Money and tax
Old vs New Tax Regime for FY 2026-27: Worked Examples
By the AllToolsDesk team · Updated
Every salaried taxpayer in India chooses between two ways of calculating income tax. The new regime has lower rates and almost no deductions. The old regime has higher rates but lets you subtract investments, insurance, rent and home loan interest. Which one is cheaper depends entirely on how much you can deduct.
Budget 2026 kept the rates from the previous year, so the figures below apply to income earned from 1 April 2026 to 31 March 2027. The Income-tax Act, 2025 took effect on the same date and renumbered most sections (the old 80C deduction is now section 123, with the same ₹1.5 lakh limit), but the familiar names are used here because that is still how employers and investment proofs refer to them.
Tax slabs for FY 2026-27
| Taxable income | Rate |
|---|---|
| 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% |
| Taxable income | Rate |
|---|---|
| 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% |
Both regimes add 4% health and education cess on the tax. Salaried people get a standard deduction of ₹75,000 in the new regime and ₹50,000 in the old one.
The ₹12 lakh rebate
In the new regime, if taxable income is ₹12 lakh or less, a rebate of up to ₹60,000 cancels the tax completely. With the ₹75,000 standard deduction, a salary of up to ₹12.75 lakh pays no income tax. Just above that line, marginal relief makes sure the tax is never more than the income above ₹12 lakh.
The old regime's rebate is much smaller: up to ₹12,500, for taxable income of ₹5 lakh or less.
Three worked examples
All three people are under 60, earn only salary, and have no capital gains. Figures are from our Income Tax Calculator.
| Salary | Deductions in old regime | New regime | Old regime | |
|---|---|---|---|---|
| Anita | ₹12,75,000 | — | ₹0 | — |
| Rahul | ₹15,00,000 | ₹2,25,000 (80C ₹1.5 lakh, 80D ₹25,000, NPS ₹50,000) | ₹97,500 | ₹1,87,200 |
| Priya | ₹15,00,000 | ₹6,05,000 (Rahul's, plus HRA ₹1.8 lakh and home loan interest ₹2 lakh) | ₹97,500 | ₹84,760 |
Rahul in the new regime: ₹15,00,000 − ₹75,000 = ₹14,25,000 taxable. Tax is 5% of ₹4 lakh (₹20,000) + 10% of ₹4 lakh (₹40,000) + 15% of ₹2.25 lakh (₹33,750) = ₹93,750, plus 4% cess = ₹97,500.
Rahul in the old regime: ₹15,00,000 − ₹50,000 − ₹2,25,000 = ₹12,25,000 taxable. Tax is 5% of ₹2.5 lakh (₹12,500) + 20% of ₹5 lakh (₹1,00,000) + 30% of ₹2.25 lakh (₹67,500) = ₹1,80,000, plus cess = ₹1,87,200. The new regime saves him ₹89,700.
Priya has the same salary but pays rent and a home loan. Her old-regime taxable income falls to ₹8,45,000, and her tax to ₹84,760, which is ₹12,740 less than the new regime.
A quick way to decide
- If your salary is ₹12.75 lakh or less, the new regime costs nothing in tax. Choose it.
- If your only deductions are 80C and a health insurance premium, the new regime almost always wins.
- The old regime starts to win when large HRA exemption and home loan interest are added on top of 80C. For a ₹15 lakh salary, deductions other than the standard deduction need to exceed about ₹5.4 lakh.
- Salaried people can switch every year. Tell your employer at the start of the year, and you can still change the choice when filing your return.
This guide is general information, not tax advice. Surcharge applies above ₹50 lakh, and capital gains, business income and senior-citizen slabs follow different rules. Check your own figures in the calculator, and with a tax professional for complex cases.