Income Tax Planning•8 min read•Published: 2026-02-16
New vs Old Tax Regime: Which One Saves More Tax for AY 2026-27?
The New Tax Regime is the default tax regime in India featuring 7 concessional tax slabs, ₹75,000 standard deduction, and zero tax on salaried income up to ₹12.75 Lakh.
Key Financial Takeaways
- Salaried income up to ₹12.75 Lakh is 100% tax-free under New Regime (₹75k standard deduction + enhanced Section 87A rebate).
- For taxable income between ₹15L and ₹25L, the breakeven deduction point is around ₹4.5 Lakh to ₹5 Lakh.
- If your total deductions (80C + 80D + HRA + Home Loan Interest) exceed ₹4.5 Lakh, Old Regime may be beneficial; otherwise, the New Regime provides maximum savings.
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Tax Slabs Comparison for AY 2026-27 (FY 2025-26)
Here is the side-by-side slab comparison:
| Income Slab | New Regime Rate (AY 2026-27) | Old Regime Rate | Key Differences |
|---|---|---|---|
| Up to ₹2.5 Lakh | Nil | Nil | Both Nil |
| ₹2.5L to ₹4.0 Lakh | Nil | 5% | New regime exempts up to 4L |
| ₹4.0L to ₹5.0 Lakh | 5% | 5% | Same rate |
| ₹5.0L to ₹8.0 Lakh | 5% | 20% | Massive 15% discount in New Regime |
| ₹8.0L to ₹10.0 Lakh | 10% | 20% | 10% lower in New Regime |
| ₹10.0L to ₹12.0 Lakh | 10% | 30% | 20% lower in New Regime + 87A rebate makes it zero |
| ₹12.0L to ₹16.0 Lakh | 15% | 30% | 15% lower in New Regime |
| ₹16.0L to ₹20.0 Lakh | 20% | 30% | 10% lower in New Regime |
| ₹20.0L to ₹24.0 Lakh | 25% | 30% | 5% lower in New Regime |
| Above ₹24.0 Lakh | 30% | 30% | Same rate, but lower surcharge in New Regime (25% vs 37%) |
Frequently Asked Questions
Can I switch regimes every year?
Salaried individuals without business income can freely switch between New and Old regimes every financial year while filing their ITR.
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