Key takeaways
- Budget 2026 left both regimes unchanged for Tax Year 2026-27 (April 2026 – March 2027).
- The new regime is the default. Salary up to ₹12.75 lakh is tax-free under it (₹12 lakh rebate limit + ₹75,000 standard deduction).
- The old regime only wins if your deductions are large — roughly ₹5.4 lakh at a ₹15 lakh salary and ₹8 lakh at ₹25 lakh and above.
- Salaried people can switch every year. Anyone with business income can move between regimes only once.
The slabs for Tax Year 2026-27
Budget 2026 made no change to rates or slabs under either regime, so the structure introduced in Budget 2025 continues.
New regime (default)
| Taxable income | Rate |
|---|---|
| Up to ₹4 lakh | Nil |
| ₹4 – 8 lakh | 5% |
| ₹8 – 12 lakh | 10% |
| ₹12 – 16 lakh | 15% |
| ₹16 – 20 lakh | 20% |
| ₹20 – 24 lakh | 25% |
| Above ₹24 lakh | 30% |
A rebate makes tax nil if taxable income is up to ₹12 lakh, with marginal relief just above that. Salaried taxpayers also get a ₹75,000 standard deduction, which is why a salary of ₹12.75 lakh pays no tax. The rebate does not cover income taxed at special rates, such as capital gains on shares.
Old regime
| Taxable income | Rate |
|---|---|
| Up to ₹2.5 lakh | Nil |
| ₹2.5 – 5 lakh | 5% |
| ₹5 – 10 lakh | 20% |
| Above ₹10 lakh | 30% |
The basic exemption is ₹3 lakh for resident senior citizens (60+) and ₹5 lakh for super senior citizens (80+). The rebate makes tax nil up to ₹5 lakh, and the standard deduction for salary is ₹50,000. In exchange for higher rates, the old regime keeps the familiar deductions: HRA, interest on a home loan (up to ₹2 lakh for a self-occupied house), and investments under the old Section 80C (PPF, EPF, ELSS, home-loan principal, children's tuition fees — up to ₹1.5 lakh).
Under both regimes, 4% health and education cess is added to the tax.
The break-even: how much in deductions do you need?
We worked out, for a salaried individual, how much you would have to claim in deductions beyond the old regime's ₹50,000 standard deduction before the old regime produces a lower tax bill.
| Gross salary | Tax under new regime | Old regime wins only if deductions exceed |
|---|---|---|
| ₹10 lakh | Nil | ₹4.5 lakh |
| ₹12.75 lakh | Nil | ₹7.25 lakh |
| ₹15 lakh | ₹97,500 | ₹5.44 lakh |
| ₹20 lakh | ₹1,92,400 | ₹7.08 lakh |
| ₹25 lakh | ₹3,19,800 | ₹8.0 lakh |
| ₹30 lakh | ₹4,75,800 | ₹8.0 lakh |
Figures include 4% cess and ignore surcharge (which starts above ₹50 lakh). Above about ₹24 lakh the break-even settles at ₹8 lakh, because from there every extra rupee is taxed at 30% under both regimes.
What this means in practice: ₹1.5 lakh under 80C plus ₹2 lakh of home-loan interest is ₹3.5 lakh — well short of the break-even at any salary. The old regime usually only makes sense if you also have a large HRA exemption (high rent in a metro) and a home loan, or other sizeable deductions.
Who should still look at the old regime
- Metro tenants with a high HRA component who also pay home-loan interest on a different property.
- Senior citizens with large eligible deductions and modest income.
- Taxpayers with large losses or deductions that the new regime doesn't allow to be set off.
For most people — especially anyone with income above ₹12.75 lakh and few deductions — the new regime is simpler and cheaper.
Can you switch?
- Salaried individuals (no business income): you can choose afresh every year, when you file your return. Tell your employer your choice at the start of the year so TDS is right, but you can still change it in the return.
- Business or professional income: the new regime applies unless you opt out by filing the prescribed form before the return due date. If you opt out, you can come back to the new regime only once — and after coming back, you can't leave it again.
How we help
We run both computations on your actual numbers — salary structure, rent, loans, capital gains and business income — before you commit, and we restructure salary components where the employer allows it. For directors of private companies, the bigger savings usually come from how and when you draw income from the company: see our guide on how company directors can legally reduce tax.