Old vs new tax regime FY 2026-27: which one saves you more

Slabs side by side (unchanged for FY 2026-27)

The Income-tax Act, 2025 applies from 1 April 2026. It calls the year "tax year 2026-27" instead of "FY 2026-27 / AY 2027-28". The Finance Act 2026 did not change the tax rates.

The new regime is the default. You can opt out and use the old regime instead. Both regimes below are for a resident salaried person below 60. To test your own salary, use the income tax calculator.

In the old regime, the nil band is ₹3 lakh at 60–79 and ₹5 lakh at 80 or older. The new regime has the same slabs at every age. A 4% cess is added to the tax in both.

Standard deduction and the rebate

Two fixed items do most of the work for a salaried person. Both are bigger in the new regime.

Standard deduction: ₹75,000 vs ₹50,000

Every salaried person gets a flat deduction from salary. You don't need to show any bills. It is ₹75,000 in the new regime and ₹50,000 in the old one.

Rebate: ₹12 lakh vs ₹5 lakh

The rebate wipes out your tax when income is low enough. In the new regime, there is no tax if taxable income is ₹12 lakh or less (rebate up to ₹60,000). Add the ₹75,000 standard deduction, and a salary of ₹12,75,000 pays no tax.

Just above ₹12 lakh, "marginal relief" stops a sudden jump. Your tax can't be more than the income above ₹12 lakh. For example, a ₹13 lakh salary has taxable income of ₹12,25,000. Slab tax is ₹63,750, but relief caps it at ₹25,000. With cess, you pay ₹26,000.

In the old regime, the rebate is up to ₹12,500, and only if taxable income is ₹5 lakh or less. There is no marginal relief above that.

• The rebate doesn't cover special-rate income, such as capital gains.
• We ignore surcharge (extra tax above ₹50 lakh income). All figures here are for incomes up to ₹30 lakh.

Deductions you give up in the new regime

The new regime has lower rates, but it drops most deductions. These are the main ones you can claim only in the old regime:

• HRA exemption (rule 279): the least of HRA received, rent minus 10% of salary, or 50% of salary in 8 metro cities (40% elsewhere). Salary here means basic + DA. Try the HRA calculator.
• Tax-saving investments (old section 80C, now section 123): up to ₹1,50,000 a year. To see your yearly PF contributions, try the EPF calculator.
• Health insurance (old 80D, now section 126): up to ₹25,000 for self and family, plus ₹25,000 for parents. Each is ₹50,000 if the person insured is a senior citizen.
• Home-loan interest on a self-occupied home (old 24(b), now section 22): up to ₹2,00,000 a year.
• Your own extra NPS (old 80CCD(1B), now section 124): up to ₹50,000.

Two things stay in both regimes. The standard deduction (₹75,000 or ₹50,000), and your employer's NPS contribution (section 124, old 80CCD(2)). In the new regime, employer NPS is allowed up to 14% of basic + DA.

Break-even table

The old regime only costs less if your deductions are large enough. This table shows the deductions you'd need, on top of the ₹50,000 standard deduction, for the old regime to cost the same as the new one.

How we worked this out: we ran each salary through the same tested tax module as our income tax calculator. Tax includes 4% cess. It assumes a resident below 60, salary income only, no employer NPS and no surcharge. "Deductions for old to match" is the smallest total of old-regime deductions (HRA, section 123, 126, 22, 124) at which old regime tax is no higher than new.

Read it this way. At ₹10 lakh and ₹12 lakh, the new regime tax is ₹0. To match that, the old regime needs your taxable income down to ₹5 lakh, which takes ₹4.5–6.5 lakh of deductions. From ₹25 lakh up, the gap settles at about ₹8 lakh.

Most people can claim ₹1,50,000 in tax-saving investments, up to ₹1,00,000 for health insurance and ₹50,000 of extra NPS. That is ₹3 lakh at most. Reaching ₹6–8 lakh usually needs large HRA and home-loan interest as well.

Worked example: ₹18 lakh salary with HRA, investments and a home loan

Priya earns ₹18,00,000 a year in Bengaluru. Her basic pay is ₹7,20,000 and her HRA is ₹3,60,000. She pays rent of ₹30,000 a month (₹3,60,000 a year). She invests ₹1,50,000 under section 123 and pays ₹2,00,000 of home-loan interest.

Step 1: HRA exemption

Bengaluru is one of the 8 cities at 50%. The three limits are ₹3,60,000 (HRA received), ₹2,88,000 (rent minus 10% of basic) and ₹3,60,000 (50% of basic). The least is ₹2,88,000, so that much HRA is tax-free.

Step 2: Total deductions

Old regime: ₹50,000 standard deduction + ₹2,88,000 HRA + ₹1,50,000 investments + ₹2,00,000 home-loan interest = ₹6,88,000. New regime: only the ₹75,000 standard deduction.

Taxable income, new regime

₹17,25,000

Taxable income, old regime

₹11,12,000

Tax, old regime

₹1,51,944

Tax, new regime

₹1,50,800

Even with ₹6,38,000 of deductions beyond the standard one, the new regime costs ₹1,144 less. She is just under the ₹6.42 lakh break-even at ₹18 lakh.

Step 3: Small changes tip it

• Add ₹25,000 of health insurance for herself (section 126). Old regime tax falls to ₹1,44,144. Now the old regime costs ₹6,656 less.
• Drop the home loan instead. Old regime tax rises to ₹2,14,344, so the new regime costs ₹63,544 less.

How we worked this out: HRA from our tested HRA module; tax from the same income tax module, with 4% cess, for a resident below 60.

This example keeps things simple. Whether you can claim both HRA and home-loan interest depends on where the home is and who lives in it. Check with a CA if that applies to you.

Who should pick the old regime

Compare your own total deductions with the break-even figure for your salary. The old regime could cost less if:

1. You pay high rent in a metro and get HRA in your salary.
2. You also pay home-loan interest on a self-occupied home, close to the ₹2,00,000 limit.
3. You already use the full ₹1,50,000 for tax-saving investments, plus health insurance and extra NPS.

If you have only tax-saving investments and health insurance, the new regime is likely to cost less. Those add up to about ₹3 lakh at most, well below the break-even at every salary in the table.

If you are 60 or older, the old regime's nil band is higher. The break-even figures above won't match; run your numbers in the calculator with your age.

Switching between regimes

The new regime applies unless you opt out (section 202(4), old 115BAC). How often you can move between regimes depends on your income type. Salaried people and people with business income have different rules. Check the rules for your income type on incometax.gov.in before you file.

New Act section numbers

The Income-tax Act, 2025 renumbers most sections. Old names still appear on forms and payslips, so here is the map.

HRA exemption now sits in Schedule III with rule 279.

Sources

• Section 202 (new regime), Income Tax Department
• Section 156 (rebate), Income Tax Department
• Section 19 (standard deduction), Income Tax Department
• Section 123 (tax-saving investments), Income Tax Department
• Section 126 (health insurance), Income Tax Department
• Section 22 (home-loan interest), Income Tax Department
• Section 124 (NPS), Income Tax Department
• Rule 279 (HRA), Income Tax Department
• Budget 2026 Memorandum, Ministry of Finance

By the OnlineCalculator.pro team. Checked against the sources above on 15 October 2026.

For education only, not tax advice. Based on rules for FY 2026-27. Check with a CA or the Income Tax Department before you file.