 2026-27
| Income Slab | Tax Rate |
|---|---|
| Up to ₹2,50,000 | Nil |
| ₹2,50,000 – ₹5,00,000 | 5% |
| ₹5,00,000 – ₹10,00,000 | 20% |
| Above ₹10,00,000 | 30% |
The exemption limit rises to ₹3 lakh for senior citizens (60+) and ₹5 lakh for super senior citizens (80+). The old regime's standard deduction is ₹50,000, lower than the new regime's ₹75,000 — but it unlocks over 70 deductions and exemptions the new regime doesn't allow.
What deductions do you lose under the new regime?
This is the crux of the decision. Moving to the new regime means giving up:
- Section 80C — up to ₹1.5 lakh for PPF, ELSS, life insurance premiums, EPF contributions, home loan principal.
- Section 80D — health insurance premiums (₹25,000–₹1,00,000 depending on age).
- HRA exemption — often one of the largest deductions for salaried employees renting a home in a metro.
- Section 24(b) — up to ₹2 lakh interest deduction on a self-occupied home loan.
- LTA, 80E (education loan interest), 80TTA/TTB and most other Chapter VI-A deductions.
A rough rule of thumb
If your total deductions (80C + 80D + HRA + home loan interest, added up) exceed roughly ₹4–4.5 lakh, the old regime usually starts winning at higher income levels. Below that, the new regime's lower slab rates and larger rebate typically come out ahead. The only way to know for certain is to compute both ways for your actual numbers — a few thousand rupees of difference either way is common, so it's worth the five minutes.
If you're weighing where those 80C rupees should go under the old regime, our 80C tax saving calculator compares PPF, ELSS and NPS side by side.
Frequently asked questions
No. It's usually better for people with few deductions — especially those without a home loan or large HRA claims. Once your combined deductions cross roughly ₹4–4.5 lakh, the old regime can pull ahead, particularly at higher income levels.
Salaried individuals without business income can switch between the old and new regime every financial year when filing their return. Those with business or professional income have more restricted switching rules under current law.
No. HRA exemption is one of the deductions not available under the new regime — this is often the single biggest reason salaried employees paying high rent in metro cities still choose the old regime.
If your gross total income exceeds the basic exemption limit, filing a return is generally still required even if the final tax payable is nil after rebate — check current ITR filing thresholds for your situation or consult a CA.