New vs old tax regime FY 2026-27 — real tax calculations, break-even table, 5 case studies, and a clear verdict for every income level after Budget 2026.
Every year, the same question. Every year, the same confusion. “Which regime is better — old or new?” Most people answer this by asking their colleague. Or by letting HR decide. Or by Googling and reading an article that gives a generic answer without a single real number.
In this article, I will give you the actual tax payable — with and without deductions — across multiple income levels for FY 2026-27. A break-even table that tells you exactly how much deduction you need to make the old regime worth choosing. And five real-world case studies with honest verdicts.
Refer the complete list of deductions based on Budget 2026 changes here – All Tax Deductions: Old vs New Regime Full List FY 2026-27
New Tax Regime vs Old Regime: Who Wins in FY 2026-27
What Budget 2026 Changed — And What It Did Not
Let us get this out of the way first, because there is a lot of confusion around it.
Budget 2026 did NOT change tax slabs. Not under the new regime. Not under the old regime. Both regimes carry forward exactly the same slabs that were introduced in Budget 2025.
What Budget 2026 did change — and these matter for every taxpayer — are these:
1. Income Tax Act 2025 comes into effect from 1st April 2026 The Income Tax Act 1961, which has been the foundation of Indian tax law for over six decades, is officially retired. The new Income Tax Act 2025 replaces it from FY 2026-27 onwards. The intent is simplification — the language is cleaner, sections are renumbered, and redundant provisions removed. The tax rates, slabs, and deduction principles remain the same. But section numbers will change. So when your CA or colleague references “Section 80C” this year, they are technically referring to the equivalent section under the new Act. For practical purposes, all deductions continue as before — just under a new legal structure.
2. ITR Deadline Extended for Some Taxpayers
- Salaried individuals (ITR-1 and ITR-2): Deadline remains 31st July 2026 — no change.
- Non-audit business taxpayers (ITR-3 and ITR-4): Extended from 31st July to 31st August 2026.
- Revised ITR deadline extended from 9 months to 12 months from the end of the tax year — meaning you can now file a revised return up to 31st March 2027 for AY 2026-27. If you file the revision after 9 months (i.e., after 31st December 2026), a nominal fee of Rs.1,000 (income up to Rs.5 lakh) or Rs.5,000 (above Rs.5 lakh) applies.
3. TCS Rates Reduced — Useful for Those Sending Money Abroad or Travelling
- LRS remittances for education and medical purposes: TCS reduced from 5% to 2% (for remittances above Rs.10 lakh)
- Overseas tour packages: TCS reduced to a flat 2% — earlier it was 5% up to Rs.7 lakh and 20% above that
- This is not a tax deduction but a cash flow benefit — the TCS you pay gets adjusted against your total tax liability at the time of ITR filing
4. STT Hiked on F&O — Relevant for Traders Securities Transaction Tax on futures raised from 0.02% to 0.05%. On options, raised from 0.1% to 0.15%. If you trade in F&O, your transaction costs have gone up meaningfully. This does not affect long-term equity investors or mutual fund investors.
5. SGB Taxation Change — Important for Secondary Market Buyers If you purchased Sovereign Gold Bonds (SGBs) from the secondary market (not directly from RBI), capital gains on maturity redemption will now be taxable from FY 2026-27. Earlier, maturity redemption was tax-free regardless of how you acquired the bonds. If you hold SGBs bought from the secondary market, factor this into your planning.
6. Buyback Now Taxed as Capital Gains Earlier, buyback proceeds were treated as dividend income and taxed accordingly. From FY 2026-27, buyback proceeds are taxed as capital gains in the hands of shareholders. This is generally beneficial for minority shareholders who were disadvantaged under the old dividend treatment.
What did NOT change:
- Tax slabs under old and new regime — unchanged
- Standard deduction — remains Rs.75,000 (new) and Rs.50,000 (old)
- Section 87A rebate — remains Rs.60,000 under new regime
- Rs.12 lakh zero-tax threshold under new regime — continues
- All deductions (80C, 80D, HRA, NPS etc.) — continue under old regime
- New regime remains the default
The Slabs — FY 2026-27
New Tax Regime
| Income Slab | Tax Rate |
| Up to Rs.4 lakh | Nil |
| Rs.4 lakh – Rs.8 lakh | 5% |
| Rs.8 lakh – Rs.12 lakh | 10% |
| Rs.12 lakh – Rs.16 lakh | 15% |
| Rs.16 lakh – Rs.20 lakh | 20% |
| Rs.20 lakh – Rs.24 lakh | 25% |
| Above Rs.24 lakh | 30% |
Standard deduction Rs.75,000 for salaried employees. Section 87A rebate of Rs.60,000 makes taxable income up to Rs.12 lakh fully tax-free. For salaried individuals, gross salary up to Rs.12.75 lakh means zero tax.
