Income Tax
Old vs New Tax Regime FY 2026-27: Which One Saves You More?
Old vs new tax regime for FY 2026-27 with worked examples at Rs 8L, Rs 15L and Rs 25L salaries — and the deduction threshold where old wins.
Published 2026-07-10 · Last reviewed 2026-10-28 · Part of Tax planning
By Om Patel — investor, blogger and entrepreneur
Quick answer
Old vs new tax regime for FY 2026-27 with worked examples at Rs 8L, Rs 15L and Rs 25L salaries — and the deduction threshold where old wins.
For FY 2026-27, the new regime wins for almost everyone earning under ₹25 lakh. The old regime only wins if you have ₹6 lakh+ in deductions — and most people don't. Let's run the numbers with a real salary.
What changed (Budget 2025), and what didn't (Budget 2026)
Budget 2025 rewrote the maths below. Budget 2026 changed no slabs and no rebates (Source: Budget 2026-27 summaries), so every figure here carries straight into FY 2026-27.
Budget 2025 changed the tax math significantly. The new tax regime (default since FY 2023-24) got three big changes:
- Standard deduction raised to ₹75,000 (was ₹50,000)
- Section 87A rebate raised to ₹60,000 (was ₹12,500)
- New slabs start at ₹4 lakh (not ₹2.5 lakh)
Result: A salaried person earning ₹12.75 lakh pays zero tax under the new regime. No 80C, no 80D, no HRA calculations needed. Just salary minus ₹75,000 standard deduction. The old regime? You still get the deductions, but the slabs are harsh. You pay 5% from ₹2.5 lakh, 20% from ₹5 lakh, 30% from ₹10 lakh. You need massive deductions just to catch up.
Tax Slabs: New vs Old (FY 2026-27 / AY 2027-28)
New Tax Regime
| Taxable Income | Tax Rate |
|---|---|
| Up to ₹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% |
Standard deduction: ₹75,000 Section 87A rebate: Up to ₹60,000 if taxable income ≤ ₹12,00,000 Effective zero-tax ceiling (salaried): ₹12,00,000 + ₹75,000 = ₹12,75,000 Source: PIB Press Release PRID 2098406, Union Budget 2025-26; Section 115BAC Income Tax Act
Old Tax Regime (Below 60 years)
| Taxable Income | Tax Rate |
|---|---|
| Up to ₹2,50,000 | Nil |
| ₹2,50,001 – ₹5,00,000 | 5% |
| ₹5,00,001 – ₹10,00,000 | 20% |
| Above ₹10,00,000 | 30% |
Standard deduction: ₹50,000 Section 87A rebate: Up to ₹12,500 if taxable income ≤ ₹5,00,000 Source: Income Tax Department portal; Section 113 Income Tax Act
Worked Examples
Salary ₹8 lakh, deductions ₹1.2 lakh (typical: EPF + 80D + a small ELSS SIP)
Under the new regime: 8L minus 75K standard deduction = 7.25L taxable. Tax comes to 16,250, but Section 87A wipes that out completely. Net tax: zero. Yes, zero. Under the old regime: 8L minus 1.2L deductions minus 50K standard deduction = 6.3L taxable. Tax: 38,500 plus cess. You pay 40,040. The new regime saves you 40,040. That's roughly a month of rent in most tier-1 cities.
Salary ₹15 lakh, deductions ₹5.29 lakh (including HRA, home loan, 80C, NPS)
New regime: ₹15,00,000 – ₹75,000 = ₹14,25,000 taxable. Tax = ₹93,750. After 4% cess = ₹97,500 Old regime: ₹15,00,000 – ₹5,29,000 – ₹50,000 = ₹9,21,000 taxable. Tax = ₹96,700. After 4% cess = ₹1,00,568 Winner: New regime by ₹3,068 — even with ₹5.29 lakh deductions!
