Every salaried person in India faces the same question each year: new vs old tax regime – which one saves more tax? Since Budget 2025 made income up to ₹12 lakh tax-free under the new regime, the answer has changed for millions of taxpayers. This guide explains the new tax regime slabs for FY 2026-27, the old tax regime slabs, the deductions each allows, and shows exactly which tax regime is better at every salary level – with a simple break-even rule you can apply to your own income.
New vs Old Tax Regime: The Quick Answer
For most salaried taxpayers in FY 2026-27, the new tax regime is better. It has lower slab rates, a ₹75,000 standard deduction and a rebate that makes taxable income up to ₹12 lakh completely tax-free. The old tax regime only wins if you claim large deductions – typically more than ₹4.5 lakh to ₹8 lakh a year depending on your salary – through investments, HRA, a home loan and insurance.
New Tax Regime Slabs for FY 2026-27 (AY 2027-28)
The income tax slab for 2026-27 under the new regime is the same for all ages:
| Taxable income | Tax rate |
|---|---|
| Up to ₹4,00,000 | Nil |
| ₹4,00,001 – ₹8,00,000 | 5% |
| ₹8,00,001 – ₹12,00,000 | 10% |
| ₹12,00,001 – ₹16,00,000 | 15% |
| ₹16,00,001 – ₹20,00,000 | 20% |
| ₹20,00,001 – ₹24,00,000 | 25% |
| Above ₹24,00,000 | 30% |
Budget 2026 did not change these slabs, so they are the same as FY 2025-26. From 1 April 2026 the Income-tax Act, 2025 replaced the 1961 Act; section numbers changed, but the rates and main benefits described here continue.
Old Tax Regime Slabs
The old tax regime slabs depend on your age:
| Taxable income | Below 60 years | 60–79 years | 80 years and above |
|---|---|---|---|
| Up to ₹2,50,000 | Nil | Nil | Nil |
| ₹2,50,001 – ₹3,00,000 | 5% | Nil | Nil |
| ₹3,00,001 – ₹5,00,000 | 5% | 5% | Nil |
| ₹5,00,001 – ₹10,00,000 | 20% | 20% | 20% |
| Above ₹10,00,000 | 30% | 30% | 30% |
The old regime's rebate makes income up to ₹5 lakh tax-free. This senior citizen tax slab advantage exists only in the old regime.
₹12 Lakh Tax-Free: Rebate and Marginal Relief
Under the new regime, the Section 87A rebate (as it is popularly known) cancels tax of up to ₹60,000, so a resident individual with taxable income up to ₹12 lakh pays zero tax. Add the standard deduction of ₹75,000 and a salaried employee earning up to ₹12.75 lakh pays nothing.
Just above ₹12 lakh, marginal relief protects you from a sudden jump. Without it, taxable income of ₹12,10,000 would attract ₹61,500 of tax. With marginal relief, the tax cannot exceed the income above ₹12 lakh – so the tax is ₹10,000 plus 4% cess, or ₹10,400. The rebate does not apply to income taxed at special rates, such as capital gains on shares and equity mutual funds.
Deductions: What Each Regime Allows
Deductions allowed in the new tax regime
- Standard deduction of ₹75,000 for salaried employees and pensioners.
- Employer's contribution to NPS, up to 14% of basic salary plus DA.
- Employer's contribution to EPF (within limits) and a few others such as the deduction for family pension.
Most popular deductions – 80C investments, HRA, home loan interest on a self-occupied house, health insurance – are not available in the new regime.
Deductions in the old tax regime
- Standard deduction in the old regime: ₹50,000.
- 80C deduction: up to ₹1.5 lakh for EPF, PPF, ELSS, life insurance, home loan principal, children's tuition fees and more.
- HRA exemption if you pay rent.
- Home loan interest deduction: up to ₹2 lakh on a self-occupied house.
- Health insurance premium (popularly Section 80D): up to ₹25,000, or ₹50,000 for senior citizens, plus more for parents.
- NPS deduction of an extra ₹50,000 for your own contribution.
Tax Regime Comparison at Different Salaries
This tax regime comparison shows total tax including 4% health and education cess for a resident individual below 60 with salary income. "Old regime" figures use the ₹50,000 standard deduction plus the extra deductions shown.
| Gross salary | New regime | Old – no other deductions | Old – ₹3.75 lakh deductions | Old – ₹5 lakh deductions |
|---|---|---|---|---|
| ₹8 lakh | ₹0 | ₹65,000 | ₹0 | ₹0 |
| ₹10 lakh | ₹0 | ₹1,06,600 | ₹28,600 | ₹0 |
| ₹12.75 lakh | ₹0 | ₹1,87,200 | ₹85,800 | ₹59,800 |
| ₹15 lakh | ₹97,500 | ₹2,57,400 | ₹1,40,400 | ₹1,06,600 |
| ₹20 lakh | ₹1,92,400 | ₹4,13,400 | ₹2,96,400 | ₹2,57,400 |
| ₹25 lakh | ₹3,19,800 | ₹5,69,400 | ₹4,52,400 | ₹4,13,400 |
| ₹30 lakh | ₹4,75,800 | ₹7,25,400 | ₹6,08,400 | ₹5,69,400 |
Look at the tax on 15 lakh salary: ₹97,500 in the new regime versus ₹1,40,400 even with ₹3.75 lakh of deductions in the old regime. For the tax on 20 lakh salary, the new regime saves more than ₹1 lakh compared with the old regime at ₹3.75 lakh of deductions.
