Every salaried person has to choose between the old and the new tax regime. The new regime has lower rates and a rebate that makes income up to ₹12 lakh tax-free, but it allows almost no deductions. The old regime has higher rates but allows HRA, 80C, 80D, home loan interest and more. The right choice depends on how much you can actually claim.
New regime slabs for 2026-27
| Taxable income | Rate |
|---|---|
| Up to ₹4 lakh | Nil |
| ₹4 lakh to ₹8 lakh | 5% |
| ₹8 lakh to ₹12 lakh | 10% |
| ₹12 lakh to ₹16 lakh | 15% |
| ₹16 lakh to ₹20 lakh | 20% |
| ₹20 lakh to ₹24 lakh | 25% |
| Above ₹24 lakh | 30% |
A rebate of up to ₹60,000 makes the tax nil when taxable income is up to ₹12 lakh. Salaried people also get a standard deduction of ₹75,000, so a salary of up to ₹12.75 lakh is tax-free. The rebate does not cover income taxed at special rates, such as capital gains on shares.
Old regime slabs (below 60 years)
| Taxable income | Rate |
|---|---|
| Up to ₹2.5 lakh | Nil |
| ₹2.5 lakh to ₹5 lakh | 5% |
| ₹5 lakh to ₹10 lakh | 20% |
| Above ₹10 lakh | 30% |
The rebate in the old regime makes tax nil only up to ₹5 lakh of taxable income. The standard deduction is ₹50,000.
What each regime allows
| Item | Old regime | New regime |
|---|---|---|
| Standard deduction | ₹50,000 | ₹75,000 |
| HRA, LTA | Allowed | Not allowed |
| 80C (PF, PPF, ELSS, insurance), up to ₹1.5 lakh | Allowed | Not allowed |
| 80D health insurance | Allowed | Not allowed |
| Home loan interest on a self-occupied house, up to ₹2 lakh | Allowed | Not allowed |
| Education loan interest | Allowed | Not allowed |
| Employer's contribution to NPS | Allowed | Allowed |
Worked examples: when does the old regime win?
The table shows the tax in the new regime, including 4% cess, and the total deductions you would need in the old regime, including the ₹50,000 standard deduction, just to pay the same tax.
| Gross salary | Tax in new regime | Deductions needed in old regime to break even |
|---|---|---|
| ₹10 lakh | Nil | ₹5 lakh |
| ₹12 lakh | Nil | ₹7 lakh |
| ₹15 lakh | ₹97,500 | About ₹5.94 lakh |
| ₹20 lakh | ₹1,92,400 | About ₹7.58 lakh |
| ₹25 lakh | ₹3,19,800 | ₹8.5 lakh |
Example: at a ₹15 lakh salary, someone claiming HRA of ₹2 lakh, 80C of ₹1.5 lakh and 80D of ₹25,000 has total deductions of ₹4.25 lakh with the standard deduction. Their old regime tax is about ₹1,40,400, against ₹97,500 in the new regime, so the new regime is better. With a home loan adding ₹2 lakh of interest, the deductions cross ₹5.94 lakh and the old regime starts to win.
How to choose
- Add up what you can actually claim, not what you could claim in theory. Count rent you really pay and investments you really make.
- Salaried people can switch every year when filing the return, whatever they told the employer for TDS.
- People with business income have only one switch: once they opt out of the new regime by filing Form 10-IEA, they can return to it only one time and cannot opt out again. Choose carefully.
- The new regime is the default. To use the old regime you must choose it in a return filed by the due date.
Frequently asked questions
Which tax regime is better for 2026-27?
For most salaried people earning up to ₹12.75 lakh, the new regime is better because the tax is nil. Above that, the old regime is better only if total deductions are large, roughly ₹5.9 lakh or more at a ₹15 lakh salary.
Is income up to ₹12 lakh tax-free in the new regime?
Yes. A rebate of up to ₹60,000 makes the tax nil when taxable income is up to ₹12 lakh. With the ₹75,000 standard deduction, a salary of up to ₹12.75 lakh is tax-free. The rebate does not cover income taxed at special rates, such as capital gains on shares.
Can I switch between the old and new tax regime every year?
Salaried people without business income can choose either regime each year when filing the return. People with business income have only one switch: after opting out of the new regime, they can return to it only once.
Is HRA allowed in the new tax regime?
No. HRA, LTA, 80C, 80D and home loan interest on a self-occupied house are not allowed in the new regime. The standard deduction of ₹75,000 and the employer’s NPS contribution are allowed.
How Vitt-Marg helps
We handle income-tax returns, capital gains computation, tax planning, GST and ROC compliance for individuals, businesses and companies across Noida, Ghaziabad and Delhi NCR. Send us your broker statements or documents and we will tell you exactly what you owe and how to file it correctly.
General information, current as of 8 November 2026, not advice for a specific case. Due dates and fees change with MCA and CBDT notifications. Check with us before acting on it.