New Tax Regime vs Old Tax Regime FY 2026-27: Complete Comparison

New Tax Regime Slabs for FY 2026-27 (AY 2027-28)

The new tax regime was overhauled in Budget 2025 (effective FY 2025-26 onwards). It is now the default regime for all taxpayers — you must actively opt for the old regime if you prefer it.

Key highlight: zero income tax for individuals with total income up to Rs 12 lakh under the new regime, via a full tax rebate under Section 87A. For salaried employees, the standard deduction of Rs 75,000 means zero tax up to Rs 12,75,000 gross salary.

• Rs 0 to Rs 4L: NIL
• Rs 4L to Rs 8L: 5%
• Rs 8L to Rs 12L: 10%
• Rs 12L to Rs 16L: 15%
• Rs 16L to Rs 20L: 20%
• Rs 20L to Rs 24L: 25%
• Above Rs 24L: 30%
• Rebate under 87A: full tax rebate for income up to Rs 12L (net tax = Rs 0)
• Standard deduction: Rs 75,000 (salaried employees and pensioners only)

Old Tax Regime Slabs for FY 2026-27

The old regime retains all deductions and exemptions but has higher slab rates compared to the new regime above Rs 6L income.

The old regime allows: standard deduction (Rs 50,000 for salaried), 80C deductions (up to Rs 1.5L), HRA exemption (up to 50% of salary in metros), home loan interest deduction under Section 24b (up to Rs 2L), health insurance premium deduction under 80D (up to Rs 25,000 individual + Rs 50,000 senior citizen parents), NPS contribution under 80CCD(1B) (Rs 50,000 extra), and several other deductions.

• Rs 0 to Rs 2.5L: NIL
• Rs 2.5L to Rs 5L: 5% (rebate under 87A makes this NIL for income up to Rs 5L)
• Rs 5L to Rs 10L: 20%
• Above Rs 10L: 30%
• Key deductions: 80C Rs 1.5L + std deduction Rs 50K + HRA + home loan interest + 80D
• Rebate 87A: full rebate for income up to Rs 5L only (old regime)

Which Regime Saves More Tax — Decision Framework

The decision depends entirely on your actual deductions. The new regime wins when you have few deductions; the old regime wins when you maximise all available deductions. Here is a simple rule of thumb.

Calculate your total deductions: standard deduction + 80C investments + HRA exemption + home loan interest Section 24b + 80D health insurance + other deductions. If the total exceeds approximately Rs 3.5 to Rs 4 lakh, the old regime typically results in lower tax. If total deductions are below Rs 3.5 lakh, the new regime is usually better.

For income up to Rs 12.75 lakh: new regime always wins — zero tax guaranteed. For income between Rs 12.75L and Rs 15L with significant deductions (HRA in a metro + 80C maxed out + home loan), the old regime may be marginally better. Above Rs 15L with maximum deductions (HRA + 80C + home loan + 80D + NPS), the old regime can save Rs 30,000 to Rs 1,00,000 more. Use the RupeeKit calculator for your exact numbers.

Who Benefits Most from the New Regime

The new regime is clearly better for: salaried employees with income up to Rs 12.75 lakh (zero tax), employees without HRA exemption (rented accommodation in employer-provided housing or own home), young professionals early in career with minimal investments, and self-employed or freelancers who have no EPF or HRA to claim.

The new regime is also better for those who cannot fully utilise 80C — for example, employees whose EPF contributions already exhaust most of the Rs 1.5L limit, leaving little room for additional investments.

• Income up to Rs 12.75L: new regime, zero tax.
• No HRA or home loan: new regime usually better.
• Minimal 80C investments beyond EPF: new regime.
• High income (Rs 30L+) with maximum deductions: old regime often better.

Switching Between Regimes

Salaried employees can switch between old and new regimes every year at the time of filing their income tax return. Inform your employer which regime you want for TDS purposes at the start of the financial year — your employer deducts TDS accordingly. If you choose the wrong regime for TDS but file under the other regime in the ITR, you either get a refund or pay the difference.

Self-employed and business income taxpayers can switch from the new to the old regime only once in their lifetime. After switching to the old regime, reverting to the new regime permanently closes the option to switch again.

• Salaried: can switch regimes every year when filing ITR.
• Business income: can switch from new to old once; going back to new is permanent.
• Inform employer by April for correct TDS. File ITR under chosen regime regardless of TDS.