Old vs New Tax Regime for FY 2026-27: How to Choose in 10 Minutes

Every April, the same question comes from HR: “Please declare your tax regime.” And every April, many people pick one in a hurry and regret it in February when the TDS jumps.

This year there is extra confusion, because the new Income-tax Act, 2025 has replaced the 1961 law from 1 April 2026. The good news: section numbers changed, but the slabs did not. Let me make the choice simple. Everything below is as of October 2026.

📋 The Two Regimes at a Glance

New regime (default)

• Slabs: nil up to ₹4 lakh; 5% for ₹4–8 lakh; 10% for ₹8–12 lakh; 15% for ₹12–16 lakh; 20% for ₹16–20 lakh; 25% for ₹20–24 lakh; 30% above ₹24 lakh.
• Standard deduction of ₹75,000 for salaried people.
• Rebate makes taxable income up to ₹12 lakh effectively tax-free. For salaried people, that means up to ₹12.75 lakh of salary.
• Very few deductions — but employer NPS contribution (up to 14% of basic + DA) is still allowed.

Old regime (you must opt for it)

• Slabs (below 60): nil up to ₹2.5 lakh; 5% for ₹2.5–5 lakh; 20% for ₹5–10 lakh; 30% above ₹10 lakh.
• Standard deduction of ₹50,000; rebate up to ₹5 lakh taxable income.
• Allows the familiar deductions: ₹1.5 lakh for PPF/EPF/ELSS/insurance/principal, HRA, home loan interest up to ₹2 lakh, health insurance, the extra ₹50,000 NPS deduction and more.

A 4% cess applies in both.

🏙️ Good News on HRA

Under the new Income-tax Rules, 2026, Bengaluru, Hyderabad, Pune and Ahmedabad have joined Delhi, Mumbai, Kolkata and Chennai in the 50%-of-salary HRA category from FY 2026-27. If you rent in one of these cities and use the old regime, your HRA exemption may be higher. Check it with my HRA Calculator.

🧮 The Break-Even Test

The old regime wins only when your deductions (beyond the standard deduction) are large enough. My rough calculations for FY 2026-27:

• Salary up to ₹12.75 lakh: new regime — zero tax. Easy choice.
• Salary ₹15 lakh: new regime tax is about ₹97,500. The old regime wins only if your deductions total roughly ₹5.45 lakh or more.
• Salary ₹20 lakh: break-even is about ₹7.1 lakh of deductions.
• Salary ₹25 lakh: break-even is about ₹8 lakh of deductions.

Example: a person at ₹15 lakh with ₹1.5 lakh in 80C-type savings, ₹2 lakh home loan interest and ₹25,000 health insurance has ₹3.75 lakh of deductions. Old regime tax ≈ ₹1.40 lakh — so the new regime still wins. Add a big HRA claim, and the answer may flip.

Don’t guess — put your own numbers into my free Income Tax Calculator. It shows both regimes side by side.

“Choose your tax regime with a calculator, not with a colleague’s opinion.”

🔍 Quick Decision Guide

• Fresher or no big deductions → new regime.
• Paying high rent in a metro + home loan + full ₹1.5 lakh savings → calculate; old regime may win.
• Home loan on a self-occupied house → the ₹2 lakh interest deduction exists only in the old regime.
• Employer offers NPS → useful in both regimes; ask HR to restructure if possible.

🔁 Can You Switch?

Salaried people can choose afresh every year while filing the return, even if they told the employer something else for TDS. People with business income have much stricter limits on switching back and forth.

One honest warning: don’t invest in something just to save tax. Choose good investments first; tax saving is a bonus.

✅ The Takeaway

For most salaried people today, the new regime is simpler and often cheaper. The old regime still makes sense for those with high rent, a home loan and full use of deductions. Spend ten minutes with a calculator in April — it can save you thousands by March. If your salary structure confuses you, start with CTC vs In-Hand Salary.

Figures are approximate and for resident individuals below 60, as of October 2026. This is general information, not tax or financial advice — please consult a qualified tax professional.