# New vs old tax regime 2026-27: slabs, rebate and which to choose > Income up to ₹12 lakh is tax-free under the new regime (₹12.75 lakh for salaried). Slabs, worked examples at ₹8–30 lakh, break-even deductions and how to switch. - URL: https://2search.in/knowledge/articles/oct-26/new-vs-old-tax-regime-india - Genre: Personal finance - Country: India - Published: 2026-10-27 - Updated: 2026-10-27 - Publisher: 2search (https://2search.in) > **Quick answer:** For FY 2026-27 the **new regime** has nil tax up to ₹4 lakh, then 5% to 30% in ₹4 lakh steps, plus a **₹60,000 rebate** — so income **up to ₹12 lakh is tax-free**, or **₹12.75 lakh for salaried people** after the ₹75,000 standard deduction. The **old regime** only wins if your deductions (80C, HRA, home loan interest, 80D and so on) add up to roughly **₹6 lakh or more** at a ₹15 lakh salary — and the bar rises as income goes up. > **Key takeaways** > - The new regime is the **default**. If you do nothing, your employer and the ITR use it. > - Salaried people earning **up to ₹12.75 lakh** pay **zero tax** under the new regime. > - From **1 April 2026**, the **Income-tax Act, 2025** replaced the 1961 Act. Rates didn't change, but section numbers did — **80C is now section 123**. > - Salaried people can **switch every year**. People with business income can switch back only once. > - The old regime usually helps only with **big HRA + home loan + full 80C** together. Every April, your employer asks which regime you want for TDS. Picking the wrong one can cost you thousands — or just lock up money in TDS until your refund. This guide lays out both slab structures, runs real numbers at different salaries, shows the break-even level of deductions, and explains what changed with the new Income-tax Act. ![New vs old tax regime 2026-27: slabs, rebate and which to choose Breakdown & Visual Guide](/images/articles/new-vs-old-tax-regime-india/diagram.svg) ## New tax regime slabs (FY 2026-27) | Taxable income | Tax rate | | --- | --- | | Up to ₹4 lakh | Nil | | ₹4 lakh – ₹8 lakh | 5% | | ₹8 lakh – ₹12 lakh | 10% | | ₹12 lakh – ₹16 lakh | 15% | | ₹16 lakh – ₹20 lakh | 20% | | ₹20 lakh – ₹24 lakh | 25% | | Above ₹24 lakh | 30% | What else you get under the new regime: - **Standard deduction:** ₹75,000 for salaried people and pensioners - **Rebate:** up to **₹60,000**, which makes tax zero if taxable income is ₹12 lakh or less - **Marginal relief:** if your income is just above ₹12 lakh, your tax can't be more than the amount above ₹12 lakh - **Employer NPS contribution** (old 80CCD(2)) up to 14% of basic pay is still deductible - **Family pension deduction** and agniveer corpus deductions continue Add **4% health and education cess** on the tax. Surcharge applies above ₹50 lakh. ## Old tax regime slabs (FY 2026-27) | Taxable income | Tax rate (below 60 years) | | --- | --- | | Up to ₹2.5 lakh | Nil | | ₹2.5 lakh – ₹5 lakh | 5% | | ₹5 lakh – ₹10 lakh | 20% | | Above ₹10 lakh | 30% | - Senior citizens (60–80): nil up to ₹3 lakh. Super seniors (80+): nil up to ₹5 lakh. - **Standard deduction:** ₹50,000 - **Rebate:** up to ₹12,500, so tax is zero if taxable income is ₹5 lakh or less - You keep all the familiar deductions and exemptions (listed below). ## What you give up in the new regime | Deduction / exemption | Old section (1961 Act) | Old regime | New regime | | --- | --- | --- | --- | | PPF, ELSS, EPF, life insurance, home loan principal, tuition fees | 80C (now **123**) | Up to ₹1.5 lakh | ✗ | | Extra NPS (own contribution) | 80CCD(1B) | ₹50,000 | ✗ | | Health insurance premium | 80D (now **126**) | ₹25,000–₹1 lakh | ✗ | | House Rent Allowance | 10(13A) | Yes | ✗ | | Home loan interest (self-occupied) | 24(b) | Up to ₹2 lakh | ✗ | | Leave Travel Allowance | 10(5) | Yes | ✗ | | Savings interest | 80TTA / 80TTB | ₹10,000 / ₹50,000 | ✗ | | Employer NPS contribution | 80CCD(2) | 10% of basic | **14% of basic** ✓ | | Standard deduction | 16 | ₹50,000 | **₹75,000** ✓ | ## Worked examples: tax at different salaries Assumptions for the old regime: ₹50,000 standard deduction, full ₹1.5 lakh 80C and ₹25,000 80D. The "heavy" column also adds **₹1.8 lakh HRA exemption** and **₹2 lakh home loan interest**. All figures include 4% cess. | Gross salary | New regime | Old regime (80C + 80D) | Old regime (heavy deductions) | | --- | --- | --- | --- | | ₹8 lakh | **₹0** | ₹28,600 | ₹0 | | ₹12.75 lakh | **₹0** | ₹1,32,600 | ₹48,360 | | ₹15 lakh | ₹97,500 | ₹2,02,800 | **₹95,160** | | ₹20 lakh | **₹1,92,400** | ₹3,58,800 | ₹2,40,240 | | ₹25 lakh | **₹3,19,800** | ₹5,14,800 | ₹3,96,240 | | ₹30 lakh | **₹4,75,800** | ₹6,70,800 | ₹5,52,240 | > **Example:** At a **₹15 lakh** salary, the new regime tax is ₹97,500. To beat it, you'd need about **₹6 lakh of deductions** in the old regime — full 80C, 80D, a large HRA exemption *and* ₹2 lakh of home loan interest. Even then you save only about ₹2,300. At **₹20 lakh and above**, the new regime wins even with heavy deductions, because its lower slab rates save more than the deductions do. ## Marginal relief just above ₹12 lakh Without relief, crossing ₹12 lakh by ₹1 would cost ₹60,000+ in tax. Marginal relief prevents that: your tax can't be more than your income above ₹12 lakh. > **Example:** A salaried person earning ₹12.85 lakh has taxable income of ₹12.10 lakh. Normal tax would be ₹61,500, but marginal relief caps it at **₹10,000** (the amount above ₹12 lakh), plus cess = **₹10,400**. ## How to decide in 3 steps 1. **Add up your real deductions** — only what you'll actually pay: 80C, 80D, NPS 80CCD(1B), HRA exemption, home loan interest, LTA. 2. **Compare with the break-even.