New vs Old Tax Regime FY 2026-27: Which Saves More?

For most salaried people in FY 2026-27, the new tax regime results in lower or equal tax. The old regime only wins if your deductions and exemptions are large. At ₹15 lakh salary you need about ₹5.4 lakh of them, and from ₹25 lakh salary upward you need ₹8 lakh. Below is the exact math, a breakeven table, and a simple way to decide.

What changed for FY 2026-27

The Income-tax Act, 2025 replaced the Income-tax Act, 1961 from 1 April 2026, so FY 2026-27 is the first "tax year" under the new law. The rates did not change, but the section numbers did:

• The new (default) regime is now Section 202 (old Section 115BAC).
• The rebate that makes income up to ₹12 lakh tax-free is now Section 156 (old Section 87A).
• The deductions you know as 80C, 80CCD and 80D now sit in Chapter VIII as Section 123 (old 80C), Section 124 (old 80CCD) and Section 126 (old 80D).

Returns for FY 2025-26 (filed in 2026) still cite the old 1961 Act numbers. Only income earned from 1 April 2026 falls under the new numbering.

Slabs side by side

Other key differences:

• Standard deduction for salary/pension: ₹75,000 (new) vs ₹50,000 (old).
• Rebate: Up to ₹60,000 in the new regime, so tax is nil up to ₹12 lakh taxable income (₹12.75 lakh salary). In the old regime the rebate is up to ₹12,500, so tax is nil up to ₹5 lakh taxable income.
• Cess: A 4% health and education cess is added to tax (plus any surcharge) under both regimes.
• Surcharge: It applies above ₹50 lakh income in both regimes. The top rate is capped at 25% in the new regime, while the old regime goes up to 37% above ₹5 crore.

For a full breakdown of each slab, see income tax slabs for FY 2026-27.

What you give up in the new regime

The new regime trades deductions for lower rates. These are not available in it:

• Section 123 (old 80C): EPF, PPF, ELSS, life insurance, home loan principal, tuition fees and similar, up to ₹1.5 lakh
• Section 124 self-contribution to NPS (old 80CCD(1B)): an extra ₹50,000
• Section 126 (old 80D): health insurance premiums
• Interest on a home loan for a self-occupied house (old Section 24(b)): up to ₹2 lakh
• HRA and LTA exemptions
• Most other Chapter VIII deductions (education loan interest, donations and so on)

What still works in the new regime:

• The ₹75,000 standard deduction
• The employer's contribution to your NPS account (old 80CCD(2))
• Interest on a home loan for a let-out property, set against rent from that property

Breakeven deductions: the decision table

The fairest comparison asks how much in deductions and exemptions you need under the old regime for its tax to match the new regime. The table below is for a resident salaried individual below 60. "Deductions needed" means everything you claim on top of the ₹50,000 standard deduction: 80C, 80D, NPS, home loan interest, HRA exemption and so on.

Three patterns stand out:

1. Up to ₹12.75 lakh salary, the new regime almost always wins. Its tax is zero, so the old regime can only tie. A tie needs enough deductions to bring old-regime taxable income down to ₹5 lakh.
2. Between ₹15 and ₹24 lakh, the breakeven rises from about ₹5.4 lakh to ₹8 lakh. The new regime's middle slabs (10–25%) are much gentler than the old regime's 20% and 30%.
3. From about ₹24.75 lakh salary onward, the breakeven is flat at ₹8 lakh. Both regimes charge 30% at the margin there, so the gap stops changing. Cess scales both figures by the same 4%, so it does not move the breakeven point.

Above ₹50 lakh, surcharge enters the picture and its cap differs between regimes, so run your own figures through the income tax calculator.

Worked example: ₹20 lakh salary

Priya earns ₹20 lakh a year. She claims ₹1.5 lakh under old 80C, ₹25,000 under old 80D, ₹50,000 in NPS under old 80CCD(1B), ₹2 lakh of home loan interest and a ₹2.4 lakh HRA exemption. That is ₹6.65 lakh in total.

New regime

• Taxable income: ₹20,00,000 − ₹75,000 = ₹19,25,000
• Tax: ₹20,000 (4–8L) + ₹40,000 (8–12L) + ₹60,000 (12–16L) + ₹65,000 (20% of ₹3.25L) = ₹1,85,000
• Plus 4% cess (₹7,400) = ₹1,92,400

Old regime

• Taxable income: ₹20,00,000 − ₹50,000 − ₹6,65,000 = ₹12,85,000
• Tax: ₹12,500 (2.5–5L) + ₹1,00,000 (5–10L) + ₹85,500 (30% of ₹2.85L) = ₹1,98,000
• Plus 4% cess (₹7,920) = ₹2,05,920

Even with ₹6.65 lakh of deductions, Priya pays ₹13,520 more under the old regime. She would need about ₹43,000 more in deductions (roughly ₹7.08 lakh in total) just to break even.

Marginal relief just above ₹12 lakh

In the new regime, someone with taxable income slightly above ₹12 lakh loses the full ₹60,000 rebate. Without relief, ₹10,000 of extra income would trigger ₹61,500 of tax. Marginal relief caps the tax at the amount by which income exceeds ₹12 lakh. At ₹12.1 lakh taxable income, tax is therefore ₹10,000 plus 4% cess, or ₹10,400.

The relief fades out at about ₹12,70,588 of taxable income. At that point normal slab tax (₹60,000 + 15% of the excess) equals the excess itself. For salaried people this is roughly ₹13.46 lakh gross salary. Marginal relief is available only to resident individuals, and only under the new regime.

How to decide in three steps

1. Total your real deductions and exemptions. Count only money you would spend or invest anyway: EPF, rent you actually pay, an existing home loan, health insurance.
2. Compare that figure with the breakeven for your salary in the table above.
3. If you are close, lean towards the new regime. It keeps your money liquid and avoids tax-driven lock-ins. Investing just to claim a deduction rarely makes sense when the new regime already taxes you less.

Salaried individuals without business income can choose the regime each year when filing their return. The choice you give your employer for TDS does not lock you in. If you go with the old regime, read our guide to tax-saving options under 80C to use the ₹1.5 lakh limit well.

Key takeaways

• From FY 2026-27 the new regime is Section 202 of the Income-tax Act, 2025, and the old 80C/80D deductions are Sections 123/126.
• The new regime gives nil tax up to ₹12 lakh taxable income (₹12.75 lakh salary). Marginal relief applies up to about ₹12.71 lakh of taxable income.
• The old regime breaks even only with large deductions: about ₹5.4 lakh at ₹15 lakh salary, rising to ₹8 lakh from roughly ₹25 lakh upward.
• 4% cess applies under both regimes and does not change the breakeven point.
• Re-check every year. Your salary, rent and loans change, and salaried taxpayers can switch regimes at filing time.