Short answer: For Tax Year 2026-27, the new tax regime is better for most salaried people. If your salary is up to ₹12.75 lakh, you pay zero tax under the new regime. Above that, the old regime only wins if your total deductions (80C, 80D, HRA, home loan interest and so on) are larger than roughly ₹5.4 lakh at a ₹15 lakh salary, ₹6.4 lakh at ₹18 lakh, and ₹8 lakh at ₹25 lakh or more. The salary examples below show exactly where the line falls.
💡 Rules last checked: September 2026. All figures are for Tax Year 2026-27 (1 April 2026 – 31 March 2027) for resident individuals below 60 years, including 4% cess. Tax rules change with every Budget — always confirm with the Income Tax Department or a chartered accountant before you file.
Key takeaways
- Slabs didn’t change in Budget 2026. The Budget 2025 slabs continue for Tax Year 2026-27 in both regimes.
- Up to ₹12.75 lakh salary = zero tax in the new regime (₹75,000 standard deduction + rebate up to ₹12 lakh taxable income).
- The old regime needs big deductions to win — ₹5.4 lakh to ₹8 lakh, depending on your salary. Most people with only 80C and health insurance are better off in the new regime.
- New for 2026-27: a new Income-tax Act has replaced the 1961 Act, “Tax Year” replaces FY/AY, and Bengaluru, Hyderabad, Pune and Ahmedabad now get the higher 50% HRA limit.
- Salaried people can switch regimes every year when filing their return.
What’s new for Tax Year 2026-27
- New law, same money. The Income-tax Act, 2025 took effect on 1 April 2026. Section numbers changed — for example, the familiar Section 80C is now Section 123 — but the limits are the same. You’ll still see the old names (80C, 80D, HRA) used everywhere, including in this guide.
- “Tax Year” replaces FY and AY. What used to be “FY 2026-27 / AY 2027-28” is now simply Tax Year 2026-27.
- No slab changes. Budget 2026 kept the slabs, rebate and standard deduction exactly as they were.
- HRA: 8 metro cities now. Under the Income-tax Rules, 2026, Bengaluru, Hyderabad, Pune and Ahmedabad join Delhi, Mumbai, Kolkata and Chennai at the 50%-of-salary HRA limit (other cities: 40%). This only matters in the old regime.
- The new regime is still the default. If you want the old regime, you have to choose it.
Income tax slabs 2026-27: new vs old regime
| New regime — taxable income | Rate | Old regime — taxable income | Rate |
|---|---|---|---|
| Up to ₹4 lakh | Nil | Up to ₹2.5 lakh | Nil |
| ₹4–8 lakh | 5% | ₹2.5–5 lakh | 5% |
| ₹8–12 lakh | 10% | ₹5–10 lakh | 20% |
| ₹12–16 lakh | 15% | Above ₹10 lakh | 30% |
| ₹16–20 lakh | 20% | ||
| ₹20–24 lakh | 25% | ||
| Above ₹24 lakh | 30% | ||
| Standard deduction | ₹75,000 | Standard deduction | ₹50,000 |
| Rebate | Zero tax up to ₹12 lakh taxable | Rebate | Zero tax up to ₹5 lakh taxable |
A 4% health and education cess is added to the tax in both regimes. Just above ₹12 lakh, the new regime gives “marginal relief”, so your tax can never be more than the amount by which your income crosses ₹12 lakh.
Old vs new tax regime: salary examples
This table answers the real question: how much in deductions do I need before the old regime beats the new one? The “deductions needed” column counts everything beyond the standard deduction — 80C, 80D, NPS, HRA exemption, home loan interest and so on.
| Annual salary | Tax in new regime | Old regime tax with no deductions | Deductions needed for old regime to win |
|---|---|---|---|
| ₹8 lakh | ₹0 | ₹65,000 | Never worth it (new = ₹0) |
| ₹10 lakh | ₹0 | ₹1,06,600 | Never worth it (new = ₹0) |
| ₹12.75 lakh | ₹0 | ₹1,87,200 | Never worth it (new = ₹0) |
| ₹15 lakh | ₹97,500 | ₹2,57,400 | ₹5.44 lakh |
| ₹18 lakh | ₹1,50,800 | ₹3,51,000 | ₹6.42 lakh |
| ₹20 lakh | ₹1,92,400 | ₹4,13,400 | ₹7.09 lakh |
| ₹25 lakh | ₹3,19,800 | ₹5,69,400 | ₹8 lakh |
| ₹30 lakh | ₹4,75,800 | ₹7,25,400 | ₹8 lakh |
| ₹50 lakh | ₹10,99,800 | ₹13,49,400 | ₹8 lakh |
Tax includes 4% cess; surcharge (above ₹50 lakh income) not included. Up to ₹12.75 lakh the old regime could match the new regime’s zero tax only with ₹2.5–7.25 lakh of deductions, which is unrealistic at those salaries.
Notice the pattern: from ₹25 lakh upwards, the break-even stays at about ₹8 lakh of deductions, because both regimes charge 30% at the top.
Four real-life examples
Sneha — ₹12 lakh salary, fresher in Chennai
Sneha invests ₹1.5 lakh under 80C, pays ₹25,000 for health insurance and puts ₹50,000 into NPS. In the old regime she’d still pay ₹1,01,400. In the new regime she pays ₹0. New regime wins by ₹1,01,400.
Priya — ₹18 lakh, renting in Bengaluru
Priya’s basic salary is ₹7.2 lakh, her HRA is ₹3.6 lakh, and she pays ₹35,000 a month in rent. Because Bengaluru now gets the 50% HRA limit, her HRA exemption rises to ₹3,48,000 (it would have been ₹2,88,000 under last year’s 40% rule). With 80C (₹1.5 lakh), 80D (₹25,000) and NPS (₹50,000), her total deductions are ₹5.73 lakh.