One trap that catches many people every year: The 87A rebate does NOT apply on special rate income. Short-term capital gains on equity (taxed at 20%), long-term capital gains on equity (taxed at 12.5%), and online gaming or lottery income — these are taxed at their respective special rates even if your total income is below Rs.12 lakh. Many people discover this surprise at ITR filing time. If you have such income, your tax liability may not be zero even if your salary alone is under Rs.12 lakh.
Old Tax Regime
| Income Slab | Tax Rate (below 60 years) |
| Up to Rs.2.5 lakh | Nil |
| Rs.2.5 lakh – Rs.5 lakh | 5% |
| Rs.5 lakh – Rs.10 lakh | 20% |
| Above Rs.10 lakh | 30% |
Standard deduction Rs.50,000. Section 87A rebate of Rs.12,500 makes taxable income up to Rs.5 lakh tax-free.
Senior citizens (60–80 years): Basic exemption Rs.3 lakh. Super senior citizens (above 80 years): Basic exemption Rs.5 lakh.
Add 4% Health and Education Cess on tax in both regimes.
What You Can and Cannot Claim
Under the new regime, the deductions available are limited:
- Standard deduction Rs.75,000
- Employer’s NPS contribution — up to 14% of Basic+DA (private sector)
- Home loan interest on let-out property — no ceiling
- Family pension deduction
- Gratuity and leave encashment exemptions at retirement
Everything else — 80C, 80D, 80E, HRA, LTA, home loan interest on self-occupied property, 80CCD(1B) NPS, 80G, 80TTA, 80TTB — none of these are available in the new regime.
Under the old regime, all deductions are available. The major ones that move the needle:
- HRA — Rs.2 lakh to Rs.4 lakh annually for people paying significant rent in metros
- Section 80C — Rs.1.5 lakh (PPF, ELSS, LIC, EPF, home loan principal, SSY, tuition fees)
- Section 80CCD(1B) — additional Rs.50,000 for your own NPS contribution, over and above 80C
- Section 24(b) — Rs.2 lakh on home loan interest for self-occupied property
- Section 80D — up to Rs.25,000 (self+family) + Rs.25,000 (parents) on health insurance premiums. Rs.50,000 each if senior citizens
- Section 80E — full interest deduction on education loan, no upper limit
- Section 80TTB — Rs.50,000 on interest income for senior citizens
For the complete section-by-section list of every deduction under both regimes, read: All Tax Deductions: Old vs New Regime Full List FY 2026-27 [link to Article 2 once published]
The Break-Even Table — This Is What Decides Everything
This is the most important part of this article.
This table tells you exactly one thing: how much total deduction (over and above the standard deduction) do you need in the old regime to make it worth choosing over the new regime?
If your actual deductions cross this number — old regime wins. If they do not — new regime wins. No guesswork needed.
| Gross Salary | New Regime Tax | Break-Even Deduction Needed |
| Rs.8 lakh | Rs.0 | Rs.2.50 lakh |
| Rs.10 lakh | Rs.0 | Rs.4.50 lakh |
| Rs.12 lakh | Rs.0 | Rs.6.50 lakh |
| Rs.12.75 lakh | Rs.0 | Rs.7.25 lakh |
| Rs.15 lakh | Rs.97,500 | Rs.5.44 lakh |
| Rs.20 lakh | Rs.1,92,400 | Rs.7.08 lakh |
| Rs.25 lakh | Rs.3,19,800 | Rs.8.00 lakh |
| Rs.30 lakh | Rs.4,75,800 | Rs.8.00 lakh |
(All figures include 4% cess. Standard deduction of Rs.50,000 already included in old regime calculation. For individuals below 60 years.)
Look at the Rs.12.75 lakh row. New regime tax is zero. To benefit from the old regime at this income level, you would need deductions of Rs.7.25 lakh over and above the standard deduction. That is virtually impossible for most salaried people at this income level. The new regime wins without contest.
The Rs.15 lakh row is where most people get confused. Break-even is Rs.5.44 lakh. That means your HRA + home loan interest + 80C + NPS + 80D combined must cross Rs.5.44 lakh. Without a significant home loan and without paying high rent, this is genuinely hard to achieve. With both, it is very achievable.
Above Rs.25 lakh, the break-even stabilises at Rs.8 lakh. You need nearly the maximum possible deductions to make the old regime competitive.
Five Real-World Cases — Actual Numbers
All calculations include 4% cess.
