The old vs new tax regime comparison matters because the two systems calculate income tax differently. For Tax Year 2026-27, the new tax regime has lower slab rates and a higher basic exemption limit, while the old tax regime continues to allow a wider range of deductions and exemptions.
So, which tax regime is better for you? It depends on your taxable income, salary structure, investments, eligible deductions, HRA, home-loan interest, and other sources of income.
This guide explains the old and new tax regimes for Tax Year 2026-27, including the latest tax slabs, deductions, rebate, examples, and key factors to consider before choosing a regime.
Note: Tax Year 2026-27 refers to the period beginning 1 April 2026. The Income-tax Act, 2025 applies to tax years beginning on or after 1 April 2026, while earlier tax years continue under the Income-tax Act, 1961 through the applicable transitional provisions.
Old vs New Tax Regime 2026-27: Key Differences
| Feature | Old Tax Regime | New Tax Regime |
| Basic exemption limit for individuals below 60 | ₹2.5 lakh | ₹4 lakh |
| Tax rates | Higher slab rates | Lower across more slabs |
| Standard deduction for salaried taxpayers/pensioners | ₹50,000 | ₹75,000 |
| 80C-type deductions | Available, subject to conditions | Generally not available |
| 80D-type deductions | Available, subject to conditions | Generally not available |
| HRA exemption | Available, subject to conditions | Not available |
| Self-occupied home-loan interest | Available, subject to conditions | Not available |
| Regime status | Optional | Default |
The new tax regime is the default regime for eligible taxpayers. However, taxpayers who meet the applicable conditions can opt for the old tax regime.
For taxpayers without business or professional income, the regime can generally be changed each year while filing the ITR. Taxpayers with business or professional income need to follow the specific rules and file Form 10-IEA where applicable.
New Tax Regime Slabs for Tax Year 2026-27
The new tax regime slabs for Tax Year 2026-27 are:
| Taxable Income | Tax Rate |
| Up to ₹4 lakh | Nil |
| ₹4 lakh – ₹8 lakh | 5% |
| ₹8 lakh – ₹12 lakh | 10% |
| ₹12 lakh – ₹16 lakh | 15% |
| ₹16 lakh – ₹20 lakh | 20% |
| ₹20 lakh – ₹24 lakh | 25% |
| Above ₹24 lakh | 30% |
These slab rates apply to individuals under the new tax regime for Tax Year 2026-27.
New Tax Regime Rebate
Under the new tax regime, eligible resident individuals can claim a rebate of up to ₹60,000 when total income does not exceed ₹12 lakh. Marginal relief can also apply when total income is slightly above ₹12 lakh. The marginal-relief limit extends up to ₹12,70,588.
For salaried taxpayers eligible for the ₹75,000 standard deduction, this corresponds to a gross salary of up to ₹13,45,588, assuming there is no other taxable income.
The rebate does not generally apply to income taxed at special rates, such as certain capital gains and lottery income.
The rebate is commonly referred to as the Section 87A rebate because Section 87A of the Income-tax Act, 1961 provided for the corresponding rebate under the earlier law. For Tax Year 2026-27, the corresponding provision under the Income-tax Act, 2025 is Section 156, while the new tax regime slab rates are provided under Section 202.
Old Tax Regime Slabs
For individuals below 60 years of age, the old tax regime slabs are:
| Taxable Income | Tax Rate |
| Up to ₹2.5 lakh | Nil |
| ₹2.5 lakh – ₹5 lakh | 5% |
| ₹5 lakh – ₹10 lakh | 20% |
| Above ₹10 lakh | 30% |
Resident individuals with total income up to ₹5 lakh can claim a Section 87A rebate of up to ₹12,500 if they meet the eligibility criteria.
The basic exemption limit is higher for senior citizens under the old tax regime:
- 60 to below 80 years: ₹3 lakh
- 80 years and above: ₹5 lakh
Under the new tax regime, the ₹4 lakh basic exemption limit applies irrespective of age.
Deductions Available Under the Old Tax Regime
One of the main advantages of the old tax regime is the wider range of deductions and exemptions available to eligible taxpayers.
80C-Type Deductions
The old Section 80C corresponds to Section 123 under the Income-tax Act, 2025. Eligible investments and payments can include:
- Employees’ Provident Fund (EPF)
- Public Provident Fund (PPF)
- Equity Linked Savings Scheme (ELSS)
- Life insurance premiums
- Tuition fees
- Principal repayment of a home loan
- National Savings Certificate (NSC)
The combined deduction limit is generally ₹1.5 lakh, depending on the type of investment or payment.