Salary ₹25 lakh, deductions ₹5.25 lakh
New regime: ~₹3,18,500 Old regime: ~₹4,05,600 Winner: New regime by ~₹87,100
When Does the Old Regime Actually Win?
| Gross Salary | Deductions Needed for Old to Win | Realistic? |
|---|---|---|
| Up to ₹12.75L | Impossible | ❌ New always wins |
| ₹13L – ₹15L | ₹6L+ | Only with HRA + home loan + 80C + NPS + senior parents' health |
| ₹16L – ₹20L | ₹7L+ | Very difficult |
| ₹21L – ₹25L | ₹9L+ | Unlikely for most |
| Above ₹25L | ₹10L+ | Possible for high earners with large home loans |
Source: TheSalaryInvestor break-even analysis In plain terms: unless you have a home loan EMI plus HRA plus maxed-out 80C plus senior parents' health insurance plus NPS contributions, the new regime wins.
What You Lose vs What Survives in New Regime
| Deduction | Old Regime | New Regime |
|---|---|---|
| 80C (EPF, PPF, ELSS, insurance, tuition) | ₹1.5L | ❌ |
| 80D (Health insurance) | ₹25K + ₹50K (senior parents) | ❌ |
| 80CCD(1B) (NPS self) | ₹50K | ❌ |
| HRA Exemption | Actual calculation | ❌ |
| Section 24(b) (Home loan interest) | ₹2L | ❌ |
| 80E (Education loan) | No limit | ❌ |
| LTA | Actual cost | ❌ |
| 80TTA (Savings interest) | ₹10K | ❌ |
What survives under the new regime: standard deduction of 75K, employer NPS at 14% of basic (80CCD(2)), gratuity, VRS, leave encashment, family pension, and gifts up to 50K.
Risk Flags You Should Know
- HRA metro expansion — Pune, Bengaluru, Hyderabad, Ahmedabad become "metro" (50% HRA rate) from April 2026 — live now for FY 2026-27.
- Business income? You must file Form 10-IEA to opt for old regime. Switching back to new regime is a one-time lifetime option.
- Capital gains: Section 87A rebate does NOT apply to LTCG (112A) or STCG (111A).
- 80TTA gone in new regime: All savings interest fully taxable at slab rate.
- NPS employer contribution: New regime gives 14% of basic vs old regime's 10% — new regime actually wins here.
- Income Tax Act, 2025 starts 1 April 2026. It renumbers sections but does not change rates for FY 2026-27.
- Budget 2026 confirmed: No changes to slabs for FY 2026-27.
- Super seniors (80+): Only old regime gives ₹5 lakh basic exemption.
Common Myths Busted
| Myth | Reality |
|---|---|
| "Old regime always better with deductions" | False. Need ₹6L+ deductions at ₹15L salary. |
| "80TTA saves ₹10K in new regime" | False. 80TTA NOT available in new regime. |
| "Can switch yearly with business income" | False. One-time lifetime option only. |
| "Income Tax Act 2025 changes tax rates" | False. Only reorganises sections. |
| "Standard deduction is ₹50K in both" | False. New: ₹75K. Old: ₹50K. |
Your Action Step Today
If you're salaried and earn under ₹25 lakh: Choose the new regime when filing ITR. You don't need to do anything special — it's the default. Just pick it when you file — the FY 2026-27 return is due by 31 July 2027. If you earn above ₹25 lakh OR have a large home loan + HRA + senior parents' insurance: Sit with your CA this week. Calculate both regimes with actual numbers. The old regime might win — but only with documented proof of deductions. If you have business income: You must actively opt for old regime via Form 10-IEA before filing. Talk to your CA this week — the one-time switch rule is a trap.
Key Takeaway
For FY 2026-27, the new tax regime is the default winner for 90%+ of salaried Indians. The math changed in Budget 2025. Stop assuming old regime saves money. Run the numbers once, pick the winner, and file on time. Sources: PIB Budget 2025-26 (PRID 2098406), Income Tax Dept portal, Section 115BAC, ClearTax 87A guide, Budget 2026 confirmation (BusinessToday), TheSalaryInvestor break-even analysis.
This is educational content, not tax advice. Consult a CA for your specific situation.