Old vs New Tax Regime 2026-27: Which to Choose
Old or new tax regime for 2026-27? Compare slabs, deductions and the exact break-even point for your salary, with worked examples and a free calculator.
By SmartFigure Editorial Team
· 3 min read
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Every salaried person in India has to make the same choice each year: stay with the new tax regime (the default) or opt for the old regime with its deductions. For tax year 2026-27, the first year under the new Income-tax Act, 2025, the slabs and rules are the same as last year, and for most people the answer has become clear. This guide shows you exactly where the line falls.
The short answer
- If your salary is up to ₹12.75 lakh, the new regime means zero tax. Choose it.
- Above that, the old regime wins only if your deductions and exemptions are very large: roughly ₹5.4 lakh at a ₹15 lakh salary and about ₹8 lakh once your income crosses ₹24 lakh (on top of the ₹50,000 standard deduction).
- Most people who claim only 80C, health insurance and professional tax pay much less tax in the new regime.
New regime slabs for 2026-27
| Taxable income | Rate |
|---|---|
| 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% |
Salaried people get a ₹75,000 standard deduction, and a rebate makes tax zero on taxable income up to ₹12 lakh. That is why a salary of ₹12.75 lakh pays nothing. Just above ₹12 lakh, marginal relief ensures you never pay more tax than the income above ₹12 lakh.
Old regime slabs for 2026-27
| Taxable income (below 60) | Rate |
|---|---|
| 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% |
The standard deduction is ₹50,000 and the rebate covers taxable income up to ₹5 lakh. The old regime’s advantage is its deductions: Section 80C (now Section 123 of the new Act) up to ₹1.5 lakh, health insurance (80D), HRA exemption, home loan interest up to ₹2 lakh, NPS under 80CCD(1B) and more.
Tax at common salaries
With ₹1.5 lakh in 80C, ₹25,000 in health insurance and ₹2,500 professional tax claimed under the old regime:
| Salary | New regime | Old regime |
|---|---|---|
| ₹10,00,000 | ₹0 | ₹69,680 |
| ₹12,75,000 | ₹0 | ₹1,31,820 |
| ₹15,00,000 | ₹97,500 | ₹2,02,020 |
| ₹20,00,000 | ₹1,92,400 | ₹3,58,020 |
| ₹30,00,000 | ₹4,75,800 | ₹6,70,020 |
Even with the full 80C limit used, the old regime costs ₹1–2 lakh more at these salaries.
The break-even point: how many deductions you need
This is the amount of deductions and exemptions (on top of the ₹50,000 standard deduction) at which the old regime starts to cost less:
| Salary | New regime tax | Old regime needs deductions of at least |
|---|---|---|
| ₹15,00,000 | ₹97,500 | ₹5,44,000 |
| ₹18,00,000 | ₹1,50,800 | ₹6,42,000 |
| ₹20,00,000 | ₹1,92,400 | ₹7,08,500 |
| ₹25,00,000 and above | ₹3,19,800 | ₹8,00,000 |
Reaching ₹5–8 lakh usually needs all of these at once: the full ₹1.5 lakh 80C, a large HRA exemption from high rent in a metro, ₹2 lakh of home loan interest, ₹50,000 in NPS and health insurance for yourself and your parents.
Work out your own answer
Enter your salary and deductions below. The calculator shows both regimes side by side with every step of the calculation.
Who should still choose the old regime?
- You pay high rent in a big city and get a large HRA exemption. From 2026-27, Bengaluru, Hyderabad, Pune and Ahmedabad count as metros for HRA, so employees there can claim more. Check yours with the HRA calculator.
- You pay home loan interest on the house you live in, close to the ₹2 lakh limit.
- You already max out 80C, 80D and NPS.
If you only have one or two of these, the new regime almost always wins.
How to choose the regime
- At work: tell your employer your choice at the start of the year so the right TDS is deducted. If you say nothing, the new regime applies.
- When filing your return: salaried people without business income can pick either regime every year while filing, even if they told their employer something different.
- With business income: you can switch back from the old regime only once, so decide carefully.
Things to remember
- The rebate that makes income up to ₹12 lakh tax-free does not cover capital gains taxed at special rates, such as gains on shares and equity funds. Use the capital gains calculator for those.
- Your employer’s NPS contribution (up to 14% of basic pay) is deductible even in the new regime.
- A 4% health and education cess is added to the tax in both regimes, and a surcharge applies above ₹50 lakh.
To see how the regime changes your monthly take-home pay, try the salary calculator.
This article is for general information and education, not financial, tax or investment advice. Rules and rates change; check official sources or consult a qualified professional before acting. See our disclaimer.