80D-Type Deductions
The old Section 80D corresponds to Section 126 under the Income-tax Act, 2025. It allows eligible taxpayers to claim deductions for certain health insurance premiums and specified medical expenses, with the deduction amount depending on the taxpayer’s age, the type of expense, and the applicable limits.
HRA Exemption
House Rent Allowance (HRA) exemption is available under the old tax regime if the taxpayer meets the applicable conditions. It is not available under the new tax regime.
Home-Loan Interest
Eligible taxpayers can claim a deduction for home-loan interest under the old regime. For a self-occupied property, a deduction of up to ₹2 lakh may be available under applicable conditions.
Under the new regime, the deduction for interest on a self-occupied property is not available. Interest deduction for a let-out property may be available under the applicable conditions.
Deductions Available Under the New Tax Regime
The new tax regime offers lower slab rates but has fewer deductions and exemptions.
Certain deductions, such as eligible employer contributions to the National Pension System (NPS) under Section 80CCD(2), can still be available under the new regime.
However, deductions such as 80C and 80D, HRA exemption, and the deduction for interest on a self-occupied home loan are generally not available under the new regime. Therefore, taxpayers with substantial eligible deductions should compare their final tax liability under both regimes before choosing one.
Standard Deduction
The standard deduction for eligible salaried taxpayers and pensioners is:
- Old tax regime: ₹50,000
- New tax regime: ₹75,000
The ₹75,000 standard deduction under the new regime is one reason salaried taxpayers can potentially have nil tax even when their gross salary is above ₹12 lakh, provided they meet the rebate eligibility criteria and do not have other taxable income.
Old vs New Tax Regime: Tax Calculation Example for ₹15 Lakh Salary
Consider a salaried taxpayer with a gross salary of ₹15 lakh.
Under the New Tax Regime
Gross salary = ₹15,00,000
Less standard deduction = ₹75,000
Taxable income = ₹14,25,000
Tax calculation:
- Up to ₹4 lakh = Nil
- ₹4 lakh – ₹8 lakh = ₹20,000
- ₹8 lakh – ₹12 lakh = ₹40,000
- ₹12 lakh – ₹14.25 lakh = ₹33,750
Income tax = ₹93,750
Health and Education Cess at 4% = ₹3,750
Total tax payable = ₹97,500
Under the Old Tax Regime
Assume the taxpayer claims:
- Standard deduction = ₹50,000
- 80C-type deduction = ₹1.5 lakh
- 80D-type deduction = ₹25,000
- Eligible home-loan interest deduction = ₹2 lakh
Total deductions = ₹4.25 lakh
Gross salary = ₹15,00,000
Taxable income = ₹10,75,000
Tax calculation:
- ₹2.5 lakh – ₹5 lakh = ₹12,500
- ₹5 lakh – ₹10 lakh = ₹1,00,000
- Above ₹10 lakh = ₹22,500
Income tax = ₹1,35,000
Health and Education Cess at 4% = ₹5,400
Total tax payable = ₹1,40,400
In this example, the new regime results in lower tax because the deductions available under the old regime are not sufficient to offset the difference in tax rates.
Old vs New Tax Regime: Breakeven Point for ₹15 Lakh Salary
There is no single deduction amount that makes the old regime better for every person earning ₹15 lakh because the result depends on the deductions and exemptions they are eligible to claim.
Under the assumptions above, the new regime gives a taxable income of ₹14.25 lakh and a base tax of ₹93,750. To bring the old-regime tax down to the same base tax, taxable income under the old regime would need to be approximately ₹9.06 lakh. That means the total deductions and exemptions from a ₹15 lakh gross salary would need to be approximately ₹5.94 lakh, including the ₹50,000 standard deduction.
The actual breakeven point can vary depending on HRA, home-loan interest, eligible deductions, salary components, and income taxed at special rates.
Which Tax Regime Should You Choose?
There is no single tax regime that is better for every taxpayer.
The new tax regime may be suitable for taxpayers who:
- Have relatively few deductions and exemptions
- Prefer simpler tax calculations
- Have limited tax-saving investments
- Can benefit from the lower slab rates and higher rebate
The old tax regime may be worth comparing if you have substantial:
- 80C-type investments
- Health insurance deductions
- HRA exemption
- Home-loan interest
- Other eligible deductions and exemptions
The best way to compare the two is to calculate the final tax payable under both regimes, instead of comparing only the headline tax rates.