Case 1 — Rs.10 Lakh Salary, Only EPF
This is the person who has EPF through employer but has not done any additional tax-saving investment.
| New Regime | Old Regime | |
| Gross Salary | Rs.10,00,000 | Rs.10,00,000 |
| Standard Deduction | Rs.75,000 | Rs.50,000 |
| Other Deductions | Nil | Rs.1,50,000 (EPF/80C) |
| Taxable Income | Rs.9,25,000 | Rs.8,00,000 |
| Tax Payable | Rs.0 | Rs.75,400 |
New regime wins. Saves Rs.75,400.
The 87A rebate eliminates the tax completely. No investment required. No calculation needed.
Case 2 — Rs.15 Lakh Salary, Good Investor, No Home Loan, No HRA
Deductions claimed: 80C Rs.1.5 lakh + NPS Rs.50,000 + Health Insurance Rs.25,000 = Rs.2.25 lakh beyond standard deduction.
| New Regime | Old Regime | |
| Gross Salary | Rs.15,00,000 | Rs.15,00,000 |
| Standard Deduction | Rs.75,000 | Rs.50,000 |
| Other Deductions | Nil | Rs.2,25,000 |
| Taxable Income | Rs.14,25,000 | Rs.12,25,000 |
| Tax Payable | Rs.97,500 | Rs.1,87,200 |
New regime wins. Saves Rs.89,700.
This is the case that shocks most people. Even with full 80C, NPS, and health insurance — without HRA and home loan the old regime loses by almost Rs.90,000. If you have been staying in the old regime at this income level thinking your 80C investments are saving you tax, they are actually costing you Rs.89,700.
Case 3 — Rs.15 Lakh Salary, Renting in Metro, Has Home Loan
Deductions: 80C Rs.1.5L + NPS Rs.50K + Health Insurance Rs.50K + HRA Rs.2L + Home Loan Interest Rs.2L = Rs.6 lakh beyond standard deduction.
| New Regime | Old Regime | |
| Gross Salary | Rs.15,00,000 | Rs.15,00,000 |
| Standard Deduction | Rs.75,000 | Rs.50,000 |
| Other Deductions | Nil | Rs.6,00,000 |
| Taxable Income | Rs.14,25,000 | Rs.8,50,000 |
| Tax Payable | Rs.97,500 | Rs.80,600 |
Old regime wins. Saves Rs.16,900.
Here the combination of HRA and home loan interest tips the balance. Old regime wins — but notice how close the numbers are. Remove either the HRA or the home loan, and new regime wins again.
Case 4 — Rs.20 Lakh Salary, Maximum Deductions
Deductions: 80C Rs.1.5L + NPS Rs.50K + Health Insurance Rs.50K + HRA Rs.2.5L + Home Loan Interest Rs.2L = Rs.6.5 lakh beyond standard deduction.
| New Regime | Old Regime | |
| Gross Salary | Rs.20,00,000 | Rs.20,00,000 |
| Standard Deduction | Rs.75,000 | Rs.50,000 |
| Other Deductions | Nil | Rs.6,50,000 |
| Taxable Income | Rs.19,25,000 | Rs.13,00,000 |
| Tax Payable | Rs.1,92,400 | Rs.1,95,000 |
New regime wins. Saves Rs.2,600.
This surprises almost everyone. Rs.20 lakh income, Rs.6.5 lakh in deductions — and the new regime still wins. To beat the new regime at Rs.20 lakh, you need deductions above Rs.7.08 lakh — which requires a very large home loan, very high rent, or both.
Case 5 — Rs.30 Lakh Salary, All Deductions Stacked
Deductions: 80C Rs.1.5L + NPS Rs.50K + Health Insurance Rs.50K + HRA Rs.3L + Home Loan Interest Rs.2L = Rs.7.5 lakh beyond standard deduction.
| New Regime | Old Regime | |
| Gross Salary | Rs.30,00,000 | Rs.30,00,000 |
| Standard Deduction | Rs.75,000 | Rs.50,000 |
| Other Deductions | Nil | Rs.7,50,000 |
| Taxable Income | Rs.29,25,000 | Rs.22,00,000 |
| Tax Payable | Rs.4,75,800 | Rs.4,91,400 |
New regime wins. Saves Rs.15,600.
Even at Rs.30 lakh with Rs.7.5 lakh in deductions, the new regime still wins. To make old regime work at this income level, you need deductions above Rs.8 lakh — meaning an HRA deduction of Rs.4 lakh or more, or a home loan interest component significantly above Rs.2 lakh.
The One Tool That Works in Both Regimes
Before the verdict, one tip that most articles never mention.
