Old vs new tax regime: which is better for you?
Rules for FY 2026-27 · Checked 24 October 2026
For most salaried people the new regime costs less in FY 2026-27. Up to ₹12.75 lakh of salary it costs nothing at all. The old regime only wins if your deductions apart from the standard deduction come to more than about ₹5.5 lakh at ₹15 lakh salary, ₹7 lakh at ₹20 lakh, or ₹8 lakh at ₹25 lakh and above.
The two regimes side by side
| New regime | Old regime | |
|---|---|---|
| Tax-free income | Up to ₹4 lakh | Up to ₹2.5 lakh (₹3 lakh at 60+, ₹5 lakh at 80+) |
| Highest rate | 30% above ₹24 lakh | 30% above ₹10 lakh |
| Standard deduction | ₹75,000 | ₹50,000 |
| Rebate | No tax up to ₹12 lakh taxable | No tax up to ₹5 lakh taxable |
| HRA, 80C, 80D, home loan interest | Not allowed | Allowed |
| Default? | Yes | Only if you choose it |
The new regime trades deductions for lower rates. So the question is simple: are your deductions big enough to make up for the old regime’s higher rates?
Three worked examples
All three are salaried, under 60, paying ₹2,400 professional tax, for FY 2026-27.
| Person | Deductions (old regime) | New regime tax | Old regime tax | Better |
|---|---|---|---|---|
| ₹14 lakh salary | 80C ₹1.5 lakh, 80D ₹25,000 | ₹81,900 | ₹1,70,850 | New, by ₹88,950 |
| ₹18 lakh salary | HRA ₹2.4 lakh, 80C ₹1.5 lakh, 80D ₹25,000, NPS ₹50,000 | ₹1,50,800 | ₹2,05,170 | New, by ₹54,370 |
| ₹25 lakh salary | HRA ₹3.6 lakh, 80C ₹1.5 lakh, 80D ₹50,000, NPS ₹50,000, home loan interest ₹2 lakh | ₹3,19,800 | ₹3,15,930 | Old, by ₹3,870 |
Even with ₹8 lakh of deductions, the third person saves less than ₹4,000 in the old regime. Most people with typical investments are better off in the new one.
The break-even point
This is how much you must deduct, apart from the standard deduction, before the old regime costs no more than the new one:
| Salary | Deductions the old regime needs to match the new |
|---|---|
| Up to ₹12.75 lakh | Never: the new regime tax is zero |
| ₹15 lakh | ₹5.44 lakh |
| ₹18 lakh | ₹6.42 lakh |
| ₹20 lakh | ₹7.09 lakh |
| ₹25 lakh and above | ₹8 lakh |
Count HRA exemption, 80C (including your PF), 80D, NPS under 80CCD(1B), home loan interest and professional tax. Do not count the standard deduction.
Try it with your numbers
What you still get in the new regime
- The ₹75,000 standard deduction for salary and pension.
- Employer’s NPS contribution under 80CCD(2), up to 14% of basic and DA.
- Interest on a home loan for a let-out property, set against the rent you receive.
- Tax-free items such as PPF and Sukanya Samriddhi interest, EPF withdrawals after 5 years and gratuity up to ₹20 lakh.
How to choose with your employer
At the start of the year your employer asks which regime you want, so it can deduct the right TDS. If you say nothing, it uses the new regime. Salaried people can still change their mind when filing the return, so the choice you give your employer is not final.
People with business or professional income can move from the new regime to the old one only once in their lifetime.
Frequently asked questions
Is the new tax regime compulsory?
No. It is the default, but you can choose the old regime each year if you are salaried.
Can I claim 80C in the new regime?
No. 80C, 80D, HRA and home loan interest on a self-occupied home are all old-regime-only.
Which regime is better for ₹10 lakh salary?
The new regime: your tax is zero, because taxable income after the ₹75,000 standard deduction is below ₹12 lakh.
Sources: Income Tax Department