New vs Old Tax Regime for Salaried Employees
Salaried employees should compare their gross salary, taxable income, deductions, and exemptions under both regimes.
For example, two employees earning the same ₹15 lakh salary may have different tax liabilities if one receives HRA, has a home loan, or makes eligible tax-saving investments while the other does not.
Can You Switch Between Old and New Tax Regimes?
The new tax regime is the default regime. For taxpayers without business or professional income, the choice between the old and new regimes can generally be made every year while filing the ITR, within the applicable due date.
For taxpayers with business or professional income, opting out of the new regime requires Form 10-IEA. They can later re-enter the new regime by filing Form 10-IEA again, but this re-entry is allowed only once. After re-entering the new regime, they generally cannot opt for the old regime again while they continue to have business or professional income.
Form 10-IEA must be filed within the applicable time limit when required. Taxpayers with business or professional income who have already opted out of the new regime do not need to file the form again every year merely to continue with the old regime.
Common Mistakes to Avoid
1. Comparing only tax slabs
Lower tax rates do not automatically mean lower final tax for every taxpayer. Deductions and exemptions can significantly affect the calculation.
2. Assuming everyone with income up to ₹12 lakh pays no tax
The ₹60,000 rebate applies to eligible resident individuals under the new regime if they meet the applicable eligibility criteria. Income taxed at special rates may be treated separately.
3. Adding every investment under the old regime
Not every payment or investment qualifies for a deduction. Check the applicable conditions and limits before including it.
4. Calculating tax on gross salary without considering deductions
Taxable income is different from gross salary because eligible deductions and exemptions can reduce taxable income.
5. Ignoring special-rate income
Certain types of income, such as specified capital gains and lottery income, may be taxed at special rates and may not qualify for the new-regime rebate in the same way as normal slab-rate income.
6. Comparing tax rates instead of final tax liability
The right comparison is the final tax payable under each regime after applying the relevant deductions, exemptions, rebate, and cess.
Conclusion
The old vs new tax regime comparison for Tax Year 2026-27 should not be based only on tax slab rates.
The new regime offers lower slab rates, a higher basic exemption limit, and a higher standard deduction, while the old regime provides a wider range of deductions and exemptions. Understanding these differences is also useful for those considering courses in accounting and taxation to gain practical knowledge of tax rules.
Before choosing a regime, calculate your taxable income and final tax liability under both options. Your salary structure, investments, HRA, home-loan interest, other deductions, and sources of income can all affect the result.
FAQs
Is the new tax regime the default for Tax Year 2026-27?
Yes. The new tax regime is the default regime, but eligible taxpayers can opt for the old tax regime.
What is the basic exemption limit under the new tax regime?
The first ₹4 lakh of total income is taxed at 0% under the new tax regime for Tax Year 2026-27.
Is there no tax up to ₹12 lakh under the new regime?
Eligible resident individuals can claim a rebate of up to ₹60,000 when their total income does not exceed ₹12 lakh, if they meet the applicable eligibility criteria. Marginal relief can apply above ₹12 lakh, up to a total income of ₹12,70,588.
What is the standard deduction under the new tax regime?
The standard deduction for eligible salaried taxpayers and pensioners is ₹75,000 under the new tax regime.
Can I claim 80C and 80D deductions under the new tax regime?
Generally, no. These deductions are available under the old tax regime if the taxpayer meets the applicable eligibility criteria.
Can I claim HRA exemption under the new tax regime?
No. HRA exemption is not available under the new tax regime.
Can I claim home-loan interest under the new tax regime?
Interest deduction for a self-occupied property is not available under the new regime. For a let-out property, interest deduction may be available if the taxpayer meets the applicable eligibility criteria.
Is Form 10-IEA required to switch tax regimes?
Taxpayers with business or professional income who want to opt out of the default new regime or later re-enter it need to file Form 10-IEA within the applicable time limit. Taxpayers without business or professional income can generally choose the regime directly in their ITR.
Can self-employed taxpayers switch between the old and new regimes every year?
No. Taxpayers with business or professional income can opt out of the new regime using Form 10-IEA and can later re-enter the new regime only once. After re-entering the new regime, they generally cannot opt for the old regime again while they continue to have business or professional income.
Which tax regime is better for a ₹15 lakh salary?
It depends on the deductions and exemptions available to you. Compare the final tax payable under both regimes after considering the standard deduction, eligible investments, HRA, home-loan interest, and other applicable deductions.
