Old vs new tax regime: which should you choose?

Updated 11 October 2026

For most salaried people the new regime gives lower tax in tax year 2026-27: salary up to ₹12.75 lakh is tax-free and the lower slabs are much wider. The old regime pays off only when your deductions are large. At a ₹15 lakh salary you need about ₹5.94 lakh of deductions, including the ₹50,000 standard deduction, before the old regime costs less.

Slab rates side by side

Budget 2026 made no change to either regime, so these are the same rates as 2025-26. The old regime figures are for people below 60; seniors get a higher nil slab (see full slab tables).

Both regimes add 4% cess. The rebate makes income up to ₹12 lakh tax-free in the new regime and up to ₹5 lakh in the old one.

Which deductions each regime allows

The employer's NPS contribution is allowed in both regimes, so it does not change the comparison. Use the HRA exemption calculator to find your HRA figure first, since it is usually the largest old-regime item.

Worked example at ₹15 lakh

Break-even deductions by salary

The table shows how much you must claim in the old regime, counting everything from the ₹50,000 standard deduction to HRA, 80C, 80D, NPS and home loan interest, just to match the new regime. Claim more than this and the old regime wins.

The ₹13 lakh row looks odd because marginal relief keeps new-regime tax very low just above ₹12 lakh of taxable income (see rebate and marginal relief). Above roughly ₹25 lakh the break-even settles at ₹8,50,000, because both regimes are then taxing the top slice at 30%. Surcharge above ₹50 lakh changes the picture again, so use the calculator for high incomes.

How to choose and when you can switch

• The new regime is the default (section 202 of the 2025 Act, section 115BAC earlier). If you do nothing, your employer and the return use it.
• Salaried people and pensioners without business income can pick either regime every year, when they file the return. Tell your employer at the start of the year too, so that TDS matches. If you told your employer one regime, you can still choose the other in your return, as long as you file it by the due date.
• If you have business or professional income, leaving the new regime needs a separate form filed by the due date, and you can come back to the new regime only once.

The old regime tends to win for people with high rent in a big city, a home loan on a self-occupied house and full use of 80C, 80D and NPS. Since tax year 2026-27, rent paid in Bengaluru, Hyderabad, Pune and Ahmedabad also qualifies for the 50% HRA limit, which helps old-regime taxpayers in those cities.