New vs Old tax regime FY 2026-27: which one saves you more?
New regime: ₹12.75L tax-free for salaried, lower slabs, no deductions. Old regime: deductions galore but higher slabs. Here's the simple decision rule.
Budget 2026 confirmed: tax slabs unchanged. The new regime is the default. But "default" doesn't mean "best for you" — let's figure out which actually saves you more.
What's on the table (FY 2026-27)
New regime — the simple one
| Income | Rate |
|---|---|
| Up to ₹4 lakh | Nil |
| ₹4 — 8 lakh | 5% |
| ₹8 — 12 lakh | 10% |
| ₹12 — 16 lakh | 15% |
| ₹16 — 20 lakh | 20% |
| ₹20 — 24 lakh | 25% |
| Above ₹24 lakh | 30% |
- Standard deduction: ₹75,000
- Rebate u/s 87A: up to ₹60,000 → effectively zero tax up to ₹12L taxable
- For salaried: ₹12L + ₹75K = ₹12.75L gross income tax-free
- Almost no other deductions allowed
Old regime — the deduction-heavy one
| Income | Rate |
|---|---|
| Up to ₹2.5 lakh | Nil |
| ₹2.5 — 5 lakh | 5% |
| ₹5 — 10 lakh | 20% |
| Above ₹10 lakh | 30% |
- Standard deduction: ₹50,000
- 80C: ₹1.5L (PPF, ELSS, LIC, EPF, home loan principal)
- 80D: ₹25K (₹50K for senior parents)
- HRA exemption (if you pay rent)
- Home loan interest: ₹2L u/s 24(b)
- NPS extra: ₹50K u/s 80CCD(1B)
The decision rule (pin this)
If your total deductions (excl. std deduction) ≥ ~₹4 lakh: Old regime usually wins.
Otherwise: New regime wins almost always — especially below ₹15 lakh income, where the rebate makes it dominate.
Three concrete scenarios
Scenario 1: ₹10L salary, no investments
- New regime: Taxable = ₹9.25L → tax = ₹37,500 → after rebate = ₹0
- Old regime: Taxable = ₹9.5L → tax = ₹1,12,500 → with cess = ₹1,17,000
New regime saves ₹1.17 lakh. No contest.
Scenario 2: ₹15L salary with full deductions
Assume ₹1.5L 80C + ₹50K NPS + ₹50K 80D + ₹2L home loan interest + ₹2L HRA = ₹6.5L deductions.
- New regime: Taxable = ₹14.25L → tax = ₹1,12,500 + cess = ₹1,17,000
- Old regime: Taxable = ₹15L − ₹6.5L − ₹50K = ₹8L → tax = ₹72,500 + cess = ₹75,400
Old regime saves ₹41,600.
Scenario 3: ₹20L salary, only 80C maxed
₹1.5L 80C + ₹50K std deduction = ₹2L deductions only.
- New regime: Taxable = ₹19.25L → tax ≈ ₹2,53,000 with cess
- Old regime: Taxable = ₹18L → tax = ₹3,52,500 + cess = ₹3,66,600
New regime saves ₹1.13 lakh. Old regime only wins if you can stack deductions.
What changed in Budget 2026?
- Tax slabs: unchanged from Budget 2025
- Standard deduction stays at ₹75,000 (new regime)
- Rebate u/s 87A stays at ₹60,000
- Cess: 4% Health & Education
- Income Tax Act 2026 effective from FY 2026-27 (AY 2027-28)
Action items
- List every deduction you currently claim (or could claim).
- If total < ₹4 lakh: stay in new regime, simplify life.
- If > ₹4 lakh: stay in old regime, keep records meticulously.
- Run both numbers in our Income Tax Calculator — it shows the comparison side-by-side.
Default to "new regime + invest the saved tax" if you don't already have a home loan and HRA. The simplicity is worth a lot.
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