Old vs New Tax Regime: Which Is Better for You in AY 2026-27?
By Pradipta Ray · Published
The New Tax Regime is now the default tax regime in India, featuring lower tax slab rates and a ₹75,000 standard deduction. Here is how to decide whether to stick with the New Regime or opt for the Old Regime.
India's dual tax regime system forces every taxpayer to make a strategic choice: pay lower slab rates with almost zero exemptions (New Regime), or pay higher rates while claiming deductions for rent, insurance, home loans, and savings (Old Regime).
Direct Answer: For gross income up to ₹7.75 Lakh, the New Regime guarantees ₹0 tax. Above ₹7.75 Lakh, the New Regime wins unless your total eligible deductions exceed the breakeven threshold (approx. ₹2.6L at ₹10L salary, ~₹5.44L at ₹15L salary).
Breakeven Deduction Table Across Salaries
| Annual Salary | New Regime Tax (₹75k Std Ded) | Breakeven Deductions Needed | Recommendation |
|---|---|---|---|
| ₹7,50,000 | ₹0 (Sec 87A rebate) | N/A | Choose New Regime (100% Tax Free) |
| ₹10,00,000 | ₹44,200 | ₹2,60,000 | New Regime for 85%+ taxpayers |
| ₹12,50,000 | ₹85,800 | ₹3,30,000 | New Regime unless heavy HRA + 80C |
| ₹15,00,000 | ₹97,500 | ₹5,44,000 | New Regime wins for almost all |
| ₹20,00,000 | ₹1,92,400 | ₹7,08,000 | New Regime wins overwhelmingly |
*Tax Assumption Caveat: These figures assume simple salaried income only, ₹75,000 standard deduction, New Tax Regime under AY 2026-27 (Finance Act 2025), no special-rate income, no surcharge, and 4% health and education cess. These figures must not be interpreted as universal tax payable for every taxpayer across differing compensation structures.
Key Deductions Disallowed in New Regime
Under the New Tax Regime, you cannot claim Section 80C (PPF, ELSS, EPF, life insurance), Section 80D (health insurance), Section 24(b) (home loan interest on self-occupied house), House Rent Allowance (HRA), or Leave Travel Allowance (LTA). However, the dramatically lower tax slabs usually more than compensate for these forfeited deductions.
Decision Checklist for Taxpayers
If you do not pay high rent in a metro or have a home loan, pick the New Tax Regime without hesitation.
Remember to claim Section 80CCD(2) corporate NPS under the New Regime to push your tax even lower.
You can change your selection at the time of filing your ITR even if your employer deducted tax under the other regime.
Frequently asked questions
What is the standard deduction in the New Tax Regime?
Can I switch between Old and New Tax Regimes every year?
What deductions are allowed under the New Tax Regime?
Calculators for this
Related reading
Calculate income tax on a ₹10 Lakh salary in India for AY 2026-27. Compare New vs Old Regime, standard deduction, and see which option saves you more money.
Calculate tax on a ₹15 Lakh salary under New and Old Tax Regimes for AY 2026-27. Learn the exact breakeven deduction threshold and monthly take-home.
Master the 3-step HRA tax exemption formula under Section 10(13A) and Rule 2A. Learn metro vs non-metro rules and calculate your tax-free allowance.
Authoritative Sources
- Income Tax Department Section 115BAC Statutory Provisions· verified 1 August 2026
- CBDT Notification on Tax Slabs and Standard Deduction· verified 1 August 2026