Old vs New Tax Regime for FY 2026-27: Which Is Better for You?
Updated 4 October 20268 min read
Since Budget 2025 made income up to ₹12 lakh tax-free under the new regime, the old regime has become the better choice for far fewer people. Budget 2026 kept the same slabs for FY 2026-27, and the new Income-tax Act, 2025 now applies from 1 April 2026. Here's how to decide.
The key numbers for FY 2026-27
| New regime | Old regime | |
|---|---|---|
| Standard deduction (salaried) | ₹75,000 | ₹50,000 |
| Tax-free limit after rebate | ₹12 lakh taxable | ₹5 lakh taxable |
| Top rate starts at | ₹24 lakh | ₹10 lakh |
| 80C, 80D, HRA, home loan interest | Not allowed | Allowed |
| Employer NPS (80CCD(2)) | Up to 14% of basic | Up to 10% of basic |
| Max surcharge | 25% | 37% |
How much tax you'd pay at common salaries
For a salaried person under 60 who invests ₹1.5 lakh under 80C, pays ₹25,000 for health insurance and puts ₹50,000 in NPS, tax works out as follows. The last column adds ₹2 lakh of home loan interest and ₹2.4 lakh of HRA exemption — a heavy-deduction case.
| Gross salary | Old regime | New regime | Old regime, heavy deductions |
|---|---|---|---|
| ₹10,00,000 | ₹59,800 | ₹0 | ₹0 |
| ₹15,00,000 | ₹1,87,200 | ₹97,500 | ₹72,280 |
| ₹20,00,000 | ₹3,43,200 | ₹1,92,400 | ₹2,05,920 |
| ₹30,00,000 | ₹6,55,200 | ₹4,75,800 | ₹5,17,920 |
The break-even rule
The old regime only wins if your deductions — beyond the ₹50,000 standard deduction — are large enough. Roughly:
- Up to ₹12.75 lakh salary: the new regime gives nil tax, so it's always at least as good.
- ₹15 lakh: you need about ₹5.4 lakh of deductions in the old regime to match the new one.
- ₹20 lakh: about ₹7.1 lakh.
- ₹25 lakh and above: about ₹8 lakh.
Who might still prefer the old regime
- People paying high rent in a metro with a large HRA component — especially now that Bengaluru, Hyderabad, Pune and Ahmedabad get the 50% HRA limit.
- Home owners with large home-loan interest (₹2 lakh) and full 80C, 80D and NPS usage.
- Senior citizens with big health-insurance premiums and modest incomes.
Even then, run the numbers: at ₹20 lakh, the heavy-deduction example above still pays more in the old regime.
Don't let tax-saving drive bad investments
In the old regime it's tempting to buy insurance-cum-investment policies just for 80C. If the new regime is cheaper for you, you're free to choose investments on merit — term insurance for protection and low-cost funds or PPF for savings.
Frequently asked questions
Is the new regime the default for FY 2026-27?
Yes. If you don't choose, your employer deducts TDS under the new regime. You can still opt for the old regime when filing your return, if you have no business income.
Can I claim HRA in the new regime?
No. HRA, 80C, 80D and home loan interest on a self-occupied house are only available in the old regime.
Are the slabs different for senior citizens?
Only in the old regime, where the exemption limit is ₹3 lakh for ages 60–80 and ₹5 lakh above 80. The new regime has the same slabs for everyone.
This guide is for general education and is not investment, tax or legal advice. Rules and rates change; check the latest official sources or a qualified adviser before acting.