The Break-Even Deduction Rule
The break-even deduction is the amount of extra deductions (over and above the standard deduction) at which both regimes charge the same tax. If your deductions are higher than this figure, the old regime is better; if they are lower, choose the new regime.
| Gross salary | Old regime is better only if your extra deductions exceed |
|---|---|
| ₹8 lakh | ₹2.5 lakh (and even then the tax is nil in both) |
| ₹10 lakh | ₹4.5 lakh |
| ₹12.75 lakh | ₹7.25 lakh |
| ₹15 lakh | ₹5.44 lakh |
| ₹20 lakh | ₹7.09 lakh |
| ₹25 lakh and above | about ₹8 lakh |
Very few people reach these numbers without a large home loan and high rent. A typical package of full 80C (₹1.5 lakh), health insurance (₹25,000), NPS (₹50,000) and home loan interest (₹1.5 lakh) adds up to ₹3.75 lakh – not enough to make the old regime better at any salary in the table.
Surcharge and Cess for High Incomes
A surcharge is added to income tax when total income exceeds ₹50 lakh: 10% above ₹50 lakh, 15% above ₹1 crore and 25% above ₹2 crore. In the old regime a further 37% surcharge applies above ₹5 crore, but in the new regime the surcharge is capped at 25%, which makes the new regime especially attractive for very high earners. Every taxpayer also pays the 4% health and education cess on tax plus surcharge.
How to Choose Your Tax Regime: Step by Step
- Add up your eligible deductions for the year: 80C, health insurance, NPS, HRA exemption and home loan interest.
- Check the break-even table above or enter your numbers in the income tax calculator.
- Choose the regime with lower tax, but also think about whether you really want to lock money into tax-saving investments just to claim a deduction.
- Tell your employer your choice at the start of the year so the right TDS is deducted each month. Use our salary calculator to see your monthly in-hand pay under each regime.
Default Tax Regime and Switching Rules
The new regime is the default tax regime: if you do nothing, your employer and the tax department will apply it. Can I switch tax regime? Yes – salaried individuals and pensioners without business income can choose either regime every year when filing the return by the due date, even if they told their employer something different. People with business or professional income can opt out of the new regime but can switch back only once in their lifetime, so they should decide carefully.
Who Should Still Choose the Old Regime?
- People with a large home loan interest deduction (close to ₹2 lakh) plus a high HRA exemption because they pay substantial rent in a metro city.
- Senior citizens with moderate income who benefit from the higher basic exemption and large medical insurance deductions.
- Taxpayers whose total deductions clearly exceed the break-even figure for their salary.
Everyone else – especially young professionals, people without a home loan, and anyone earning up to ₹12.75 lakh – will usually pay less tax in the new regime.
Frequently Asked Questions
Which tax regime is better for FY 2026-27?
For most salaried people the new tax regime is better because income up to ₹12.75 lakh is tax-free and the slab rates are lower. The old regime is better only if your deductions exceed the break-even amount, which is about ₹4.5 lakh to ₹8 lakh depending on your salary.
Is ₹12 lakh income tax-free in the new tax regime?
Yes. A resident individual with taxable income up to ₹12 lakh pays no tax under the new regime because of the rebate of up to ₹60,000. For salaried people, this means gross salary up to ₹12.75 lakh after the ₹75,000 standard deduction.
What is the tax on 15 lakh salary in the new regime?
About ₹97,500 including cess for FY 2026-27. In the old regime, the same salary pays ₹2,57,400 with only the standard deduction, or ₹1,40,400 with ₹3.75 lakh of extra deductions.
Can I claim HRA and 80C in the new tax regime?
No. HRA exemption, 80C, health insurance and home loan interest on a self-occupied house are available only in the old regime. The new regime allows the ₹75,000 standard deduction and employer NPS contributions.
Can I switch between the new and old tax regime every year?
Salaried individuals without business income can choose either regime each year while filing their return. Those with business income can switch back to the new regime only once.
Did Budget 2026 change the income tax slabs?
No. The slab rates, rebate and standard deduction for FY 2026-27 are the same as FY 2025-26.
Do senior citizens get a higher exemption in the new regime?
No. The new regime has the same slabs for all ages. The higher basic exemption for senior citizens (₹3 lakh, or ₹5 lakh at 80+) is available only in the old regime.
Disclaimer: Tax figures are for resident individuals with salary income for FY 2026-27, include 4% cess and are rounded. They do not cover special-rate income, surcharge above ₹50 lakh or every possible deduction. This article is general information, not tax advice – confirm with a tax professional or the Income Tax Department before filing.