Employer’s NPS Contribution — Section 80CCD(2)
If your employer contributes to your NPS Tier-1 account, that amount is not included in your taxable salary — in both old and new regimes. Your employer’s total cost does not change. But your taxable income reduces.
For a private sector employee with Rs.20 lakh salary and Basic of Rs.10 lakh, the employer can contribute Rs.1 lakh (10% of Basic) to NPS. That Rs.1 lakh is outside your taxable income entirely. At the 20–25% slab, that is a tax saving of Rs.20,000–Rs.26,000 per year — without you investing a single extra rupee.
How to use it: Ask your HR to restructure your CTC so a portion of the employer’s contribution goes to NPS instead of as cash. This works regardless of which regime you choose. It is legal, government-encouraged, and almost nobody does it.
Switching Between Regimes — What You Must Know
Salaried employees: You can switch between old and new regime every single year while filing your ITR. Your employer’s TDS is based on whichever regime you declare at the start of the year. But if you want to change at ITR time, you can — no restriction.
Business owners and self-employed professionals: You can opt out of the new regime by filing Form 10-IEA before the ITR due date. However, once you opt out of the new regime and choose old, you can switch back to new — but only once in your lifetime. This decision carries significant long-term consequences. Think carefully before opting out.
The Verdict — Income Level Wise
Below Rs.12.75 lakh gross salary: New regime. Your tax is zero. No contest, no calculation needed.
Rs.13 lakh to Rs.15 lakh, no home loan, no HRA: New regime wins by a large margin. Even with full 80C + NPS + health insurance, the old regime cannot compete.
Rs.15 lakh, paying high rent in metro + home loan: Run the actual numbers. If your HRA deduction + home loan interest together cross Rs.3.5–4 lakh, old regime becomes competitive.
Rs.20 lakh, without both HRA and home loan: New regime wins. The slab structure advantage is too powerful.
Rs.20 lakh, with high HRA and significant home loan: Old regime may win — but only if total deductions cross Rs.7.08 lakh. Run the specific calculation.
Rs.25 lakh and above: New regime wins in most cases. Old regime needs Rs.8 lakh in deductions to be competitive. That level requires very high rent, large home loan interest, plus all other deductions fully utilised.
Senior citizens below Rs.12 lakh income: New regime. The 87A rebate eliminates tax entirely. The higher basic exemption and 80TTB in the old regime cannot match this.
Self-employed with education loan, large 80G donations, or significant medical expenses: Old regime may still make sense — the unlimited 80E deduction and 80G are available only there.
Stop Asking the Wrong Question
Stop asking “which regime is better?” It has no universal answer.
The right question is: “What are my actual deductions, and do they cross the break-even threshold for my income level?”
Use the break-even table above. Find your income row. Add up your actual deductions — HRA, home loan interest, 80C, NPS, health insurance. If they cross the break-even number, old regime is worth a detailed calculation. If not, go with the new regime without hesitation.
That is 30 minutes of work. It could save you anywhere between Rs.20,000 and Rs.1 lakh this year.
Note: All calculations are for individuals below 60 years, FY 2026-27 (AY 2027-28). The Income Tax Act 2025 is in effect from 1st April 2026, replacing the Income Tax Act 1961. Deduction references correspond to the equivalent provisions under the new Act. Senior citizen calculations use the higher basic exemption under the old regime. The 87A rebate is not applicable on special rate income such as STCG (Section 111A), LTCG (Section 112A), and online gaming income. Please consult a qualified tax professional for advice specific to your situation.
Mr. Basu, this article was very helpful and consider this could enable lot of corporate salaried guys to be more accurate in their decisions.
Dear Siddesh,
My pleasure 🙂
Superb, very informative article. Please share so.ilar article for Superannuated individuals too.
Dear Dr.Uma,
Thanks. Sure I will write an article on your suggestion too.
Very useful and clear information.
Thanking you.
Regards
Dear Bhojkar,
My pleasure 🙂
One thing about Employer’s NPS Contribution — Section 80CCD(2) that is different between the Old Regime and the New Regime. As far as I understand, the maximum deduction allowed under old regime is 10% of Basic, and 14% of Basic under New Regime.
This means that, for salary above 25L, the deductions required to break-even will be 8L + 4% of Basic (assuming opting for Employer NPS).
DEar Karthick,
Yes.
Very detailed way of comparison. Thank you
Dear Cherish,
Thanks for your kind words 🙂
Very nice and detailed way of explanation the impact on tax between old and new regime.
While new tax regimes win in all the cases (except few here and there), old regime requires very high investment in eligible avenues (which in itself is a drain on your income left to take care of your family).
Dear Kamal,
I complete agree.