** As a rough guide: | Gross salary | Old regime needs about this much in deductions to win | | --- | --- | | Up to ₹12.75 lakh | Practically never wins | | ₹15 lakh | ~₹6 lakh | | ₹20 lakh | ~₹7.5 lakh+ | | ₹25 lakh+ | ~₹8 lakh+ | 3. **Run both** on the Income Tax Department's official calculator with your actual numbers before telling your employer. > **Tip:** Don't buy insurance or ELSS **just** to save tax in the old regime. If the new regime is cheaper, invest based on goals, not deductions. ## When the old regime still makes sense - You pay **high rent in a metro** (large HRA exemption) **and** - You have a **home loan** with big interest on a self-occupied house **and** - You already max out **80C** (EPF often covers most of it) and pay **health insurance** for parents. If you have only one or two of these, the new regime usually wins. ## Switching between regimes - **Salaried, no business income:** choose **every year** — tell your employer at the start of the year for TDS, and you can still pick the other regime when filing the ITR. - **Business or professional income:** the new regime is the default. You can opt out with **Form 10-IEA** before the due date, and you can switch back to the new regime only **once** in your lifetime. - If you chose one regime with your employer but the other is better, choose it in the ITR — any extra TDS comes back as a refund. See [how to file ITR online](/how-to-file-itr-online). ## What changed with the Income-tax Act, 2025 From **1 April 2026**, the new Act replaced the Income-tax Act, 1961: - **"Tax year"** replaces "previous year" and "assessment year" in the law. - **Rates and slabs stayed the same** — the change was meant to simplify, not raise tax. - **Section numbers changed:** 80C → **123**, NPS → **124**, 80D → **126**, standard deduction → **19**, 80TTA/80TTB → **153**, capital gains exemptions (54 etc.) → **82–86**. Your Form 16 and the ITR forms will start using the new numbers. If you see "section 123" where you expected 80C, it's the same deduction. ## Common mistakes - **Assuming the old regime is better because you "have 80C".** EPF alone often fills 80C — and it may still not be enough. - **Forgetting the standard deduction** when checking the ₹12 lakh limit — salaried people get ₹12.75 lakh. - **Claiming HRA without paying rent** or without rent receipts — this gets flagged. - **Missing employer NPS** (80CCD(2)) — it works in both regimes; ask HR if it's offered. - **Not telling your employer** — if you don't, TDS defaults to the new regime. > **Tip:** Enter your salary and deductions in our [income tax calculator](/tools/income-tax-calculator-india) to see both regimes side by side for FY 2026-27. ## Frequently asked questions ### Is income up to ₹12 lakh really tax-free? Yes, under the new regime the ₹60,000 rebate makes tax zero if taxable income is ₹12 lakh or less. Salaried people get ₹75,000 standard deduction on top, so ₹12.75 lakh salary is tax-free. ### Does the rebate apply to capital gains? Not to special-rate income like short-term gains on shares (section 111A) or long-term gains (112A). Those are taxed at their own rates even if total income is under ₹12 lakh. ### Can I claim HRA in the new regime? No. HRA exemption is available only in the old regime. ### Which regime is better for ₹10 lakh salary? The new regime — tax is zero up to ₹12.75 lakh salary. ### Can I switch regimes every year? Yes, if you have no business income. Business owners can switch back to the new regime only once. ### Has 80C been removed? No. It's now section 123 under the Income-tax Act, 2025, and it's available only in the old regime. ### Is the new regime compulsory? No. It's the default, but you can choose the old regime. ## Sources - [Business Today — Deductions and section numbers under the new Income-tax Act (Budget 2026)](https://www.businesstoday.in/amp/union-budget/story/budget-2026-what-deductions-exemptions-and-capital-gains-rules-under-the-new-income-tax-act-mean-for-taxpayers-513819-2026-02-01) - [BankBazaar — Income tax slabs FY 2026-27](https://bankbazaar.com/tax/income-tax-slabs.html) - [Business Standard — 80C deductions move to section 123](https://www.business-standard.com/amp/finance/personal-finance/i-t-bill-2025-deductions-under-80c-moves-to-section-123-see-changes-125021700699_1.html) - [Income Tax Department — Tax calculator](https://www.incometax.gov.in/iec/foportal/income-tax-calculator) - [Bajaj Finserv — Income Tax Act 2025 key features](https://www.bajajfinserv.in/new-income-tax-bill-income-tax-act)