India income tax: new vs old regime explained (FY 2026-27)

By Zulu Calculator · Updated 19 October 2026 · Money

India has two income tax regimes for tax year 2026-27 (FY 2026-27). The new regime is the default: lower slab rates, a ₹75,000 standard deduction and no tax at all on taxable income up to ₹12 lakh, but almost no deductions. The old regime has higher rates and a ₹50,000 standard deduction, but lets you claim 80C, 80D, HRA, home-loan interest and more. On a salary of ₹15 lakh with ₹1.5 lakh invested under 80C, the new regime costs ₹97,500 and the old one ₹2,10,600, so the new regime saves ₹1,13,100.

This guide explains both sets of slabs, the rebate, cess and surcharge, and how to tell which regime suits you. To run your own numbers, use the India income tax calculator, which shows both regimes side by side.

What are the new regime tax slabs for FY 2026-27?

Budget 2026 kept the slabs, rebate and standard deduction from Budget 2025. From 1 April 2026 the rules sit in the Income-tax Act 2025. In the new regime the slabs are the same at every age.

Each rate applies only to the slice of income inside that band. Someone with ₹14,25,000 of taxable income pays nothing on the first ₹4 lakh, 5% on the next ₹4 lakh, 10% on the next ₹4 lakh and 15% on the last ₹2,25,000.

Salaried people and pensioners take the ₹75,000 standard deduction off their salary first. The only other common deduction allowed is your employer’s NPS contribution, up to 14% of basic + DA.

Is income up to ₹12 lakh really tax-free?

In the new regime, yes, for resident individuals. If your taxable income is ₹12 lakh or less, a rebate of up to ₹60,000 cancels the tax completely. Add the ₹75,000 standard deduction and a salary of up to ₹12.75 lakh pays nothing. This assumes all your income is taxed at normal slab rates; special-rate income such as capital gains is left out of this guide and our calculator.

Just above ₹12 lakh, marginal relief stops a cliff edge: your tax (before cess) is never more than the amount by which your taxable income goes over ₹12 lakh. Without it, earning ₹1 over the limit would cost you ₹60,000.

The old regime has its own, much smaller rebate: up to ₹12,500 off if taxable income is ₹5 lakh or less, with no marginal relief.

What are the old regime slabs?

The old regime’s slabs depend on your age:

The jump from 5% to 20% at ₹5 lakh, and to 30% at ₹10 lakh, is why the old regime costs so much more unless you cut your taxable income a lot.

Which deductions does the old regime allow?

These are the main ones, with the yearly limits the calculator uses. None of them (except employer NPS) count in the new regime.

• Standard deduction: ₹50,000 on salary or pension.
• 80C: up to ₹1,50,000 for EPF, PPF, ELSS, life insurance, tuition fees, home-loan principal, 5-year FDs, NSC and SSY.
• 80CCD(1B): up to ₹50,000 more for your own NPS, on top of 80C.
• 80CCD(2): employer’s NPS, up to 10% of basic + DA (14% for government staff).
• 80D: health insurance, ₹25,000 for you and family (₹50,000 if you are 60+), plus ₹25,000 for parents (₹50,000 if they are 60+).
• 24(b): interest on a loan for the home you live in, up to ₹2,00,000.
• HRA exemption if you rent: the least of the HRA you get, rent minus 10% of basic + DA, and 50% of basic + DA (in Delhi, Mumbai, Kolkata, Chennai, Bengaluru, Hyderabad, Pune or Ahmedabad) or 40% elsewhere. The last four cities were added to the 50% list from 1 April 2026 under the Income-tax Rules 2026; check that your employer applies this. The India HRA calculator works this out.
• Others: 80E education loan interest (no limit, for up to 8 years), 80G donations, 80TTA savings interest up to ₹10,000 (under 60) or 80TTB interest up to ₹50,000 (60+), and professional tax up to ₹2,500.

How is income tax worked out in each regime?

New regime: taxable income = salary − ₹75,000 + other income − employer’s NPS
Old regime: taxable income = salary − HRA and other exemptions − ₹50,000 − professional tax − home-loan interest + other income − 80C, 80D, NPS and other deductions
tax = each slab’s slice of taxable income × that slab’s rate, added up
then take off any rebate, add any surcharge
total = (tax + surcharge) × 1.04

The last step is the 4% health and education cess, charged on the tax plus any surcharge in both regimes.

