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New vs Old Tax Regime for 2026-27: Which One Saves You More?
Quick Work Studio · 2026-10-27
Every salaried person in India picks between two tax systems each year. The new regime has lower rates but almost no deductions. The old regime has higher rates but lets you subtract things like PPF, insurance and rent. Budget 2026 didn't change any rates, so the slabs below are the same as last year. From 1 April 2026 the new Income-tax Act, 2025 also applies, and the year is now called the "tax year" 2026-27.
New regime slabs (the default)
| Taxable 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% |
Salaried people get a ₹75,000 standard deduction, and a rebate of up to ₹60,000 makes the tax zero if your taxable income is ₹12 lakh or less. For a salary, that means no tax up to ₹12.75 lakh. Just above ₹12 lakh, "marginal relief" makes sure you never pay more tax than the income above ₹12 lakh.
Old regime slabs
| Taxable income | Below 60 | 60 to 79 | 80 and above |
|---|---|---|---|
| Up to ₹2.5 lakh | Nil | Nil | Nil |
| ₹2.5–3 lakh | 5% | Nil | Nil |
| ₹3–5 lakh | 5% | 5% | Nil |
| ₹5–10 lakh | 20% | 20% | 20% |
| Above ₹10 lakh | 30% | 30% | 30% |
The standard deduction here is ₹50,000, and a rebate makes tax zero only up to ₹5 lakh of taxable income. In both regimes a 4% health and education cess is added to the tax.
What the old regime lets you deduct
- Up to ₹1.5 lakh for PPF, EPF (your share), ELSS mutual funds, life insurance, tuition fees for children and home loan principal.
- Health insurance premiums for yourself and your parents.
- HRA if you live in a rented home (see our HRA guide).
- Home loan interest on a house you live in, up to ₹2 lakh.
- NPS: an extra ₹50,000 on top of the ₹1.5 lakh.
The new regime allows very little of this. The main exception is the employer's contribution to NPS.
Worked examples (salary, tax including cess)
| Salary | New regime | Old: ₹1.75 lakh deductions | Old: ₹4.5 lakh deductions |
|---|---|---|---|
| ₹10 lakh | ₹0 | ₹70,200 | ₹0 |
| ₹15 lakh | ₹97,500 | ₹2,02,800 | ₹1,17,000 |
| ₹20 lakh | ₹1,92,400 | ₹3,58,800 | ₹2,73,000 |
| ₹25 lakh | ₹3,19,800 | ₹5,14,800 | ₹4,29,000 |
"₹1.75 lakh deductions" means the full ₹1.5 lakh plus ₹25,000 of health insurance, which is common. "₹4.5 lakh" adds a large HRA or home loan interest on top. Even then, the new regime wins at every salary above ₹10 lakh in this table.
How much do you need to deduct for the old regime to win?
| Salary | Old regime is better only if deductions exceed about |
|---|---|
| ₹10 lakh | ₹4.5 lakh |
| ₹15 lakh | ₹5.45 lakh |
| ₹20 lakh | ₹7.1 lakh |
| ₹25 lakh | ₹8 lakh |
These are deductions beyond the standard deduction. Very few people reach them without a big home loan and high rent together, which is why most salaried people now pay less under the new regime.
Switching between regimes
- Salaried people can choose again every year, when filing the return, whatever they told their employer at the start of the year.
- People with business income can switch back to the old regime only once, so think before leaving the new one.
- Tell your employer your choice early in the year, so the right tax is cut from each month's salary (TDS).
Common mistakes
- Investing in tax-saving products in March only to save tax, then choosing the new regime anyway, where they don't count.
- Forgetting the 4% cess when estimating tax.
- Thinking "no tax up to ₹12 lakh" applies to all income. Special-rate income, like most capital gains, is taxed separately.
Try it: the Income Tax Calculator works out your tax under both regimes side by side, with every deduction, and shows which one saves more. The Salary Calculator turns your CTC into take-home pay, and the HRA Calculator shows your tax-free rent allowance.