Old vs New Tax Regime FY 2026-27 — Which Saves More? (Updated for Income Tax Act 2025 + ₹12L Rebate)
Last verified: May 2026, against the Income Tax Act, 2025 (effective 1 April 2026), the Income Tax Rules, 2026, and the Union Budget 2026 announcements. Always verify your specific case with a CA or the official Income Tax e-filing portal.
The 30-second answer
Budget 2026 (presented 1 February 2026) made no changes to income-tax slabs for FY 2026-27. The blockbuster ₹12 lakh tax-free threshold under the new regime — introduced in Budget 2025 — continues. So the regime-choice math for FY 2026-27 looks almost identical to FY 2025-26, with one big caveat: the entire Income-tax Act, 1961 has been replaced by the Income Tax Act, 2025, which came into force on 1 April 2026.
Practically, for choosing between regimes:
- Salaried, taxable income ≤ ₹12.75 lakh: New regime wins by a wide margin (zero tax). Stop reading. Pick new.
- Taxable income ₹12.75–18 lakh, with ₹3–4 lakh of legitimate deductions: Run the numbers — both regimes are competitive.
- Taxable income above ₹18 lakh and you actively use ₹4 lakh+ of deductions (80C maxed, NPS, home-loan interest, big HRA): Old regime usually wins.
- No deductions, any income: New regime always wins.
The interactive calculator below does the comparison for you in seconds.
What changed in Budget 2026?
The slabs themselves are unchanged from FY 2025-26, but several procedural and structural changes take effect from 1 April 2026:
- Income Tax Act, 2025 + Income Tax Rules, 2026 replace the 1961 Act and 1962 Rules. The new Act re-organises the law, but core charge sections, slabs, and rebates carry over.
- Revised return window extended: From 9 months to 12 months from the end of the relevant tax year. So a revised ITR for FY 2026-27 can now be filed up to 31 March 2028 (with applicable fee).
- ITR-3 / ITR-4 deadline shifted to 31 August for non-audit cases (was 31 July).
- STT hiked on derivatives: Futures STT 0.02% → 0.05% on sell side; Options STT 0.10% → 0.15% on sell side. This affects F&O traders only.
- TCS on LRS for education and medical remittances: Reduced from 5% to 2%.
- Section 87A rebate remains at ₹60,000 for new regime (zero tax up to ₹12 lakh taxable income); ₹12,500 for old regime (zero tax up to ₹5 lakh).
FY 2026-27 new regime slabs (with ₹12 L rebate)
These apply to the default tax regime under Section 202 of the Income Tax Act, 2025 (formerly Section 115BAC). They are identical to FY 2025-26.
| Income slab (₹) | Tax rate |
|---|---|
| 0 – 4,00,000 | Nil |
| 4,00,001 – 8,00,000 | 5% |
| 8,00,001 – 12,00,000 | 10% |
| 12,00,001 – 16,00,000 | 15% |
| 16,00,001 – 20,00,000 | 20% |
| 20,00,001 – 24,00,000 | 25% |
| Above 24,00,000 | 30% |
Plus:
- Standard deduction: ₹75,000 for salaried & pensioners.
- Section 87A rebate: Full tax rebate of up to ₹60,000 if total taxable income ≤ ₹12 lakh. For salaried taxpayers, after the ₹75,000 standard deduction, gross salary up to ₹12.75 lakh attracts zero tax.
- Health & Education Cess: 4% on (income tax + surcharge).
- Surcharge: 10% above ₹50 lakh, 15% above ₹1 crore, 25% above ₹2 crore. The 37% bracket (₹5 crore+) does not apply under the new regime — surcharge is capped at 25%.
- Marginal relief applies just above ₹12 lakh (so the rebate doesn’t create a tax cliff) and at each surcharge threshold.
- No other deductions allowed: 80C, 80D, HRA, LTA, home-loan interest on self-occupied, etc. are all disallowed under the new regime.
FY 2026-27 old regime slabs (unchanged)
The old regime is now opt-in — you must explicitly elect it (Form 10-IEA for business/professional income, or by selection in your ITR for salaried taxpayers).
| Age | Slab (₹) | Tax rate |
|---|---|---|
| Below 60 | 0 – 2,50,000 | Nil |
| 2,50,001 – 5,00,000 | 5% | |
| 5,00,001 – 10,00,000 | 20% | |
| Above 10,00,000 | 30% | |
| 60 – 79 (Senior) | 0 – 3,00,000 | Nil |
| 3,00,001 – 5,00,000 | 5% | |
| 5,00,001 – 10,00,000 | 20% | |
| Above 10,00,000 | 30% | |
| 80+ (Super senior) | 0 – 5,00,000 | Nil |
| 5,00,001 – 10,00,000 | 20% | |
| Above 10,00,000 | 30% |
Plus the things the old regime keeps that the new one disallows:
- Standard deduction: ₹50,000 for salaried & pensioners.
