Income tax

New vs old tax regime for FY 2026-27: which one saves you more?

Updated October 2026 · 5 min read

From April 2026 the new Income Tax Act, 2025 replaced the 1961 law, but the slab rates stayed the same as last year. The new regime is the default. You can still choose the old one if your deductions are large enough to make it cheaper.

New regime slabs for FY 2026-27

Salaried people get a ₹75,000 standard deduction, and a rebate makes tax zero when taxable income is up to ₹12 lakh. Together, a salary of up to ₹12.75 lakh pays no tax at all under the new regime.

Old regime slabs

Nil up to ₹2.5 lakh, 5% from ₹2.5 to 5 lakh, 20% from ₹5 to 10 lakh and 30% above ₹10 lakh. The standard deduction is ₹50,000. In return you can claim deductions such as PPF, ELSS and EPF contributions (up to ₹1.5 lakh), health insurance, HRA exemption, home loan interest (up to ₹2 lakh) and NPS.

Tax at common salaries

Total tax including 4% cess. The old regime column assumes ₹3.75 lakh of deductions, for example ₹1.5 lakh in 80C-type savings, ₹25,000 health insurance and ₹2 lakh home loan interest.

At these salaries, the new regime wins even with ₹3.75 lakh of deductions.

How many deductions make the old regime worth it?

This is the amount of deductions (beyond the standard deduction) at which both regimes cost the same. Above it, the old regime is cheaper.

Up to ₹12.75 lakh the new regime is always at least as good, since it already brings your tax to zero.

Who should still pick the old regime?

• People paying a large home loan interest and claiming a big HRA exemption at the same time.
• Employees in Pune, Bengaluru, Hyderabad or Ahmedabad with high rent, now that these cities get the 50% HRA limit.
• Anyone whose total deductions comfortably exceed the break-even figure above.

Everyone else is likely better off with the new regime and fewer forms to fill.