New vs Old Tax Regime: How to Choose the Right One

Income tax · Harshit Dudeja & Co.

Every individual taxpayer has to choose between two regimes. These are the rules for Tax Year 2026-27 (FY 2026-27). Budget 2026 did not change the slabs, the rebate or the standard deduction.

New regime (the default)

• Nil tax up to ₹4 lakh, then 5% (₹4–8 lakh), 10% (₹8–12 lakh), 15% (₹12–16 lakh), 20% (₹16–20 lakh), 25% (₹20–24 lakh) and 30% above ₹24 lakh.
• Standard deduction of ₹75,000 for salaried individuals and pensioners.
• A rebate of up to ₹60,000 means no tax on taxable income up to ₹12 lakh. For a salaried person, that is a salary of about ₹12.75 lakh. The rebate does not apply to income taxed at special rates, such as some capital gains.
• Most deductions such as 80C, 80D and HRA are not available.

Old regime

• Nil tax up to ₹2.5 lakh, then 5% (₹2.5–5 lakh), 20% (₹5–10 lakh) and 30% above ₹10 lakh (for individuals below 60).
• Standard deduction of ₹50,000 for salaried individuals.
• Allows deductions and exemptions such as HRA, home loan interest and investments.
• The rebate is only up to ₹12,500, so tax is nil only up to ₹5 lakh of taxable income.

How to decide

If your deductions and exemptions are large (for example a home loan, high HRA and full investments), compare both regimes, because the old regime can still win. If you claim very little, the new regime is usually cheaper. Salaried people can choose again each year. People with business income have limits on switching, so please ask us before you decide.

From 1 April 2026 the Income-tax Act, 2025 has replaced the 1961 Act, so section numbers have changed. The rates above did not. Last verified: October 2026. Tax rules can change, so please confirm before you act.