- Section 87A rebate: ₹12,500 if total taxable income ≤ ₹5 lakh (zero tax up to ₹5 lakh).
- Section 80C: Up to ₹1.5 lakh (PPF, ELSS, EPF, life insurance premium, principal of home loan, tuition fees, NSC, tax-saving FDs).
- Section 80CCD(1B): Additional ₹50,000 for NPS contributions.
- Section 80D: Health insurance premium — ₹25,000 (self & family below 60), ₹50,000 (parents above 60), ₹50,000 (self above 60). Max combined ₹1 lakh.
- HRA exemption: Lower of (i) actual HRA, (ii) 50% of basic (metros) or 40% (non-metros), (iii) actual rent paid – 10% of basic.
- Section 24(b): Home-loan interest up to ₹2 lakh on self-occupied property; no cap on let-out.
- Other: LTA, education loan interest (80E, no cap), donations (80G), preventive health check-up (₹5,000 within 80D), savings-account interest (80TTA — ₹10,000), and many more.
- Surcharge: 10% / 15% / 25% / 37% above ₹50L / ₹1Cr / ₹2Cr / ₹5Cr respectively. The 37% rate still applies under the old regime.
- Cess: 4% on (tax + surcharge).
Side-by-side calculator (paste your numbers)
The widget below uses the same engine that powers our full Income Tax Calculator — feed it your numbers and see both regimes calculated in real time, including standard deduction, surcharge, cess, and the ₹12-lakh rebate logic.
Old vs New Regime — Side-by-Side Tax Calculator
Plug in your income and deductions. See exactly which regime saves you more for FY 2026-27 (AY 2027-28), with surcharge, cess, and the ₹12 lakh rebate built in.
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Worked examples — six income levels (FY 2026-27)
Each example below assumes a salaried taxpayer below 60. “Old regime” assumes you actually use the deductions claimed.
| Gross salary (₹/year) | Old regime tax (with ₹2L deductions) |
Old regime tax (with ₹4L deductions) |
New regime tax | Better regime |
|---|---|---|---|---|
| 7,00,000 | ₹0 (87A) | ₹0 (87A) | ₹0 | Tie — pick new (less paperwork) |
| 10,00,000 | ₹65,000 | ₹23,400 | ₹0 | New (saves up to ₹65,000) |
| 12,75,000 | ₹1,24,800 | ₹80,600 | ₹0 | New (saves up to ₹1,24,800) |
| 15,00,000 | ₹1,95,000 | ₹1,32,600 | ₹97,500 | New (saves at least ₹35,100) |
| 20,00,000 | ₹3,51,000 | ₹2,88,600 | ₹1,92,400 | New (saves at least ₹96,200) |
| 30,00,000 | ₹6,63,000 | ₹6,00,600 | ₹4,75,800 | New (saves at least ₹1,24,800) |
Note: Tax figures include 4% cess; surcharge applies above ₹50 lakh. Old-regime taxable income = gross − ₹50,000 standard deduction − stated deductions. New-regime taxable = gross − ₹75,000 standard deduction.
The income breakeven, in one table
For a salaried individual under 60 in FY 2026-27, here’s the level of legitimate deductions you’d need under the old regime to match what the new regime delivers automatically. Below the breakeven, new wins; above it, old wins.
| Gross salary (₹/year) | New regime tax | Old regime needs deductions of ≥ |
|---|---|---|
| 15,00,000 | ₹97,500 | ~ ₹5.0 lakh |
| 18,00,000 | ₹1,50,800 | ~ ₹6.0 lakh |
| 20,00,000 | ₹1,92,400 | ~ ₹7.0 lakh |
| 25,00,000 | ₹3,19,800 | ~ ₹8.0 lakh |
| 30,00,000 and above | — | ~ ₹8.0 lakh (deductions cap out) |
If your honest answer is “I can’t claim more than ₹4 L of deductions” — pick the new regime at any income level and stop optimising.
The five mistakes people make picking a regime
- Counting deductions you don’t actually claim. If you don’t have rent receipts, you don’t have HRA. If your 80C is ₹40,000 of EPF and that’s it, don’t fantasise about ₹1.5 L. Use only what shows up in your Form 16 / 26AS.
- Forgetting surcharge under the old regime. Above ₹5 crore, old regime hits 37% surcharge. New regime caps it at 25% — a meaningful difference for ultra-high earners.