- Old regime tax: ₹1,72,224
- New regime tax: ₹1,50,800
New regime still wins by ₹21,424 — she’s about ₹70,000 of deductions short of the ₹6.42 lakh break-even.
Rahul — ₹18 lakh, owns a flat in Pune with a home loan
Rahul claims 80C (₹1.5 lakh, including loan principal and EPF), 80D for himself and his senior-citizen parents (₹75,000), NPS (₹50,000) and home loan interest (₹2 lakh). That’s ₹4.75 lakh of deductions.
- Old regime tax: ₹2,02,800
- New regime tax: ₹1,50,800
New regime wins by ₹52,000. A home loan alone is often not enough to make the old regime worthwhile.
Arjun — ₹30 lakh, renting in Mumbai with a home loan on a flat in Pune
Arjun pays ₹50,000 a month rent in Mumbai (HRA exemption ₹4.8 lakh) and has a home loan on a flat in another city (₹2 lakh interest). You can claim both when your own home is in a different city from where you work. Add 80C (₹1.5 lakh), 80D (₹75,000) and NPS (₹50,000): ₹9.55 lakh of deductions.
- Old regime tax: ₹4,27,440
- New regime tax: ₹4,75,800
Old regime wins by ₹48,360. This is the typical old-regime winner: high salary, high rent in a metro, plus a home loan.
Which deductions work in which regime
| Deduction / exemption | Old regime | New regime |
|---|---|---|
| Standard deduction (salaried) | ₹50,000 | ₹75,000 |
| 80C — EPF, PPF, ELSS, life insurance, tuition fees, home loan principal | Up to ₹1.5 lakh | ✗ |
| 80D — health insurance | ₹25,000 (self/family) + up to ₹50,000 for senior-citizen parents | ✗ |
| 80CCD(1B) — your own extra NPS contribution | Up to ₹50,000 | ✗ |
| 80CCD(2) — employer’s NPS contribution | Up to 10% of basic + DA (14% for government employees) | Up to 14% of basic + DA |
| HRA exemption | ✓ (50% of salary in 8 metros, 40% elsewhere) | ✗ |
| Home loan interest — self-occupied house | Up to ₹2 lakh | ✗ |
| 80E — education loan interest | ✓ (no upper limit) | ✗ |
The employer NPS deduction is the one big tax-saver that works in both regimes — and it’s worth more in the new one.
Free checklist: choose your regime in 3 steps
- Is your salary ₹12.75 lakh or less? Choose the new regime. You pay zero tax — stop here.
- Add up your real deductions (only money you actually spend or invest): 80C + 80D + NPS 80CCD(1B) + HRA exemption + home loan interest + any other old-regime deductions.
- Compare with the salary table above. If your total is higher than the “deductions needed” figure for your salary, the old regime saves you money. If it’s lower, choose the new regime.
Don’t invest in something just to claim a deduction. A ₹1.5 lakh ELSS or insurance policy bought only for tax can cost you more than the tax it saves.
Can you switch between regimes?
- Salaried, no business income: yes, every year. You choose when you file your income tax return, even if you told your employer something different at the start of the year.
- With business or professional income (including many freelancers): you can move from the new regime to the old one, but you can switch back to the new regime only once in your lifetime. If you freelance, see our guide to freelancing in India for the tax basics.
- Tell your employer early. Your employer deducts TDS based on the regime you declare. Declaring the right one avoids a big tax bill or a long wait for a refund.
Tax-saving moves that still matter in 2026-27
- Ask for employer NPS in your salary structure. Up to 14% of basic + DA is tax-free in the new regime.
- Buy health insurance for cover, not the deduction. In the old regime it also saves tax; in either regime it protects your savings.
- Harvest equity gains. Long-term gains on shares and equity funds are tax-free up to ₹1.25 lakh a year (12.5% above that). Booking gains up to that limit each year, then reinvesting, can cut future tax in both regimes.
- Negotiate the salary, not just the tax. A raise beats any deduction — see which roles pay the most in our guide to the highest paying jobs in India, and keep your spending in check with these money rules to beat lifestyle inflation.
Frequently Asked Questions
Is the new tax regime better than the old one in 2026-27?
For most salaried people, yes. If you earn up to ₹12.75 lakh, the new regime means zero tax. Above that, the old regime is better only if your deductions exceed about ₹5.4 lakh (at ₹15 lakh salary) to ₹8 lakh (at ₹25 lakh and above).
Did the tax slabs change in Budget 2026?
No. Budget 2026 kept the slabs, the ₹75,000 standard deduction and the rebate up to ₹12 lakh unchanged. The main changes were the new Income-tax Act, 2025 (new section numbers, “Tax Year”) and the wider 50% HRA limit for eight cities.
Is 80C still available in 2026-27?
Yes, in the old regime only. It is now Section 123 of the Income-tax Act, 2025, with the same ₹1.5 lakh limit and the same eligible investments. It is not available in the new regime.
What is the break-even deduction between the old and new regime?
It depends on your salary: about ₹5.44 lakh at ₹15 lakh, ₹6.42 lakh at ₹18 lakh, ₹7.09 lakh at ₹20 lakh, and ₹8 lakh at ₹25 lakh or more. Below ₹12.75 lakh, the new regime always wins because it charges zero tax.
Can I claim HRA in the new tax regime?
No. HRA exemption, home loan interest on a self-occupied house, 80C and 80D are only available in the old regime. The employer’s NPS contribution is the main deduction allowed in the new regime.
Sources: Income Tax Department; Budget 2026 coverage; Income-tax Rules, 2026 (HRA). This guide is for education only — see our Disclaimer. For your exact situation, consult a chartered accountant.
