Old vs New Tax Regime FY 2026-27: Which Saves You More?
From FY 2024-25, the new tax regime became the default. If you do nothing, your employer files your taxes under the new regime. But "default" does not mean "better" — for many salaried Indians with HRA, home loans, and 80C investments, the old regime still wins. Here is exactly how to tell.
The Key Difference in One Line
The new regime has lower slab rates but no deductions (no 80C, no HRA, no home loan interest). The old regime has higher slab rates but allows all deductions. Your total deductions determine which is cheaper for you.
New Regime Slabs FY 2026-27
| Income Slab | Tax 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% |
Section 87A rebate: Under the new regime, income up to ₹12,00,000 attracts zero tax after the rebate. This is the single biggest advantage of the new regime for incomes below ₹12 lakh.
Old Regime Slabs FY 2026-27
| Income Slab | Tax 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% |
Under the old regime, Section 87A rebate applies up to ₹5,00,000 taxable income (after deductions), resulting in zero tax. The standard deduction under the old regime is ₹50,000.
Side-by-Side Comparison at Key Income Levels
| Gross Income | New Regime Tax | Old Regime Tax | Save with |
|---|---|---|---|
| ₹8,00,000 | ₹0 | ₹46,800 | New regime |
| ₹12,00,000 | ₹0 | ₹1,09,200 | New regime |
| ₹15,00,000 | ₹1,04,000 | ₹1,09,200 | New regime |
| ₹20,00,000 | ₹2,34,000 | ₹2,10,600 | Old regime |
| ₹30,00,000 | ₹5,46,000 | ₹4,84,600 | Old regime |
| ₹50,00,000 | ₹11,46,000 | ₹10,05,000 | Old regime |
With ₹3.5 lakh in deductions, the crossover is around ₹17–18 lakh gross income. Below that, new regime wins. Above it, old regime wins.
The Crossover Formula
The old regime beats the new regime when your total deductions exceed the "break-even deduction" for your income. A rough guide:
- Income ₹8–12L: New regime almost always wins (₹0 tax under 87A rebate)
- Income ₹12–15L: Old regime needs ₹3+ lakh deductions to compete
- Income ₹15–20L: Old regime needs ₹3.75+ lakh deductions to win
- Income above ₹20L: Old regime typically wins if you have HRA + 80C + home loan interest + 80D
Common Deductions in the Old Regime
- Standard deduction: ₹50,000 (automatic for salaried)
- Section 80C: Up to ₹1,50,000 (EPF, PPF, ELSS, LIC, home loan principal)
- HRA exemption: Depends on rent, salary, and city (metro vs non-metro)
- Section 80D: Up to ₹25,000 for health insurance premium
- Home loan interest (Section 24b): Up to ₹2,00,000
- NPS (80CCD(1B)): Additional ₹50,000 over and above 80C
Who Should Definitely Use the New Regime?
- Anyone earning below ₹12 lakh — you pay zero tax under the new regime regardless of deductions
- Salaried employees who rent but pay low rent, have no home loan, and minimal 80C investments
- Those who prefer simplicity and don't want to track and submit deduction proofs
Who Should Stick with the Old Regime?
- Income above ₹20 lakh with HRA + full 80C + home loan interest
- Anyone with large HRA exemption (e.g., paying ₹30,000+/month rent in a metro)
- Individuals with NPS contributions (80CCD(1B) can add ₹50,000 of extra deduction)