By DesiMetrics Editorial Team · Updated 3 September 2026
As a rule of thumb: if you claim few deductions — little or no HRA, 80C or home loan interest — the new regime usually saves you more. If your HRA, Section 80C investments and home loan interest add up to a large figure, the old regime can still win, even with its higher slab rates. There is no single universal answer — it comes down to your own deduction total.
What Are the Current New Regime Tax Slabs (FY 2026-27)?
Budget 2026 kept the new regime slabs unchanged from Budget 2025, for FY 2026-27 (AY 2027-28):
| Income slab | Rate |
|---|---|
| ₹0 – ₹4,00,000 | Nil |
| ₹4,00,000 – ₹8,00,000 | 5% |
| ₹8,00,000 – ₹12,00,000 | 10% |
| ₹12,00,000 – ₹16,00,000 | 15% |
| ₹16,00,000 – ₹20,00,000 | 20% |
| ₹20,00,000 – ₹24,00,000 | 25% |
| Above ₹24,00,000 | 30% |
On top of these slabs, salaried employees and pensioners get a ₹75,000 standard deduction — a flat amount subtracted from your salary before tax is calculated, no proof needed. A Section 87A rebate (a credit that cancels out your tax bill up to a threshold) then brings tax payable to zero up to ₹12 lakh taxable income — effectively up to about ₹12.75 lakh gross salary once the standard deduction is applied.
Takeaway: Under the new regime, a salaried taxpayer earning up to about ₹12.75 lakh a year pays no income tax at all.
What Are the Old Regime Tax Slabs and Deductions?
The old regime uses the traditional slab structure:
| Income slab | Rate |
|---|---|
| ₹0 – ₹2,50,000 | Nil |
| ₹2,50,000 – ₹5,00,000 | 5% |
| ₹5,00,000 – ₹10,00,000 | 20% |
| Above ₹10,00,000 | 30% |
The old regime's rates look higher at every slab — but it allows deductions the new regime doesn't: HRA exemption (a tax-free portion of your house rent allowance), Section 80C (up to ₹1.5 lakh for PPF, ELSS, life insurance and similar), Section 80D (health insurance premiums), and home loan interest on a self-occupied property (Section 24b), plus a smaller ₹50,000 standard deduction.
Takeaway: The old regime trades higher slab rates for a longer list of deductions — it only wins if those deductions are large enough to offset the rate difference.
Key Differences Between New and Old Regime
| New Regime | Old Regime | |
|---|---|---|
| Standard deduction | ₹75,000 | ₹50,000 |
| 87A rebate ceiling | ₹12,00,000 taxable income | ₹5,00,000 taxable income |
| HRA exemption | Not allowed | Allowed |
| Section 80C, 80D | Not allowed | Allowed |
| Home loan interest (24b) | Not allowed (self-occupied) | Allowed, up to ₹2,00,000 |
| Default regime | Yes, applied automatically | Must actively opt in |
| Best suited to | Few/no deductions to claim | High HRA, 80C, home loan interest |
Takeaway: Every deduction row the old regime allows is a reason to at least run the comparison before defaulting to the new regime.
Who Actually Saves More Under the New Regime?
- You don't pay rent, or your HRA exemption would be small.
- You haven't invested much (or anything) under Section 80C.
- You don't have a home loan, or already finished repaying one.
- You want a simpler return with fewer proofs and declarations to manage.
- Your total realistic deductions under the old regime would add up to well under ₹1–1.5 lakh.
Takeaway: The new regime tends to win for taxpayers who wouldn't claim much under the old regime anyway.
Who Actually Saves More Under the Old Regime?
- You pay significant rent and would claim a large HRA exemption.
- You max out (or come close to) your ₹1.5 lakh Section 80C limit.
- You're repaying a home loan on a self-occupied property.
- You pay for health insurance and would claim Section 80D.
- Your combined deductions comfortably exceed roughly ₹4–5 lakh.
Takeaway: The old regime tends to win when several deductions stack together — rarely from just one alone.
