Compare old vs new tax regime for FY 2026-27: slabs, deductions, Section 87A rebate up to ₹7L, ₹75K standard deduction, and how to choose the right one.
The choice between the old and the new tax regime is the single most-asked question in personal taxation for FY 2026-27. Since the Finance Act 2023 made the new regime the default and the Finance Act 2024-26 cycle further sweetened its slab structure and standard deduction, the math has shifted decisively in favour of the new regime for most taxpayers. Yet, the old regime remains the better choice for households with significant deduction footprint. Here is a clean framework for making the call.
Slab structure under the new regime for FY 2026-27
- Up to ₹3 lakh: Nil
- ₹3 lakh to ₹6 lakh: 5 per cent
- ₹6 lakh to ₹9 lakh: 10 per cent
- ₹9 lakh to ₹12 lakh: 15 per cent
- ₹12 lakh to ₹15 lakh: 20 per cent
- Above ₹15 lakh: 30 per cent
- Section 87A rebate makes income up to ₹7 lakh effectively tax-free.
- Standard deduction of ₹75,000 for salaried and pensioners.
- Surcharge cap of 25 per cent (versus 37 per cent in the old regime for HNIs).
Slab structure under the old regime
The old regime retains slabs of nil up to ₹2.5 lakh, 5 per cent from ₹2.5–5 lakh, 20 per cent from ₹5–10 lakh, and 30 per cent above ₹10 lakh. Section 87A rebate is capped at income up to ₹5 lakh. Standard deduction of ₹50,000 applies. The key advantage is the full menu of deductions and exemptions.
Major deductions available only under the old regime
- Section 80C investments up to ₹1.5 lakh (PPF, ELSS, life insurance, principal on home loan).
- Section 80D health insurance premium up to ₹25,000 (₹50,000 for senior citizens).
- Section 80CCD(1B) additional NPS contribution up to ₹50,000.
- Section 24(b) home loan interest up to ₹2 lakh for self-occupied property.
- House Rent Allowance (HRA) exemption under Section 10(13A).
- Leave Travel Allowance (LTA) exemption.
- Section 80E education loan interest, 80G donations, 80TTA savings interest.
Quick decision framework
If your total eligible deductions and exemptions (80C + 80D + HRA + 24(b) + 80CCD(1B), etc.) exceed roughly ₹3.75–4 lakh, the old regime is usually still better. Below that, the new regime wins on simpler slabs and the higher rebate. For a salaried person earning ₹15 lakh with HRA of ₹2 lakh, 80C of ₹1.5 lakh, and home loan interest of ₹2 lakh, the old regime saves materially. For a young professional with no home loan and modest 80C, the new regime is cleaner and cheaper.
Switching mechanics
Salaried taxpayers without business income can choose the regime each year while filing the ITR. Business and professional income taxpayers must file Form 10-IEA to opt out of the new regime, and the option once exercised can be revoked only once in a lifetime. Plan your TDS declaration with the employer accordingly — over-deduction is recoverable as refund, but cash flow during the year matters.
Conclusion
There is no universally beneficial regime — only a regime that matches your financial life. Pull out your salary slip, home loan statement, insurance and PPF receipts, and run the side-by-side calculation each year. For FY 2026-27, the new regime is the comfortable default; the old regime remains a powerful planning tool for taxpayers with substantial deductions.
