New vs Old Tax Regime 2026-27: Which Should You Choose?

India has two income tax regimes for individuals. The new regime has lower rates and a bigger rebate, but allows almost no deductions. The old regime has higher rates, but lets you subtract tax-saving investments, health insurance, home loan interest and more.

The new regime applies unless you choose the old one. So the real question is whether your deductions are big enough to make the old regime worth choosing. This guide explains both regimes for tax year 2026-27, compares them at common salaries and shows the break-even figure that settles it. All figures are for a resident under 60 whose income is salary, and come from our income tax calculator.

How the new regime works

For tax year 2026-27, income tax falls under the Income-tax Act, 2025, in force from 1 April 2026. Budget 2026 left the rates unchanged.

Salaried people get a ₹75,000 standard deduction. Residents also get a rebate of up to ₹60,000, which makes taxable income of up to ₹12 lakh tax-free. Put the two together and a salary of up to ₹12.75 lakh pays no income tax at all.

Marginal relief above ₹12 lakh

Without help, earning one rupee more than ₹12 lakh would cost you the whole rebate. Marginal relief prevents that by capping your tax at the income above ₹12 lakh.

Take a ₹13 lakh salary. Taxable income is ₹12.25 lakh, and the slabs would charge ₹63,750. Marginal relief cuts that to ₹25,000, the amount above ₹12 lakh, and 4% health and education cess brings the bill to ₹26,000. The relief runs out at about ₹12.7 lakh of taxable income, a salary of about ₹13.45 lakh. Above that, normal slab tax applies.

How the old regime works

The nil band rises to ₹3 lakh for residents aged 60 to 79, and to ₹5 lakh at 80 or older. A rebate of up to ₹12,500 makes taxable income of up to ₹5 lakh tax-free. The standard deduction for salary is smaller, at ₹50,000.

In return for its higher rates, the old regime allows deductions that the new regime does not. The main ones are:

• Tax-saving investments of up to ₹1.5 lakh a year, including PPF deposits and home loan principal
• Health insurance premiums, commonly up to ₹25,000 (₹50,000 for senior citizens), plus a separate limit for premiums you pay for your parents
• An extra ₹50,000 for your own NPS contributions
• Home loan interest on a home you live in, up to ₹2 lakh a year

Both regimes add 4% cess. Above ₹50 lakh of income there is also a surcharge of 10%, rising to 15% above ₹1 crore and 25% above ₹2 crore. Only the old regime goes higher, to 37% above ₹5 crore.

New vs old regime at common salaries

This table assumes ₹1.5 lakh of tax-saving investments and ₹25,000 of health insurance in the old regime, ₹1.75 lakh of deductions in all. Tax includes cess. The last column is the break-even, explained in the next section.

With these typical deductions, the new regime is cheaper at every salary in the table: by ₹70,200 at ₹10 lakh, and by ₹1,95,000 at ₹25 lakh and ₹30 lakh. For every salary from ₹5 lakh to ₹50 lakh, see income tax by salary.

The break-even: how much in deductions you need

New-regime tax depends only on your salary. Old-regime tax falls as your deductions rise. At some level of deductions the two bills are equal, and that is the break-even. Claim more than that, on top of the standard deduction, and the old regime costs less. Claim less, and the new regime wins.

The break-even follows a clear pattern as salary rises:

• Up to ₹12.75 lakh, the new regime charges nothing, so the old regime can at best tie. The break-even is whatever brings old-regime taxable income down to ₹5 lakh: ₹4.5 lakh of deductions on a ₹10 lakh salary, ₹7.25 lakh on ₹12.75 lakh.
• Just above ₹12.75 lakh, it drops sharply as new-regime tax starts, reaching its lowest point of about ₹5.05 lakh at a salary of about ₹13.45 lakh.
• It then climbs again, to ₹5,43,750 at ₹15 lakh and ₹7,08,333 at ₹20 lakh.
• From ₹24.75 lakh it levels off at ₹8 lakh and stays there up to ₹50 lakh, because both regimes then tax each extra rupee at 30%.

Now add up the four main deductions at their limits for someone under 60: ₹1.5 lakh + ₹25,000 + ₹50,000 + ₹2 lakh comes to ₹4.25 lakh. That is below the break-even at every salary from ₹12.75 lakh to ₹50 lakh, and at lower salaries the old regime can only tie. So for a salaried person under 60, those four on their own never make the old regime cheaper, at any salary up to ₹50 lakh. It takes more on top, such as health insurance for your parents or other deductions you claim, to cross the line.

Here is how that plays out on a ₹15 lakh salary:

Only the last row beats the new regime, and only by ₹6,500. On ₹20 lakh the break-even is ₹7,08,333. With ₹7.25 lakh of deductions there, the old regime would save just ₹5,200.

Who might still prefer the old regime

The old regime tends to suit people whose deductions are large and already being paid, such as:

• someone repaying a loan on the home they live in, with close to ₹2 lakh a year of interest, who also fills the ₹1.5 lakh investment limit
• someone paying health insurance premiums for themselves and their parents, as well as extra NPS contributions
• someone with other deductions on top, which the calculator’s advanced fields let you enter

Age changes little by itself. A 60-year-old on ₹15 lakh with ₹1.75 lakh of deductions pays ₹2,00,200 under the old regime, ₹2,600 less than someone younger, against ₹97,500 under the new regime.

It is also worth being wary of spending money just to claim a deduction. At the 30% slab, a ₹10,000 deduction saves ₹3,120 including cess, so a policy or investment you would not otherwise want rarely pays for itself.

Making the choice

• Start from the default. The new regime applies unless you choose the old one.
• Use real numbers. Count what you will actually invest, pay in premiums and pay in home loan interest this year, not what you might.
• Compare against the break-even. If your deductions are well below it, the new regime costs less. If they are close, a small change can tip the balance.
• Run the numbers again when your salary or deductions change, for example after taking a home loan.

For a quick answer at your salary, start with income tax by salary, such as the ₹15 lakh or ₹20 lakh pages. For your own figures, use the income tax calculator. If PPF is part of your ₹1.5 lakh, see how it compares with other options in PPF vs FD vs SIP.

Unfamiliar term? Look it up in the glossary. This guide is general information, not personal financial advice. Rules and products vary by country and lender.