New Regime vs Old Regime India FY 2026-27: Which Saves You More?

Every salaried Indian filing for FY 2026-27 faces the same fork: take the New Regime's wide slabs and ₹12 lakh rebate, or chase deductions through the Old Regime and hope they add up to more. Most advice online answers this with slogans. This guide answers it with arithmetic — slab tables, break-even deduction amounts, and worked examples from ₹8 lakh to ₹30 lakh.

First, the news from Budget 2026 (1 February 2026): nothing changed in the rates. The slabs, the ₹75,000 standard deduction, the ₹12 lakh rebate, surcharge and cess carried over from Budget 2025. What did change is the paperwork — the new regime is now Section 202 (was 115BAC), the rebate is Section 156 (was 87A), and 80C became Section 123. Same numbers, new labels.

The two slab tables side by side

New Regime (Section 202) — default

Up to ₹4,00,000	Nil
₹4,00,001 – ₹8,00,000	5%
₹8,00,001 – ₹12,00,000	10%
₹12,00,001 – ₹16,00,000	15%
₹16,00,001 – ₹20,00,000	20%
₹20,00,001 – ₹24,00,000	25%
Above ₹24,00,000	30%

+ ₹75,000 standard deduction · Sec 156 rebate (nil tax ≤ ₹12L taxable) · surcharge capped at 25%

Old Regime — with deductions

Up to ₹2,50,000	Nil
₹2,50,001 – ₹5,00,000	5%
₹5,00,001 – ₹10,00,000	20%
Above ₹10,00,000	30%

+ ₹50,000 standard deduction · 87A rebate (nil tax ≤ ₹5L taxable) · 80C/80D/HRA/home-loan deductions allowed · surcharge up to 37%

The ₹12 lakh rebate, explained properly

The headline "no tax up to ₹12 lakh" needs one layer of care: the rebate applies to taxable income, which is gross salary minus the ₹75,000 standard deduction. So a gross salary of ₹12,75,000 produces ₹12,00,000 taxable — that is the true boundary.

Just above the line, marginal relief prevents a cliff. If your taxable income is ₹12,10,000, raw slab tax would be ₹61,500 (₹60,000 base + 15% of ₹10,000) — more than the ₹10,000 by which you exceeded the threshold. Marginal relief caps the tax at exactly that excess, so you pay ₹10,000, not ₹61,500. The relief fades out by around ₹12,75,000 of taxable income.

One more boundary worth memorizing: because the standard deduction precedes the slabs, ₹12,75,000 of gross salary is the true "zero tax" line — a number most social media posts get wrong by ignoring the deduction.

Worked examples

₹8,00,000 gross: taxable ₹7,25,000 → slab tax ₹11,250 → with cess ₹11,700 (₹975/month). Old regime with no deductions: taxable ₹7,50,000 → ₹62,500 + cess. New regime wins by a mile.

₹15,00,000 gross: new regime: taxable ₹14,25,000 → ₹93,750 + ₹3,750 cess = ₹97,500. Old regime, zero deductions: taxable ₹14,50,000 → ₹2,85,000 + cess = ₹2,96,400. You would need roughly ₹4.25 lakh of eligible old-regime deductions for the old regime to catch up.

₹20,00,000 gross: new regime: taxable ₹19,25,000 → ₹2,00,000 + ₹8,000 cess = ₹2,08,000. Old regime with ₹5,00,000 of deductions (80C + HRA + home-loan interest): taxable ₹14,50,000 → ₹2,96,400. The new regime still wins; the old regime needs deductions well past ₹6 lakh here.

₹30,00,000 gross: new regime: taxable ₹29,25,000 → ₹4,87,500 + cess = ₹5,07,000 (surcharge 15% applies above ₹1 crore, 25% cap in new regime). Old regime with aggressive ₹10 lakh deductions: taxable ₹19,50,000 → ₹4,35,000 + cess. At this level with a home loan and maxed deductions, the two converge — run both numbers.

