Old Tax Regime vs New Tax Regime 2026-27: Which One Saves You More Tax?

For most salaried Indians, the new tax regime saves more tax than the old regime for FY 2026-27 — but that flips once your deductions (HRA, home loan interest, 80C, 80D and NPS put together) cross roughly ₹5.5-8 lakh, depending on your income. There is no single right answer; it depends on how much of your salary is already locked into rent, insurance, provident fund and loan repayments. The only reliable way to decide is to compute both regimes against your actual numbers before you file.

The slabs for FY 2026-27, side by side

Budget 2026 made no change to either regime's tax slabs — they carry over from Budget 2025. What did change is structural: from April 1, 2026, the new Income Tax Act, 2025 takes effect, replacing the six-decade-old Income Tax Act, 1961, and it keeps the new regime as the default option. If you want the old regime, you have to actively choose it every year.

New regime slabs:

• 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%

Old regime slabs (unchanged for years):

• Up to ₹2,50,000 — Nil
• ₹2,50,001–₹5,00,000 — 5%
• ₹5,00,001–₹10,00,000 — 20%
• Above ₹10,00,000 — 30%

Both add 4% health and education cess on top of the computed tax.

Standard deduction and the Section 87A rebate

The new regime gives salaried taxpayers a flat ₹75,000 standard deduction, against ₹50,000 under the old regime. More importantly, the Section 87A rebate is far more generous under the new regime: up to ₹60,000, which wipes out tax entirely on taxable income up to ₹12 lakh — or gross salary up to roughly ₹12.75 lakh once the standard deduction is applied. The old regime's rebate caps at ₹12,500, covering only income up to ₹5 lakh. The rebate does not apply to special-rate income such as short-term capital gains under Section 111A, long-term capital gains under Section 112A, or online gaming winnings, under either regime.

The old regime's advantage is everything else it still allows: Section 80C (EPF, PPF, ELSS, life insurance, up to ₹1.5 lakh), 80D (health insurance), 80E (education loan interest), Section 24(b) (home loan interest, up to ₹2 lakh on a self-occupied property), HRA exemption, and LTA. The new regime strips almost all of these out, keeping only the employer's NPS contribution under Section 80CCD(2).

Where the break-even actually falls

Because the two regimes tax the same rupee differently, there's a specific deduction amount at which they produce identical tax — below it, the new regime wins; above it, the old regime wins. Based on the current slabs, standard deductions and rebates:

• ₹10 lakh salary: old regime matches new only once deductions exceed about ₹4.5 lakh
• ₹12.75 lakh salary: break-even is around ₹7.25 lakh of deductions
• ₹15 lakh salary: break-even is around ₹5.4 lakh
• ₹20 lakh salary: break-even is around ₹7.1 lakh
• ₹25–30 lakh salary: break-even flattens out around ₹8 lakh

In practice, that means someone with a ₹15 lakh salary who only claims the standard EPF contribution and a modest 80C/health-insurance total of around ₹2.25 lakh is better off on the new regime by roughly ₹90,000. The same person, once they add HRA and a home loan's interest component to push deductions to ₹6 lakh, flips to being better off on the old regime — though usually only by a few thousand to around ₹17,000, not by a dramatic margin. Above ₹20 lakh of income, you generally need home loan interest or a very high HRA claim for the old regime to win at all; otherwise the new regime's lower rates and bigger rebate stay ahead even with substantial 80C and 80D claims.

What it means for you

If you're salaried and don't have a home loan or large HRA claim, defaulting to the new regime is usually the right call — you don't need to file anything extra, and it's already the default under the new Income Tax Act, 2025. If you do have a home loan on a self-occupied house, significant rent payments, or you max out 80C and 80D every year, run both numbers before you decide; the old regime can still come out ahead, sometimes by a meaningful amount.

Two filing details matter more than the regime math itself. First, salaried taxpayers can switch between regimes every year simply by selecting the option when filing their return — there's no lock-in. Second, if you have business or professional income, you must file Form 10-IEA before the due date to opt for the old regime, and you can switch back to the new regime only once in your lifetime. Filing a belated return can also default you into the new regime regardless of your preference, so file on time if the old regime genuinely saves you more.

Rather than estimate, plug your actual salary, 80C/80D totals, HRA and home loan interest into desisearch.net's income tax calculator and compare both regimes directly — the few minutes it takes is the only way to know which side of the break-even line you actually fall on.

The break-even isn't a fixed number across all incomes — it rises as your salary rises, which is why a flat rule of thumb ("old regime if deductions exceed ₹4 lakh") stops working once you're above ₹15-20 lakh of income.

Sources

Figures and break-even calculations cross-checked against BasuNivesh's FY 2026-27 regime comparison and Motilal Oswal's analysis of the regimes after Budget 2026, with the official comparison tool referenced at incometaxindia.gov.in.