New vs Old Tax Regime 2026: Which One Should You Choose?
Every April, salaried India faces the same fork: stick with the old tax regime and its deductions, or take the new regime's lower rates and walk away from HRA, 80C and the rest. For FY 2026-27 the answer is clearer than ever for most people, but "most people" isn't "everyone." Here's the decision, with real numbers.
The short answer
If your taxable income is up to ₹12 lakh, the new regime makes your income tax zero via the Section 87A rebate. The old regime can't beat that unless your deductions are enormous. Above that, the new regime's wider slabs and ₹75,000 standard deduction still win unless you genuinely claim roughly ₹4 lakh+ per year in combined deductions (HRA exemption, 80C, 80D, home-loan interest). Big-city renters with a home loan are the main group that should still run the old regime's numbers carefully.
What actually differs
| New regime (default) | Old regime | |
|---|---|---|
| Slab rates | Nil up to ₹4L, then 5–30% in ₹4L steps (30% above ₹24L) | Nil up to ₹2.5L, 5% to ₹5L, 20% to ₹10L, 30% above |
| Standard deduction | ₹75,000 | ₹50,000 |
| 87A rebate | Full rebate if taxable income ≤ ₹12L | Up to ₹12,500 if taxable income ≤ ₹5L |
| HRA, 80C, 80D, home-loan interest | Not available | Available |
| Cess | 4% on tax | 4% on tax |
Side by side, by CTC
Monthly in-hand under each regime, assuming a standard structure (50% basic, employer PF and gratuity inside CTC, ₹2,500/year professional tax, and no deductions beyond employee PF in the old regime):
| Annual CTC | New regime /month | Old regime /month | Winner (saves/yr) |
|---|---|---|---|
| ₹8,00,000 | ₹56,855 | ₹53,436 | New (₹41,030) |
| ₹10,00,000 | ₹71,121 | ₹64,734 | New (₹76,638) |
| ₹12,00,000 | ₹85,387 | ₹76,033 | New (₹1,12,245) |
| ₹15,00,000 | ₹1,00,299 | ₹90,953 | New (₹1,12,152) |
| ₹20,00,000 | ₹1,29,330 | ₹1,15,491 | New (₹1,66,078) |
| ₹25,00,000 | ₹1,56,126 | ₹1,40,028 | New (₹1,93,174) |
| ₹30,00,000 | ₹1,80,685 | ₹1,63,785 | New (₹2,02,800) |
Figures computed with InHandPay's FY 2026-27 engine. Old-regime column improves if you claim HRA, 80C beyond PF, or home-loan interest.
When the old regime still wins
The old regime is a deductions game. It beats the new regime only when the extra tax from its higher slab rates is outweighed by what you can subtract from taxable income. In practice that means stacking several of these:
- HRA exemption: the big one for metro renters; can easily be ₹1–3L/year.
- 80C (₹1.5L cap): EPF, PPF, ELSS, life insurance, home-loan principal.
- Home-loan interest (Sec 24): up to ₹2L/year on a self-occupied house.
- 80D health insurance: ₹25,000–₹1,00,000 depending on age and parents' cover.
- NPS 80CCD(1B): an extra ₹50,000 over the 80C cap.
If that list realistically totals under ~₹4 lakh for you, stop optimizing: take the new regime, skip the paperwork, and invest on merit rather than for tax receipts.
Two things people get wrong
- "₹12 lakh tax-free" means taxable income, not CTC. Thanks to the ₹75,000 standard deduction, and because employer PF and gratuity inside your CTC aren't taxable pay, a CTC of roughly ₹13.5–14 lakh can still land under the rebate line.
- The regime choice is per-year, not permanent. Salaried taxpayers without business income can switch every year at filing time. Pick whichever wins for that year's numbers.
Run your own numbers
Enter your CTC and see both regimes side by side, with the winner flagged, in 10 seconds.
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