New vs Old Tax Regime for FY 2026-27: Which Is Better for Salaried People?

Every salaried person in India has to choose between two ways of paying income tax: the new regime, with lower rates and few deductions, and the old regime, with higher rates but many deductions. For FY 2026-27 (assessment year 2027-28), the slabs are the same as FY 2025-26, and the new regime has a generous rebate. Here is how the two compare and how to decide.

You can run your own numbers in the free income tax calculator or, if you only know your CTC, in the salary calculator. Both work in your browser and nothing is stored.

The slabs for FY 2026-27

New regime (default)

The standard deduction is ₹75,000. Under Section 87A, there is no tax if taxable income is ₹12 lakh or less, with marginal relief just above that limit. So a salaried person can pay no tax on a salary of up to about ₹12.75 lakh.

Old regime

The standard deduction is ₹50,000, and there is no tax if taxable income is ₹5 lakh or less. The old regime lets you claim many deductions: HRA, Section 80C (up to ₹1.5 lakh), 80D health insurance, NPS under 80CCD(1B) (up to ₹50,000) and home loan interest (up to ₹2 lakh on a self-occupied home). Both regimes add 4% health and education cess.

Five worked comparisons

These examples use our calculator's standard assumptions: a metro city, professional tax of ₹2,400 a year, and the CTC converted to taxable salary using a typical structure (40% basic, HRA at 50% of basic, employee PF at 12% of basic up to the yearly cap). They include 4% cess and leave out surcharge. They are estimates, not tax advice.

In every one of these, the new regime left more money in hand. The reason is the combination of a higher basic exemption, a ₹12 lakh rebate limit and lower slab rates. For the old regime to win, you usually need a large total of deductions. In the ₹18 lakh example with rent, the old regime would need roughly ₹1.7 lakh more in deductions to match the new regime.

When the old regime can still win

• You have a large home loan with high interest and also invest the full ₹1.5 lakh under 80C.
• You pay high rent in one of the eight cities with the 50% HRA limit and your HRA is large.
• You also claim NPS, health insurance for parents and other deductions.

As a rule of thumb, add up all your old-regime deductions. If the total is small compared with the extra tax the old slabs charge, choose the new regime. Our calculator shows the break-even amount of extra deductions the old regime would need.

HRA and the eight cities

HRA exemption is available only under the old regime. From FY 2026-27, the higher 50% of basic limit applies to Delhi, Mumbai, Kolkata, Chennai, Bengaluru, Hyderabad, Pune and Ahmedabad. Bengaluru, Hyderabad, Pune and Ahmedabad were added by the Income-tax Rules, 2026, which came into force on 1 April 2026. Other places use 40%. Try the HRA calculator to see how much of your HRA is exempt.

How to choose and tell your employer

1. Enter your salary and any deductions in the income tax calculator.
2. Compare the tax and the monthly in-hand pay under both regimes.
3. Tell your employer which regime to use when they ask for your declaration, so that tax is deducted correctly from your salary.
4. Keep proofs of investments, rent and loan interest if you pick the old regime.
5. Recheck when your salary, rent or loans change, because the better regime can change.

Long-term savings can also be part of the picture. The PPF calculator shows how a yearly deposit grows, and note that PPF counts under 80C only in the old regime.

What the estimates leave out

Our figures leave out surcharge (it applies at higher incomes, above ₹50 lakh), senior citizen slabs, capital gains, and income from other sources. Rules can change in each Union Budget, so confirm the current rates on the Income Tax Department's website and speak to a tax professional for your own case.