A complete comparison of the Old and New Tax Regime for FY 2026-27 (AY 2027-28) in India. Covers slab rates, standard deduction, Section 87A rebate, which deductions survive under each regime, a break-even guide, and how to decide which one saves you more tax this year.
What’s current for 2026: The Income-tax Act, 2025 came into force on 1 April 2026, replacing the 1961 Act and renumbering provisions. Budget 2026 did not change the slab rates, rebate, or standard deduction; the figures introduced in Budget 2025 for FY 2025-26 continue unchanged into FY 2026-27. The new tax regime remains the default option unless you actively choose the old regime.
Choosing between the old and new tax regime is the single biggest tax decision most salaried Indians make every year. Since the new regime became the default, many taxpayers simply let it apply without checking whether their deductions would have made the old regime cheaper. For FY 2026-27, the answer still depends entirely on how much you claim in exemptions and deductions.
This guide compares both regimes side by side, explains what changed under the Income-tax Act, 2025, and gives you a practical way to decide which one saves more tax at your income level.
Quick Answer: If your total eligible deductions, including standard deduction, Section 80C, HRA, and home loan interest, are below roughly Rs 3.5 to Rs 4 lakh, the new regime usually saves more tax. Above that level, the old regime often wins. Run both calculations before you decide, since the exact break-even point shifts with your income slab.
Old Tax Regime vs New Tax Regime: Slab Rates for FY 2026-27
The new regime uses wider, more numerous slabs with no deductions, while the old regime keeps its familiar three-slab structure alongside a long list of exemptions and deductions.
| New Regime Slab | Rate | Old Regime Slab | Rate |
|---|---|---|---|
| Up to ₹4,00,000 | Nil | Up to ₹2,50,000 | Nil |
| ₹4,00,001 – ₹8,00,000 | 5% | ₹2,50,001 – ₹5,00,000 | 5% |
| ₹8,00,001 – ₹12,00,000 | 10% | ₹5,00,001 – ₹10,00,000 | 20% |
| ₹12,00,001 – ₹16,00,000 | 15% | ||
| ₹16,00,001 – ₹20,00,000 | 20% | Above ₹10,00,000 | 30% |
| ₹20,00,001 – ₹24,00,000 | 25% | ||
| Above ₹24,00,000 | 30% |
Note on age-based limits: The old regime’s Rs 2.5 lakh basic exemption applies to residents below 60. Senior citizens (60-80 years) get Rs 3 lakh, and super senior citizens (above 80) get Rs 5 lakh. The new regime applies a uniform Rs 4 lakh exemption regardless of age.
Rebate Under Section 87A: The Real Reason Income Up to ₹12 Lakh Is Tax-Free
Under the new regime, a resident individual with taxable income up to Rs 12 lakh pays no tax at all, not because the slabs are nil up to that point, but because the Section 87A rebate wipes out tax liability up to Rs 60,000. For a salaried employee, adding the Rs 75,000 standard deduction pushes the effective tax-free ceiling to about Rs 12.75 lakh of gross salary.
The old regime also offers a Section 87A rebate, but only up to Rs 5 lakh of taxable income, capped at Rs 12,500. Beyond that threshold, the old regime’s benefit comes entirely from deductions and exemptions rather than the rebate.
Important: The Section 87A rebate does not apply to income taxed at special rates, such as most long-term and short-term capital gains. A person with capital gains and otherwise low income can still owe tax on the gains even if total taxable income is under Rs 12 lakh.
What You Lose and Keep Under the New Regime
Worked Example: ₹15 Lakh Gross Salary
Consider a salaried employee with Rs 15 lakh gross salary who claims Rs 1.5 lakh under Section 80C, Rs 25,000 for health insurance under Section 80D, and Rs 1.8 lakh in HRA exemption under the old regime, taking total old-regime deductions well past Rs 3.5 lakh once the standard deduction is added.
Reading this example: Even with roughly Rs 3.8 lakh in deductions, the new regime still comes out lower in this case, because the wider slabs and the standard deduction do most of the work. The exact break-even point moves with income level and the mix of deductions, so this figure is illustrative, not a rule for every salary band. Use an actual calculator with your own numbers rather than relying on rough figures.
Want your exact numbers instead of an example? Compare both regimes side by side with your real salary and deductions.
Try the Old vs New Regime CalculatorHow to Decide: A Practical Approach
List Every Deduction You Actually Use
Add up standard deduction, Section 80C investments, Section 80D premiums, HRA exemption if you pay rent, and home loan interest on a self-occupied property if applicable. Use figures you genuinely claim, not the maximum limits, since unused limits do not help you.
Compute Tax Under Both Regimes
Apply the new regime slabs to your gross income minus the Rs 75,000 standard deduction. Separately, apply the old regime slabs to your gross income minus your total deductions from Step 1. Compare the two tax figures, including cess.
Check Your Ability to Switch
If you are purely salaried, you can pick either regime every year without restriction. If you have business or professional income, opting out of the new regime is allowed only once in your lifetime, so weigh the decision more carefully before switching back to the old regime.
Communicate Your Choice
Salaried employees should inform their employer of the chosen regime at the start of the year so TDS is deducted correctly, and can still change the choice while filing the return. Those with business income must file the prescribed form before the due date to opt for the old regime.
Decision Checklist Before You Choose
- Confirm whether your total genuine deductions cross roughly Rs 3.5 to Rs 4 lakh, the rough break-even zone
- Confirm whether you pay rent and can claim HRA, since this alone can shift the old regime into the lead
- Confirm whether you have an active home loan on a self-occupied property, since that interest is old-regime only
- Confirm your age band if you are a senior citizen, since the old regime’s higher exemption limit helps more at lower income levels
- Confirm whether you have business income, since your ability to switch regimes later is restricted
- Run the numbers for both regimes using your actual figures rather than assuming which one is better
Frequently Asked Questions
Conclusion
There is no single regime that wins for everyone. The new regime rewards simplicity and suits taxpayers with few deductions, while the old regime still pays off for anyone with meaningful HRA, home loan interest, or Section 80C investments. Since the slab rates for FY 2026-27 carried over unchanged from the previous year, the comparison itself has not shifted, only the section numbers behind it under the Income-tax Act, 2025.
Run your own numbers using the Old vs New Tax Regime Calculator, and cross-check your take-home figure with the Income Tax Calculator. If you are weighing HRA against the standard deduction, the HRA Exemption Calculator and Standard Deduction Calculator can help you compare the two before you commit to a regime for the year.