- Switching mid-year for a single big deduction. Salaried can switch every year, but mid-year salary structure changes (Sodexo coupons, NPS contributions via employer) need planning before April.
- Locking in old regime for business income. Form 10-IEA is needed to opt out of new for business/professional income, and you can switch back only once in your lifetime (with a few exceptions).
- Believing “₹12 lakh is tax-free” without context. The ₹12 L rebate is on taxable income, after standard deduction. So salaried up to ₹12.75 L gross are zero-tax. But capital gains, lottery winnings, and some other special-rate incomes do not get the rebate.
How to actually choose: a 3-step process
- List your real deductions. Open last year’s Form 16 / ITR. Add up what you actually claimed. Add anything new (a fresh home loan, parents’ health insurance you started paying for, NPS auto-debit). This is your ceiling — don’t pad.
- Plug both regimes into the calculator above. If new regime saves you anything ≥ ₹0, the choice is obvious. If old regime saves you, check whether the savings are worth the documentation overhead (rent receipts, ELSS lock-in, insurance premiums you’d otherwise not buy).
- Inform your employer in April. Choosing the right regime at the start of the year means correct TDS on salary. Switching later is allowed for salaried (every ITR), but TDS adjustments mid-year are messy.
Linked deep-dives on related topics
- Old vs New Tax Regime FY 2025-26 — the previous year’s comparison (still useful for back-filing).
- Section 80C investments ranked — PPF vs ELSS vs NPS vs tax-saving FD.
- HRA Calculator & Rules — how much HRA is tax-free.
- Take-Home Salary Calculator — CTC to in-hand pay.
- Capital Gains Tax on Stocks & Mutual Funds — STCG vs LTCG.
- SIP Calculator — including step-up SIP.
- Full-featured Income Tax Calculator — all heads of income.
FAQs
Did the slabs change in Budget 2026?
No. Budget 2026 (1 Feb 2026) kept both new- and old-regime slabs unchanged from FY 2025-26. The headline reform was procedural — the Income Tax Act, 2025 replaces the 1961 Act from 1 April 2026.
Is the new regime now mandatory?
The new regime is the default. The old regime is opt-in. Salaried can opt out every assessment year via the ITR. Business / professional income filers must file Form 10-IEA, and can switch back to new only once.
I earn ₹13 lakh as a salaried employee. Is my tax really not zero?
Correct. The ₹12.75 L zero-tax limit applies only when your net taxable income (after the ₹75,000 standard deduction) is ≤ ₹12 lakh. At ₹13 L gross salary, taxable is ₹12.25 L, which exceeds the ₹12 L rebate cap. Tax kicks in on the slab system, with marginal relief moderating the cliff.
Does the rebate apply to capital gains?
No — the ₹60,000 / ₹12,500 Section 87A rebate does not apply to incomes taxed at special rates (LTCG above ₹1.25 L on equities, STCG on equities at 20%, lottery winnings at 30%, etc.). It only applies to “normal slab-rate” income.
What is the HRA in the new regime?
Zero. The new regime disallows HRA exemption entirely. If your HRA component is large, model it carefully — it’s often the deciding factor in regime choice.
Can I claim NPS in the new regime?
Only the employer’s NPS contribution under Section 80CCD(2) is allowed (up to 14% of salary for new regime, vs 10% for old regime — a small advantage for new regime). The self-contribution under 80CCD(1B) of ₹50,000 is not allowed in the new regime.
Are senior citizens better off in the old regime?
Often yes, because the old regime keeps higher basic exemption (₹3 L for seniors, ₹5 L for super seniors) plus 80TTB (₹50,000 of bank interest), and seniors usually have lower income near these thresholds. Always compute both — the new regime’s ₹12 L rebate sometimes still wins.
When is the FY 2026-27 ITR due?
For non-audit individuals (ITR-1, 2, 3, 4), the deadline is 31 July 2027 — but ITR-3 and ITR-4 (non-audit business / professional) have been extended to 31 August 2027 from this year. Audit cases: 31 October 2027. Revised returns: up to 31 March 2028.
Sources & references
- Income Tax Department of India — official portal
- Union Budget 2026 — Ministry of Finance
- Income Tax Act, 2025 (effective 1 April 2026) — Section 202 (default new regime), Section 87A (rebate), First Schedule (slabs).
- Income Tax Rules, 2026 — procedural rules effective from 1 April 2026.
- Finance Act, 2025 + Finance Bill, 2026 amendments.
This article reflects the law as on May 2026. Tax law evolves; please verify before filing your return. Nothing here is personalised tax advice — consult a qualified CA for your situation.
