Old vs New Tax Regime FY 2026-27: Which Saves You More Tax?
Short answer: For most salaried people with few deductions, the new regime saves more tax in FY 2026-27. Up to about ₹12.75 lakh of salary, the new regime means zero tax. The old regime only wins when your deductions (80C, HRA, home loan interest and others) are large: at a ₹15 lakh salary you need about ₹5,45,000 of deductions to break even.
The two regimes in one minute
New regime (default): lower slab rates, a ₹75,000 standard deduction for salaried people, and almost no other deductions. Tax is nil on income up to ₹4 lakh, then 5%, 10%, 15%, 20%, 25% and 30% in steps of ₹4 lakh. A rebate under Section 87A makes tax zero if your taxable income is up to ₹12 lakh, which means a salary of about ₹12.75 lakh pays nothing.
Old regime: higher slab rates (nil to ₹2.5 lakh, then 5%, 20% and 30%), a ₹50,000 standard deduction, but you can claim 80C (up to ₹1.5 lakh), 80D, HRA, home loan interest and more. The rebate covers taxable income up to ₹5 lakh.
Tax at different salaries
| Yearly salary | New regime tax | Old regime tax (₹1.5 lakh deductions) | Old regime tax (₹3 lakh deductions) | Deductions needed for old to win |
|---|---|---|---|---|
| ₹8 lakh | ₹0 | ₹33,800 | ₹0 | ₹2,50,000 |
| ₹12 lakh | ₹0 | ₹1,17,000 | ₹85,800 | ₹6,50,000 |
| ₹15 lakh | ₹97,500 | ₹2,10,600 | ₹1,63,800 | ₹5,45,000 |
| ₹20 lakh | ₹1,92,400 | ₹3,66,600 | ₹3,19,800 | ₹7,10,000 |
| ₹30 lakh | ₹4,75,800 | ₹6,78,600 | ₹6,31,800 | ₹8,00,000 |
All figures include 4% cess and are for a salaried person below 60, calculated by our income tax calculator. Surcharge is not included.
What the table tells you
- Up to about ₹12.75 lakh: the new regime is nil. The old regime would need very large deductions to match, so the new regime is the clear choice.
- At ₹15 lakh: the new regime costs ₹97,500. With ₹1.5 lakh of deductions the old regime costs ₹2,10,600. Old wins only once deductions reach about ₹5,45,000.
- At ₹20 lakh: the break-even is about ₹7,10,000 of deductions.
- At ₹30 lakh: the break-even is about ₹8,00,000.
What counts as a deduction
Add up everything you can really claim: Section 80C (EPF, PPF, ELSS, life insurance, tuition fees) up to ₹1.5 lakh; 80D health insurance; HRA exemption if you pay rent (check it with the HRA calculator); home loan interest up to ₹2 lakh; and an extra NPS deduction (₹50,000 under the old Act’s Section 80CCD(1B); check the current provision). Do not count money you would not otherwise spend. Buying an insurance policy only for tax is not a saving.
One more point: from tax year 2026-27 the Income-tax Act, 2025 applies, so these provisions carry new section numbers (published mapping guides list Section 80C as Section 123 and the Section 87A rebate as Section 156). The amounts discussed here are unchanged.
How to decide in 3 steps
- Add up your real deductions for the year.
- Enter your salary and that total in the calculator.
- Pick the regime with the lower tax. Salaried people can switch every year when filing.
Two limits of this comparison
Near the ₹12.75 lakh mark, marginal relief reduces the tax of people who are only slightly above the rebate limit, and our calculator includes it. It does not include surcharge, which applies above ₹50 lakh of income. Also, if you have business income, the switching rules are stricter, so check with a tax professional.
Keep reading
- Section 80C Explained: What You Can Claim Up to ₹1.5 Lakh — Income tax, 6 min read
- New vs Old Tax Regime for FY 2025-26 (AY 2026-27): Which Is Better? — Income tax, 7 min read
- CTC vs In-Hand Salary: Why Your Take-Home Is Less Than Your CTC — Salary and tax, 6 min read
- DA Hike to 63% From July 2026: What Changes for Your Pay and Arrears — Government pay, 5 min read
Frequently asked questions
Which tax regime is better for a ₹15 lakh salary?
The new regime costs ₹97,500 and the old regime costs ₹2,10,600 with ₹1.5 lakh of deductions. You need around ₹5,45,000 of deductions for the old regime to match the new one.
Is salary up to ₹12 lakh really tax-free?
Under the new regime, taxable income up to ₹12 lakh gets a full rebate, and the ₹75,000 standard deduction means a salary of about ₹12.75 lakh pays no tax. The rebate does not apply to some special-rate incomes such as short-term capital gains.
Can I switch between regimes every year?
Salaried individuals without business income can choose a regime each year when they file their return. People with business income have more limited switching rights.
Do HRA and 80C work in the new regime?
No. Most deductions, including HRA exemption and Section 80C, are available only in the old regime. The ₹75,000 standard deduction is the main one the new regime keeps for salaried people.
Sources: Income Tax Department — tax rates and slabs · Income Tax e-filing portal · ClearTax — Income-tax Act 2025 section numbers, old vs new