India runs two personal tax systems side by side. The new regime is the default and has wider slabs with lower rates but virtually no deductions. The old regime taxes more heavily but lets you claim 80C, 80D, HRA, home loan interest and the rest. Picking wrong costs most salaried taxpayers between ₹20,000 and ₹80,000 a year.
The slabs for FY 2026-27
Budget 2026 left the new regime slabs unchanged: nil up to ₹4 lakh, 5% to ₹8 lakh, 10% to ₹12 lakh, 15% to ₹16 lakh, 20% to ₹20 lakh, 25% to ₹24 lakh, and 30% above that. The standard deduction is ₹75,000 for salaried taxpayers, and a Section 87A rebate of ₹60,000 makes taxable income up to ₹12 lakh effectively tax free — ₹12.75 lakh of gross salary once the standard deduction is applied.
The old regime is unchanged too: nil to ₹2.5 lakh, 5% to ₹5 lakh, 20% to ₹10 lakh and 30% above, with a ₹50,000 standard deduction and an 87A rebate up to ₹5 lakh of taxable income.
The break-even rule
Total your deductions — 80C, 80D, the NPS ₹50,000 under 80CCD(1B), HRA exemption and home loan interest. If the total is below roughly ₹3.5 to ₹4 lakh, the new regime almost always wins. Above it, the old regime usually does. The exact crossover moves with income, which is why the income tax calculator computes both on your actual numbers rather than relying on the rule.
Worked examples
₹12 lakh salary, few deductions. New regime: taxable ₹11.25 lakh after the standard deduction, tax nil after the 87A rebate. Old regime with ₹1.5 lakh of 80C: taxable ₹10 lakh, tax around ₹1.17 lakh. The new regime wins decisively.
₹15 lakh salary, ₹2.25 lakh of deductions. New regime: ₹97,500. Old regime: about ₹1.87 lakh. New regime still wins by roughly ₹90,000.
₹20 lakh salary, renting in a metro with a home loan. With ₹1.5 lakh of 80C, ₹50,000 of NPS, ₹25,000 of 80D, ₹3 lakh of HRA exemption and ₹2 lakh of home loan interest, total deductions reach ₹7.25 lakh and the old regime pulls ahead. This is the classic old-regime profile.
Who still belongs in the old regime
- Renters in metro cities with a large HRA component — the exemption alone can exceed ₹3 lakh
- Borrowers with a home loan on a self-occupied property claiming the full ₹2 lakh under Section 24(b)
- Anyone with large 80D premiums for parents, particularly senior citizens
- Those repaying an education loan, where the entire interest is deductible under 80E with no cap
What survives in the new regime
Not much, but two matter. The ₹75,000 standard deduction applies automatically to salaried taxpayers. And the employer's NPS contribution under Section 80CCD(2) — up to 14% of salary — remains deductible in the new regime, which makes it one of the few remaining structuring opportunities. Ask your employer whether they support it.
Switching between regimes
Salaried taxpayers choose afresh every financial year when filing, regardless of what they declared to their employer for TDS purposes. Taxpayers with business or professional income can move from the new regime to the old only once, and cannot go back.
Frequently asked questions
If your total deductions are below about ₹3.5 to ₹4 lakh, the new regime almost always leaves you with more. Above that, the old regime usually wins. Run both on your exact figures before deciding.
Under the new regime, yes. The Section 87A rebate of ₹60,000 removes the tax on taxable income up to ₹12 lakh, and the ₹75,000 standard deduction lifts the effective threshold to ₹12.75 lakh of gross salary.
Salaried taxpayers can choose again each year at filing. Those with business or professional income may switch from new to old only once, with no return.
Not for a self-occupied property — neither interest nor principal is deductible. Interest on a let-out property can still be set off against the rental income.