Every salaried person in India has to make the same choice each year: stay in the new tax regime (lower rates, almost no deductions) or switch to the old regime (higher rates, but you can claim 80C, 80D, HRA, home-loan interest and more). This guide shows the numbers so you can decide in a couple of minutes.
Quick answer: if your salary is up to about ₹12.75 lakh, the new regime means zero tax, so it wins. Above that, the old regime only wins if your deductions (not counting the standard deduction) are larger than roughly ₹5.4 lakh at a ₹15 lakh salary, ₹7.1 lakh at ₹20 lakh, and ₹8 lakh at ₹25 lakh or more.
Try the calculatorIncome Tax Calculator India (FY 2026-27)New vs old regime tax→The tax slabs for FY 2026-27
Budget 2026 did not change the slabs, so the rates introduced in Budget 2025 continue for FY 2026-27 (AY 2027-28).
| Taxable income | New regime | Old regime (below 60) |
|---|---|---|
| Up to ₹2.5 lakh | Nil | Nil |
| ₹2.5 – 4 lakh | Nil | 5% |
| ₹4 – 5 lakh | 5% | 5% |
| ₹5 – 8 lakh | 5% | 20% |
| ₹8 – 10 lakh | 10% | 20% |
| ₹10 – 12 lakh | 10% | 30% |
| ₹12 – 16 lakh | 15% | 30% |
| ₹16 – 20 lakh | 20% | 30% |
| ₹20 – 24 lakh | 25% | 30% |
| Above ₹24 lakh | 30% | 30% |
Other key differences:
- Standard deduction: ₹75,000 in the new regime, ₹50,000 in the old regime (for salary and pension).
- Section 87A rebate: in the new regime, tax is nil if taxable income is up to ₹12 lakh (with marginal relief just above). In the old regime the rebate only covers taxable income up to ₹5 lakh.
- 4% health and education cess applies in both, plus surcharge above ₹50 lakh (capped at 25% in the new regime).
- The new regime is the default. If you do nothing, your employer deducts tax under it.
What you give up in the new regime
The new regime removes most popular deductions, including 80C (PF, PPF, ELSS, life insurance, tuition fees, home-loan principal), 80D health insurance, HRA exemption, LTA, home-loan interest on a self-occupied home (Section 24b) and 80E/80G. You still keep the standard deduction and your employer's NPS contribution under 80CCD(2).
Worked examples
Here is the tax for a salaried person under 60 with "typical" old-regime deductions — ₹1.5 lakh under 80C and ₹25,000 under 80D — and nothing else. All figures include cess.
| Annual salary | New regime tax | Old regime tax | Better choice |
|---|---|---|---|
| ₹10 lakh | ₹0 | ₹70,200 | New |
| ₹12.75 lakh | ₹0 | ₹1,32,600 | New |
| ₹15 lakh | ₹97,500 | ₹2,02,800 | New |
| ₹20 lakh | ₹1,92,400 | ₹3,58,800 | New |
| ₹25 lakh | ₹3,19,800 | ₹5,14,800 | New |
| ₹30 lakh | ₹4,75,800 | ₹6,70,800 | New |
With only 80C and 80D, the new regime is clearly better at every salary level. The old regime needs a lot more deductions to catch up.
The break-even point: how many deductions do you need?
This table shows the total deductions (80C + 80D + HRA exemption + home-loan interest + NPS + others, excluding the standard deduction) at which both regimes cost the same. If your deductions are higher than this, the old regime saves you money.
| Annual salary | Old regime wins if deductions exceed |
|---|---|
| Up to ₹12.75 lakh | Never (new regime tax is already zero) |
| ₹15 lakh | about ₹5.44 lakh |
| ₹20 lakh | about ₹7.08 lakh |
| ₹25 lakh and above | about ₹8.00 lakh |
Reaching ₹8 lakh usually needs a large HRA exemption in a metro plus home-loan interest — for example ₹1.5 lakh (80C) + ₹50,000 (80D for self and parents) + ₹50,000 (NPS 80CCD(1B)) + ₹2 lakh (home-loan interest) + ₹3.5 lakh HRA exemption.
Try the calculatorHRA Exemption CalculatorTax-free part of your HRA→Who should still choose the old regime?
- You pay high rent in a metro and get a big HRA exemption, and
- You have a home loan on a self-occupied house (up to ₹2 lakh interest deduction), and
- You already max out 80C, 80D and NPS.
If you tick all three and your salary is above ₹15 lakh, run your own numbers in the income tax calculator — the old regime may still win.
How to choose and switch
- Tell your employer at the start of the year (when they ask for your investment declaration) so the right amount of TDS is deducted each month.
- Your final choice is made when you file your return. Salaried people without business income can pick either regime every year, even if it differs from what they told their employer.
- If you have business or professional income, the rules for switching are stricter — check the current rules before changing.
- From 1 April 2026 the new Income-tax Act, 2025 replaces the 1961 Act. It mainly simplifies wording and renumbers sections; the slab rates above stay the same for FY 2026-27.
Bottom line
For most people the new regime is simpler and cheaper. The old regime only makes sense if your deductions are very large. Two minutes with the income tax calculator — or the salary calculator to see your monthly in-hand pay — will tell you for sure.
This article is general information, not personal financial, tax or legal advice. Rules and rates change — check the latest figures with an official source or a qualified adviser. Read our disclaimer.