For FY 2026–27, two tax regimes are available to Indian taxpayers — the New Tax Regime and the Old Tax Regime. Choosing the right one can save you thousands of rupees every year. This guide breaks down every difference clearly.
New Tax Regime — Slabs 2026–27
The new regime tax slab for FY 2026–27 offers lower rates with no deductions (except standard deduction of ₹75,000 for salaried employees). Income up to ₹12 lakh is effectively tax-free after Section 87A rebate.
| Annual Taxable Income | Tax Rate | Max Tax on Slab |
|---|---|---|
| Up to ₹3,00,000 | NIL | ₹0 |
| ₹3,00,001 – ₹7,00,000 | 5% | ₹20,000 |
| ₹7,00,001 – ₹10,00,000 | 10% | ₹30,000 |
| ₹10,00,001 – ₹12,00,000 | 15% | ₹30,000 |
| ₹12,00,001 – ₹15,00,000 | 20% | ₹60,000 |
| Above ₹15,00,000 | 30% | On balance |
* Section 87A rebate: net taxable income up to ₹12,00,000 = zero tax. Salaried employees also get ₹75,000 standard deduction, so gross salary up to ₹12,75,000 may be tax-free.
Old Tax Regime — Slabs 2026–27
The old regime has higher slab rates but allows a wide range of deductions — 80C, HRA, home loan interest, 80D, and more — which can significantly reduce your taxable income.
| Annual Taxable Income | Tax Rate | Key Note |
|---|---|---|
| Up to ₹2,50,000 | NIL | Basic exemption limit |
| ₹2,50,001 – ₹5,00,000 | 5% | 87A rebate if income ≤ ₹5L |
| ₹5,00,001 – ₹10,00,000 | 20% | Deductions reduce taxable income |
| Above ₹10,00,000 | 30% | + 4% health & education cess |
New vs Old — What Each Regime Offers
Simpler. Lower base rates.
- Zero tax up to ₹12 lakh (87A rebate)
- Standard deduction ₹75,000
- No 80C, HRA or home loan deduction
- Default regime from FY 2023–24
- NPS employer contribution allowed
- Ideal for those with few investments
More deductions available.
- Section 80C up to ₹1,50,000
- HRA exemption available
- Home loan interest up to ₹2,00,000
- 80D medical insurance deduction
- LTA, professional tax, NPS
- Better for high-deduction taxpayers
Deductions — New Regime vs Old Regime
| Deduction / Exemption | Old Regime | New Regime |
|---|---|---|
| Section 80C (PPF, ELSS, LIC) | Up to ₹1,50,000 | Not allowed |
| HRA Exemption | Allowed | Not allowed |
| Home Loan Interest (Sec 24b) | Up to ₹2,00,000 | Not allowed |
| Standard Deduction | ₹50,000 | ₹75,000 ✓ |
| Section 80D (Medical Insurance) | Up to ₹50,000 | Not allowed |
| Employer NPS (80CCD2) | Allowed | Allowed ✓ |
| LTA (Leave Travel Allowance) | Allowed | Not allowed |
Which Tax Regime Should You Choose?
Quick decision guide for FY 2026–27
Your total deductions are below ₹1.5–2 lakh. No home loan, no HRA, or minimal 80C investments.
You have ₹2.5 lakh+ in deductions — 80C, home loan interest, HRA, and insurance premiums combined.
New regime is almost always better — no home loan, fewer investments, and simpler ITR filing.
Old regime likely saves more. Home loan interest + 80C alone can exceed ₹3.5 lakh in deductions.
Calculate your tax liability under both regimes using your actual income and deductions. The regime with the lower tax outgo is the right choice. Consulting a CA is always the best approach.
Frequently Asked Questions
- Can I switch between new and old tax regime every year?
- Salaried employees can switch between regimes each year at the time of filing their ITR. However, individuals with business or professional income can switch only once — from old to new — and cannot revert.
- What is the new regime tax slab for FY 2026–27?
- NIL up to ₹3L, 5% for ₹3–7L, 10% for ₹7–10L, 15% for ₹10–12L, 20% for ₹12–15L, and 30% above ₹15L. With 87A rebate, income up to ₹12 lakh is effectively tax-free.
- How do I use an income tax calculator for the new regime?
- Subtract ₹75,000 standard deduction from your gross salary to get net taxable income. Apply the new regime slabs to this amount. Check if 87A rebate applies (taxable income ≤ ₹12L), then add 4% cess.
- Is standard deduction available in the new tax regime?
- Yes. Salaried employees and pensioners get a standard deduction of ₹75,000 under the new regime — higher than the ₹50,000 available in the old regime.
Conclusion
The new tax regime for FY 2026–27 is significantly more attractive than before — especially for salaried individuals with limited deductions. The ₹75,000 standard deduction, revised slabs, and 87A rebate make it a compelling default for most earners up to ₹12–15 lakh.
That said, if you actively invest in PPF, ELSS, or hold a home loan, the old regime may still deliver a lower total tax outgo. The right answer depends entirely on your personal deduction profile — so run both calculations before you decide.