New vs Old Tax Regime: Which Should You Choose in FY 2026-27?

What Changed in FY 2026-27?

The Union Budget 2024 introduced significant changes to the new tax regime, making it more attractive for many taxpayers:

• Higher Standard Deduction: Increased from Rs 50,000 to Rs 75,000 in the new regime
• Revised Tax Slabs: Lower rates across most income brackets
• Enhanced 87A Rebate: No tax up to Rs 12 lakh income (new regime)
• Higher NPS Contribution: Employer contribution limit increased to 14%

New Regime Tax Slabs (FY 2026-27)

Income Slab	Tax Rate
Up to Rs 4,00,000	Nil
Rs 4,00,001 - 8,00,000	5%
Rs 8,00,001 - 12,00,000	10%
Rs 12,00,001 - 16,00,000	15%
Rs 16,00,001 - 20,00,000	20%
Rs 20,00,001 - 24,00,000	25%
Above Rs 24,00,000	30%

Old Regime Tax Slabs (FY 2026-27)

Income Slab (Below 60 years)	Tax Rate
Up to Rs 2,50,000	Nil
Rs 2,50,001 - 5,00,000	5%
Rs 5,00,001 - 10,00,000	20%
Above Rs 10,00,000	30%

Key Differences

Feature	Old Regime	New Regime
Standard Deduction	Rs 50,000	Rs 75,000
Section 80C	Available (Rs 1.5L)	Not Available
Section 80D	Available	Not Available
HRA Exemption	Available	Not Available
Home Loan Interest	Rs 2L deduction	Not Available
Leave Travel Allowance	Exempt	Taxable

When to Choose Old Regime?

The old regime may be better if you have significant deductions:

• Home loan interest exceeding Rs 1.5-2 lakh per year
• High HRA exemption (living in metro with substantial rent)
• Maximum Section 80C investments (Rs 1.5 lakh)
• Health insurance premiums (80D) for self and parents
• NPS contributions beyond employer's share

When to Choose New Regime?

The new regime is typically better if:

• Your income is below Rs 12 lakh (zero tax after rebate)
• You have minimal or no deductions to claim
• You live in own house (no HRA benefit)
• You prefer simpler tax filing without documentation
• Your deductions are less than Rs 3-4 lakh per year

Breakeven Analysis

As a rule of thumb, if your total deductions exceed these amounts, old regime may save more tax:

Annual Income	Breakeven Deduction
Rs 10 lakh	~Rs 2.5 lakh
Rs 15 lakh	~Rs 3.5 lakh
Rs 20 lakh	~Rs 4.25 lakh
Rs 25 lakh	~Rs 4.75 lakh

Use Our Calculator

Don't guess - use our Income Tax Calculator to compare both regimes with your actual numbers. It will show you exactly how much tax you'll pay under each regime and recommend the better option.

Frequently Asked Questions

Can I switch between old and new regime every year?

Yes, salaried individuals can choose between old and new regime each financial year. However, individuals with business or professional income can switch only once — after opting out of the new regime, they cannot switch back.

Is the new regime default for FY 2026-27?

Yes, the new tax regime is the default regime from FY 2023-24 onwards. If you want to opt for the old regime, you need to explicitly select it while filing your ITR (or inform your employer for TDS purposes).

Do I lose all deductions in the new regime?

Not all. The new regime allows standard deduction of Rs 75,000, employer NPS contribution under 80CCD(2), and a few other specific exemptions. However, major deductions like 80C, 80D, HRA, and home loan interest (Section 24) are not available.

At what income level does old regime become better?

There is no fixed threshold — it depends on your total deductions. Generally, if your eligible deductions (80C + 80D + HRA + home loan interest etc.) exceed Rs 3.5-4 lakh, the old regime may save more tax. Use our calculator to compare with your exact numbers.

What is the rebate under Section 87A in both regimes?

Under the new regime for FY 2026-27, if your total taxable income is up to Rs 12 lakh (after standard deduction), you get a full rebate and pay zero tax. Under the old regime, the 87A rebate applies if taxable income is up to Rs 5 lakh, with a maximum rebate of Rs 12,500.