Old vs new tax regime: slabs, rebate and which one saves you more

✓Checked against official sources · verified 30 October 2026

Which law and which year?

From 1 April 2026 the Income-tax Act, 2025 replaced the 1961 Act, and "previous year / assessment year" became a single tax year. This page covers tax year 2026-27 (1 April 2026 to 31 March 2027; returns due in 2027). The new regime is now section 202 (formerly 115BAC), and the Finance Act, 2026 kept the slab rates unchanged.

Returns filed in 2026 for FY 2025-26 (AY 2026-27) came under the 1961 Act. The rates, rebate and standard deduction were the same, but the sections were 115BAC, 87A and 16(ia).

New regime slabs (default) — tax year 2026-27

Old regime slabs — tax year 2026-27

Under both regimes, 4% health and education cess is added to the tax (plus surcharge, if any). Surcharge starts once income goes above ₹50 lakh. In the new regime the highest surcharge rate is 25%.

Rebate and standard deduction

• Rebate, new regime: a resident individual whose total income is not more than ₹12,00,000 gets a rebate of up to ₹60,000, which brings tax to nil. Just above ₹12 lakh, marginal relief applies, so your tax cannot be more than the amount by which your income goes over ₹12 lakh (section 156 of the 2025 Act; formerly 87A).
• Rebate, old regime: up to ₹12,500 for a resident individual with total income up to ₹5,00,000.
• Standard deduction from salary: ₹75,000 in the new regime and ₹50,000 in the old regime, or the salary amount if that is lower (section 19 of the 2025 Act; formerly 16(ia)).

So a salaried person with gross salary up to ₹12,75,000 and no other income pays nil tax under the new regime (₹12,75,000 − ₹75,000 = ₹12,00,000).

What you give up in the new regime

The new regime takes away most exemptions and deductions. The main ones people lose (using the familiar 1961-Act names) are:

• Section 80C investments and payments (PF, PPF, ELSS, life insurance, home-loan principal, tuition fees) — up to ₹1,50,000
• Section 80D health insurance — ₹25,000 for self and family, plus up to ₹25,000 (₹50,000 if senior citizens) for parents
• Your own NPS contribution under 80CCD(1B) — up to ₹50,000
• HRA exemption and leave travel concession
• Interest on a home loan for a self-occupied house (up to ₹2,00,000). Also, a loss from house property cannot be set off against other income.
• Professional tax deduction, and most other Chapter VI-A deductions such as 80G donations and 80TTA/80TTB interest

You do keep the standard deduction, the employer's NPS contribution (old 80CCD(2)) and a few other deductions. The 2025 Act gives these deductions new section numbers. To match an old section with its new number, use our section finder.

How to choose and switch

• No business or professional income (salary, pension, house property, capital gains, interest): you choose the regime each year in your return. To use the old regime, you must say so in a return filed by the original due date. If you file late, you are taxed under the new regime. Telling your employer which regime you want only affects TDS during the year, and your return can still make a different choice. If you do not tell your employer, TDS is worked out under the new regime.
• Business or professional income: to move to the old regime you must file a separate option form by the due date of the return. For AY 2026-27 this was Form 10-IEA. Once you opt out, the choice carries on for later years. You can withdraw it only once, and after that you cannot go back to the old regime while you still have business income.

Worked examples (tax year 2026-27, resident, below 60)

These examples assume salary income only and no professional tax. All figures are in rupees.

How the new-regime tax of ₹1,85,000 is worked out: 5% of ₹4 lakh (20,000) + 10% of ₹4 lakh (40,000) + 15% of ₹4 lakh (60,000) + 20% of ₹3.25 lakh (65,000). Old-regime tax in example B: 12,500 + 1,00,000 + 30% of ₹2.85 lakh (85,500) = ₹1,98,000. In example C, the 80D figure of ₹75,000 is ₹25,000 for self and family plus ₹50,000 for senior-citizen parents.

Marginal relief example: new-regime taxable income ₹12,10,000. Slab tax is ₹61,000, but your income is only ₹10,000 above ₹12 lakh, so tax is limited to ₹10,000. With cess it comes to ₹10,400.

When the old regime is usually better

At a salary of around ₹20 lakh, the old regime starts to win only when your deductions (on top of the ₹50,000 standard deduction) go above roughly ₹7.08 lakh. Typically that means rent with an HRA exemption, a home loan on a self-occupied house, a full 80C, 80D for parents and NPS — all at once. If your income after the standard deduction is ₹12 lakh or less, the new regime usually gives nil tax and is very hard to beat. Run your own numbers in our income tax calculator before you decide.

Frequently asked questions

How TaxEase can help

We compare both regimes on your actual Form 16, AIS and investment proofs before filing, and we file Form 10-IEA or its replacement when you have business income. See our ITR filing service, check your figures in the AIS/26AS reconciliation guide, keep an eye on the due dates, or send us your query.