Short answer
For FY 2026-27 the new regime is cheaper for most salaried people. If your salary is up to ₹12.75 lakh, the new regime makes your tax nil. Above that, the old regime only wins if your deductions (HRA, 80C, home-loan interest, 80D and so on) add up to more than roughly ₹5.4 lakh at ₹15 lakh salary, ₹7.1 lakh at ₹20 lakh, or ₹8 lakh at ₹25 lakh and above. Check your own numbers with the income tax calculator, which compares both regimes side by side.
What changed for FY 2026-27
From 1 April 2026 the Income-tax Act, 2025 replaced the 1961 Act. The new law renumbers most sections, but Budget 2026 kept the slab rates, the rebate and the standard deduction the same as FY 2025-26. So the comparison below is the same one many people made last year. The familiar names (80C, 80D, HRA) are used here because that is still how payslips, employers and most people refer to them.
The two regimes side by side
| Taxable income | New regime (default) | Old regime (below 60) |
|---|---|---|
| Up to ₹2.5 lakh | Nil | Nil |
| ₹2.5 – 4 lakh | Nil | 5% |
| ₹4 – 5 lakh | 5% | 5% |
| ₹5 – 8 lakh | 5% | 20% |
| ₹8 – 10 lakh | 10% | 20% |
| ₹10 – 12 lakh | 10% | 30% |
| ₹12 – 16 lakh | 15% | 30% |
| ₹16 – 20 lakh | 20% | 30% |
| ₹20 – 24 lakh | 25% | 30% |
| Above ₹24 lakh | 30% | 30% |
| Standard deduction (salary/pension) | ₹75,000 | ₹50,000 |
| Rebate | Tax nil up to ₹12 lakh taxable income (with marginal relief just above) | Up to ₹12,500, so tax nil up to ₹5 lakh taxable income |
Both regimes add a 4% health and education cess, and surcharge on very high incomes (10% above ₹50 lakh, 15% above ₹1 crore, 25% above ₹2 crore; the old regime also has 37% above ₹5 crore). Senior citizens get a higher basic exemption only in the old regime (₹3 lakh from 60 to 79, ₹5 lakh from 80).
Which deductions work in which regime
| Deduction | New regime | Old regime |
|---|---|---|
| Standard deduction | Yes (₹75,000) | Yes (₹50,000) |
| Employer’s NPS contribution (80CCD(2)) | Yes, up to 14% of basic + DA | Yes, up to 10% of basic + DA for private-sector employees |
| 80C (PF, PPF, ELSS, life insurance, tuition fees, home-loan principal) | No | Yes, up to ₹1.5 lakh |
| 80D health insurance | No | Yes |
| HRA exemption | No | Yes (see the HRA calculator) |
| Home-loan interest on a self-occupied house | No | Yes, up to ₹2 lakh |
| Your own extra NPS contribution (80CCD(1B)) | No | Yes, up to ₹50,000 |
The break-even: how much deduction makes the old regime worth it
We ran both regimes through the same calculator for a salaried person below 60, and found the total deductions (on top of the standard deduction) at which the old regime starts to cost less. These are our own calculations using the FY 2026-27 slabs; tax includes 4% cess.
| Gross salary | Tax: new regime | Tax: old regime, no deductions | Old regime wins only if deductions exceed |
|---|---|---|---|
| ₹8 lakh | ₹0 | ₹65,000 | Never cheaper (new is already nil) |
| ₹12.75 lakh | ₹0 | ₹1,87,200 | Never cheaper (new is already nil) |
| ₹15 lakh | ₹97,500 | ₹2,57,400 | about ₹5.44 lakh |
| ₹18 lakh | ₹1,50,800 | ₹3,51,000 | about ₹6.42 lakh |
| ₹20 lakh | ₹1,92,400 | ₹4,13,400 | about ₹7.09 lakh |
| ₹25 lakh and above | ₹3,19,800 at ₹25 lakh | ₹5,69,400 at ₹25 lakh | about ₹8 lakh |
Why does the number stop rising at ₹8 lakh? Above ₹24 lakh both regimes charge 30% on each extra rupee, so the gap between them stays fixed; you need about ₹8 lakh of deductions to close it.
A realistic example
Priya earns ₹18 lakh in Pune and pays ₹30,000 a month rent. Her basic salary is ₹75,000 a month and she receives ₹30,000 a month HRA. She has ₹1.5 lakh in 80C (mostly her own PF), ₹25,000 health insurance and no home loan.
- HRA exemption (Pune counts as a 50% city from FY 2026-27): the lowest of ₹3,60,000 HRA received, ₹2,70,000 (rent ₹3,60,000 minus 10% of ₹9,00,000 basic) and ₹4,50,000 (50% of basic) = ₹2,70,000.
- Total deductions for the old regime: ₹2,70,000 + ₹1,50,000 + ₹25,000 = ₹4,45,000.
- That is below the ₹6.42 lakh break-even for an ₹18 lakh salary, so the new regime is still cheaper: ₹1,50,800 against ₹2,12,160 under the old regime.
If Priya also had a home loan with ₹2 lakh of interest, her deductions would reach ₹6.45 lakh and the old regime would become marginally cheaper (₹1,49,760 against ₹1,50,800). That is the typical profile where the old regime still makes sense: high rent or a home loan, plus full 80C.
Common mistakes
- Counting employer PF as your deduction. Your employer’s 12% PF is not an 80C deduction; only your own contribution is.
- Forgetting the rebate stops at ₹12 lakh. Earning ₹1 more than ₹12 lakh of taxable income does not suddenly cost you ₹60,000; marginal relief caps the tax at the amount above ₹12 lakh. But the relief fades out quickly (by about ₹12.7 lakh of taxable income).
- Assuming capital gains get the rebate. The ₹12 lakh rebate does not cover gains taxed at special rates, such as equity gains.
- Not telling your employer. Your employer deducts TDS under the new regime unless you declare the old regime. Choosing the wrong one means either a refund to wait for or tax to pay when you file.
Can you switch?
Salaried people and pensioners without business income can choose the regime every year when they file their return. People with business or professional income have limited chances to switch back to the old regime once they leave it, so think longer-term before switching.
Check your own numbers
Enter your salary and deductions in the income tax calculator. It shows both regimes side by side, including rebate, marginal relief, surcharge and cess. If you pay rent, work out your exempt HRA first with the HRA calculator, and see your monthly take-home with the CTC to in-hand salary calculator.
This guide explains general rules for resident individuals. It is not tax advice. Check special cases (capital gains, business income, NRIs) with a chartered accountant.