Compare your own salary

The Income Tax Calculator India computes both regimes for any salary — new regime with Sec 156 rebate and marginal relief, old regime, cess and surcharge included.

So which regime should you pick?

Gross salary under ₹13 lakh, no big deductions: New regime, every time. The rebate makes it unbeatable.
₹13-25 lakh with modest deductions: New regime unless your deductions exceed roughly ₹4.25-6 lakh — which requires maxed 80C plus substantial HRA or home-loan interest.
₹25 lakh+ with a home loan and full 80C/80D/NPS: The gap narrows; compute both. Surcharge differences (37% vs 25% cap) also tilt high earners toward the new regime.
Freelancers with business income: Different rules apply (presumptive taxation, 44ADA); this comparison covers salaried individuals only.

Common mistakes

Ignoring the standard deduction before the rebate boundary. The zero-tax line is ₹12,75,000 gross, not ₹12,00,000.
Claiming 80C in the new regime. It is simply not available — the new regime's benefit is the structure itself.
Fearing the ₹12 lakh threshold. Marginal relief means earning ₹1,000 more never costs more than ₹1,000 in slab tax near the line.
Judging by one month's TDS. Employers average the annual tax; compare annual figures only.

Frequently asked questions

What changed in income tax for FY 2026-27 (AY 2027-28)?

Budget 2026 (1 February 2026) left personal income tax untouched: the new-regime slabs, the ₹75,000 standard deduction, the ₹12 lakh Section 156 rebate with marginal relief, surcharge tiers and the 4% cess are exactly what Budget 2025 set for FY 2025-26. Only section numbers were renumbered — the new regime is now Section 202 (was 115BAC), the rebate is Section 156 (was 87A), and 80C is Section 123.

Is salary up to ₹12 lakh really tax-free under the new regime?

For resident individuals, yes — effectively. With the ₹75,000 standard deduction, a gross salary up to ₹12,75,000 yields taxable income of ₹12,00,000 or less, and the Section 156 rebate wipes out the entire slab tax at that level. Slightly above ₹12 lakh taxable, marginal relief caps the tax at the amount by which income exceeds ₹12 lakh, so there is no cliff.

How much tax on a ₹15 lakh salary under the new regime?

Taxable income = ₹15,00,000 − ₹75,000 = ₹14,25,000. Slab tax = ₹60,000 + 15% × ₹2,25,000 = ₹93,750. Add 4% cess = ₹3,750. Total ₹97,500 per year (about ₹8,125/month). No rebate applies because taxable income exceeds ₹12 lakh.

When does the old regime beat the new regime?

Only when your eligible deductions are large. As a rule of thumb, deductions (80C, 80D, HRA, home-loan interest, NPS) worth more than about ₹4.25 lakh make the old regime competitive at a ₹15 lakh salary; the break-even deduction amount grows with income. Below ₹12-13 lakh of gross salary with no major deductions, the new regime always wins.

Can I switch between regimes every year?

Salaried individuals without business income can choose a regime fresh each financial year at filing time — last year's choice does not bind this year's return. Your employer's TDS during the year follows the declaration you made at the start; the true-up happens in your ITR.

Does the ₹75,000 standard deduction apply in the old regime too?

The old regime allows a ₹50,000 standard deduction. The enhanced ₹75,000 figure applies only to the new regime. Both apply to salary and pension income before the slabs are computed.

Related tools

Income Tax Calculator India — both regimes, rebate and marginal relief built in.
Income Tax Calculator Pakistan — FBR TY 2027 slabs for Pakistani salaries.
Loan Calculator — check the EMI that fits your post-tax take-home.

Disclaimer: This guide is for informational planning only and reflects the Finance Act 2025 schedule continued by Budget 2026 for FY 2026-27 (AY 2027-28), salaried individuals, new regime per Section 202 with Section 156 rebate. Special-rate incomes (capital gains under 111A/112) are excluded from rebate calculations. Verify with the CBDT portal or a tax professional before filing.