Tax & Compliance
New vs old tax regime: which wins in FY 2026-27?
The new regime is the default, and for most salaried people it now wins outright. But “most” isn’t “everyone” — if you have large deductions, the old regime can still come out ahead. Here’s the current picture and a quick way to decide.
The new-regime slabs (FY 2026-27)
Budget 2026 left the structure introduced in Budget 2025 unchanged, so for FY 2026-27 (AY 2027-28) the new-regime slabs are:
| Taxable income | 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% |
Salaried taxpayers get a ₹75,000 standard deduction, and a Section 87A rebate (up to ₹60,000) makes tax nil for taxable income up to ₹12,00,000. After the standard deduction that pushes the effective no-tax salary to roughly ₹12.75 lakh. A 4% health & education cess applies on top, and surcharge kicks in above ₹50 lakh (capped at 25% in the new regime). Marginal relief smooths the jump just above ₹12 lakh.
What the old regime still offers
The old regime keeps the familiar exemptions and deductions — 80C (up to ₹1.5 lakh), 80D health insurance, HRA, home-loan interest (up to ₹2 lakh), and the extra ₹50,000 NPS deduction under 80CCD(1B). Its slabs are a ₹2.5 lakh basic exemption (₹3 lakh for 60–80, ₹5 lakh for 80+), then 5% to ₹5 lakh, 20% to ₹10 lakh, and 30% above, with the 87A rebate only up to ₹5 lakh of taxable income.
A quick way to decide
The new regime wins by default for anyone whose deductions are modest, and it’s a clear win if your taxable income is at or below ₹12 lakh (you pay zero). The old regime can still beat it only when your claimable deductions are large — think a metro HRA, a full ₹1.5 lakh 80C, ₹2 lakh of home-loan interest, 80D, and the ₹50k NPS top-up stacked together. As a rough guide, the old regime tends to pull ahead once total deductions run into the ₹4–4.5 lakh-plus range at higher salaries; below that, the new regime’s lower rates usually win.
One nuance worth knowing: the employer’s NPS contribution under 80CCD(2) (up to 14% of basic salary) is allowed in the new regime too — so even there, structuring some salary into employer NPS can reduce tax.
The only reliable answer is to compute both. Run your numbers under each, including every deduction you’ll actually claim, and pick the lower figure — you can switch regimes year to year if you’re salaried.