Real Example: Same Salary, Two Regimes, Two Outcomes
Both examples below use the same ₹15,00,000 gross salary — only the deductions claimed change. All figures are computed using the exact FY 2026-27 slabs and rebate rules above.
Example A: Minimal deductions
| Gross salary | ₹15,00,000 |
| Deductions claimed (old regime) | ₹0 (minimal) |
| New regime — taxable income | ₹14,25,000 |
| New regime — total tax | ₹97,500 |
| Old regime — taxable income | ₹14,50,000 |
| Old regime — total tax | ₹2,57,400 |
| Winner | New regime, by ₹1,59,900 |
Example B: High HRA + 80C + home loan interest
| Gross salary | ₹15,00,000 |
| Deductions claimed (old regime) | ₹6,50,000 (80C ₹1.5L + HRA ~₹3L + home loan interest ₹2L) |
| New regime — taxable income | ₹14,25,000 |
| New regime — total tax | ₹97,500 |
| Old regime — taxable income | ₹8,00,000 |
| Old regime — total tax | ₹75,400 |
| Winner | Old regime, by ₹22,100 |
Same salary, opposite winner — Example A shows the new regime saving nearly ₹1.6 lakh, while Example B's larger deductions flip the result, with the old regime saving about ₹22,100 instead. Run your own salary and deductions through our new vs old tax regime calculator rather than relying on either example.
Takeaway: The exact same salary can favour either regime — the deciding factor is always your own deduction total, not the salary itself.
How to Decide Which Regime Is Right for You
- 1Add up your realistic old-regime deductions: HRA exemption, Section 80C investments, Section 80D premiums, and home loan interest (up to ₹2 lakh for a self-occupied property).
- 2If that total is small (well under ₹1–1.5 lakh), the new regime is very likely to win.
- 3If that total is large (₹4–5 lakh or more, as in Example B), compare both properly — the old regime may well win.
- 4For anything in between, run both numbers through a calculator rather than guessing.
- 5Remember the new regime is now the default — you must actively opt for the old regime if you want it.
This article is general information, not personalised financial or tax advice — individual circumstances vary, and it's worth consulting a CA or tax advisor for anything beyond a straightforward salaried situation.
Takeaway: When in doubt, add up your real deductions and compare both regimes directly — don't assume either one is automatically better.
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Frequently asked questions
Can I switch between old and new regime every year?
Salaried individuals without business income can choose either regime each financial year when filing their return — you are not locked in. Those with business or professional income face more restricted switching rules, so check current CBDT guidance if that applies to you.
Is HRA available in the new tax regime?
No — the HRA (House Rent Allowance) exemption is one of the deductions the new regime does not allow. If your HRA exemption is large, that is one of the strongest reasons to compare against the old regime before deciding.
What is the Section 87A rebate?
It is a rebate that reduces your tax liability to zero up to a certain taxable income — ₹12 lakh under the new regime for FY 2026-27, or ₹5 lakh under the old regime. Combined with the new regime’s ₹75,000 standard deduction, this means salaried taxpayers with gross income up to about ₹12.75 lakh pay no tax under the new regime.
Which deductions can I still claim under the new regime?
Mainly the ₹75,000 standard deduction (for salaried/pensioners) and the employer’s NPS contribution under Section 80CCD(2). Most other common deductions — 80C, 80D, HRA, and home loan interest on a self-occupied property — are only available under the old regime.
Is the new tax regime always better?
Not always — it usually wins if you claim few deductions, but if your HRA, Section 80C investments and home loan interest add up to a large enough figure, the old regime can still save you more, even at its higher slab rates. The only way to know for sure is to compare both for your own numbers.
Do I have to actively choose the old regime, or is it automatic?
The new regime is the default as of now — if you want the old regime, you must actively opt for it when filing your return or submitting investment declarations to your employer.
Tax slabs, rebate thresholds and deduction limits are set by the Union Budget and can change every year. This article covers FY 2026-27 (AY 2027-28) figures — always verify the current-year slabs on the official Income Tax Department website (incometax.gov.in) before filing, and this is not a substitute for advice from a qualified CA or tax advisor.