Old vs new tax regime for tax year 2026-27

The 2026 Budget left the rates where the previous one set them, so tax year 2026-27 — 1 April 2026 to 31 March 2027 — uses the same slabs as the year before. The new regime is the default: if you say nothing, this is how your employer will deduct tax.

The two sets of slabs are not comparable on their own, because they start from different taxable incomes. The new regime takes a ₹75,000 standard deduction off salary and almost nothing else; the old regime takes ₹50,000 and then whatever you can claim.

Under the new regime, a resident whose taxable income is ₹12 lakh or less gets a rebate of up to ₹60,000, which wipes out the tax entirely. For a salaried person that means a salary of ₹12.75 lakh, because the standard deduction comes off first.

Just above that line, marginal relief keeps the tax from jumping: the tax cannot exceed the income above ₹12 lakh. At ₹12.05 lakh of taxable income the slab tax would be ₹60,750, but relief limits it to the ₹5,000 by which the income exceeds the limit, plus cess.

This is why a bonus can be taxed at an effective rate far above its slab. The rebate is also not available on capital gains taxed at special rates, so a share sale can cost the rebate on your salary as well as tax on the gain.

The old regime's advantage is entirely in its deductions. The common ones for a salaried person are:

For any salary there is a level of deductions at which the two regimes cost the same. Below it the new regime is cheaper; above it the old one is.

The figures below are for a salaried person under 60 with no capital gains. They include each regime's standard deduction, so “deductions needed” means everything else — Section 123, HRA, home-loan interest and the rest — added together.

At ₹10 lakh the new regime charges nothing at all, because taxable income stays under the ₹12 lakh rebate limit. The old regime cannot beat nil, and needs about ₹4.5 lakh of deductions merely to match it.

At ₹15 lakh you need roughly ₹5.45 lakh of deductions before the old regime wins. A full ₹1.5 lakh under Section 123 plus ₹2 lakh of home-loan interest is ₹3.5 lakh — not enough on its own. Add an HRA exemption of ₹2 lakh, which means rent of roughly ₹25,000 a month against a ₹50,000 basic, and it tips.

At ₹30 lakh the break-even is about ₹8 lakh of deductions. That is reachable for someone paying a large home loan and high rent in a metro, and out of reach for most people who are not.

Two things move the needle: a home loan on a house you live in, and rent in one of the eight cities that allow a 50% HRA exemption. Without at least one of them, the new regime almost always wins.

The new regime applies unless you opt out. A salaried person without business income can choose either regime each year when filing a return, whatever they told their employer at the start of the year — the employer's choice only affects how much TDS is deducted month by month, not what you finally pay.

Someone with business or professional income has one chance to go back: having opted for the old regime, they can return to the new one once, and then cannot switch again.

The Income-tax Act, 2025 replaced the 1961 Act from 1 April 2026 and renumbered the sections — 80C became 123 and 87A became 156 — without changing what they do. Anything still quoting the old numbers is describing the same rules.