The surcharge only touches high incomes: 10% of the tax when taxable income is over ₹50 lakh, 15% over ₹1 crore and 25% over ₹2 crore. The new regime stops at 25%; the old regime rises to 37% above ₹5 crore. Marginal relief applies at each step, so crossing a threshold never costs more than the extra income. For example, on ₹51 lakh of taxable income in the new regime, the slab tax is ₹11,10,000; a full 10% surcharge would be ₹1,11,000, but relief cuts it to ₹70,000, for a total of ₹12,27,200 with cess.

How much tax will I pay at different salaries?

Tax for a full year on salary only, for someone under 60. The last column shows how much the old regime would need in deductions and exemptions (on top of its ₹50,000 standard deduction) just to cost the same as the new one.

Two things stand out. Up to ₹12.75 lakh, the new regime is nil, so the old regime can at best tie. And from about ₹25 lakh upwards, the old regime needs around ₹8 lakh of deductions to break even. For someone under 60, 80C, own NPS and 80D for yourself and senior parents add up to ₹2.75 lakh at most, so the rest would have to come from HRA, home-loan interest or similar.

Worked examples

Example 1: ₹13 lakh salary, just over the rebate line

New regime, no other income.

• Taxable income: ₹13,00,000 − ₹75,000 = ₹12,25,000
• Slab tax: 5% of ₹4 lakh (₹20,000) + 10% of ₹4 lakh (₹40,000) + 15% of ₹25,000 (₹3,750) = ₹63,750
• Over the ₹12 lakh limit by ₹25,000, so marginal relief caps the tax at ₹25,000 (relief of ₹38,750)
• Cess: 4% of ₹25,000 = ₹1,000
• Total: ₹26,000 a year, about ₹2,167 a month

The old regime with no deductions would charge ₹1,95,000, or ₹1,48,200 with ₹1.5 lakh in 80C.

Example 2: ₹15 lakh salary with ₹1.5 lakh in 80C

• New: ₹15,00,000 − ₹75,000 = ₹14,25,000 taxable (80C does not count). Tax = ₹20,000 + ₹40,000 + 15% of ₹2,25,000 (₹33,750) = ₹93,750. With cess of ₹3,750: ₹97,500.
• Old: ₹15,00,000 − ₹50,000 − ₹1,50,000 = ₹13,00,000 taxable. Tax = 5% of ₹2.5 lakh (₹12,500) + 20% of ₹5 lakh (₹1,00,000) + 30% of ₹3 lakh (₹90,000) = ₹2,02,500. With cess of ₹8,100: ₹2,10,600.
• The new regime saves ₹1,13,100.

To tie, the old regime would need ₹3,93,750 more in deductions, bringing old taxable income down to ₹9,06,250. Check: ₹12,500 + 20% of ₹4,06,250 (₹81,250) = ₹93,750, plus cess = ₹97,500.

Example 3: ₹20 lakh, renting in Mumbai, with heavy deductions

Basic pay ₹10,00,000, HRA ₹5,00,000, rent ₹4,80,000 a year. You claim ₹1,50,000 under 80C, ₹50,000 own NPS, ₹25,000 health insurance and ₹50,000 for senior parents’ health insurance.

• New: ₹20,00,000 − ₹75,000 = ₹19,25,000. Tax = ₹20,000 + ₹40,000 + ₹60,000 + 20% of ₹3,25,000 (₹65,000) = ₹1,85,000. With cess: ₹1,92,400.
• HRA exemption: least of ₹5,00,000 (HRA), ₹4,80,000 − ₹1,00,000 = ₹3,80,000, and 50% of basic = ₹5,00,000. So ₹3,80,000.
• Old: ₹20,00,000 − ₹3,80,000 − ₹50,000 = ₹15,70,000. Less ₹2,75,000 of deductions = ₹12,95,000 taxable. Tax = ₹12,500 + ₹1,00,000 + 30% of ₹2,95,000 (₹88,500) = ₹2,01,000. With cess of ₹8,040: ₹2,09,040.

Even with ₹7,05,000 of exemptions and deductions, the new regime is still ₹16,640 cheaper. It would take ₹53,333 more to tie. Add an education loan with ₹1,00,000 of interest a year (80E) and old taxable income drops to ₹11,95,000: tax ₹1,71,000 plus ₹6,840 cess = ₹1,77,840. Now the old regime wins by ₹14,560.

How do I decide which regime is better for me?

1. If your salary is ₹12.75 lakh or less and you have no other income, the new regime is nil. Stop there.
2. Add up what you can really claim in the old regime: HRA exemption, 80C, own NPS, 80D, home-loan interest, 80E and the rest. Count only money you would spend or invest anyway.
3. Compare that total with the break-even figure for your salary in the table above. Below it, pick the new regime. Above it, the old regime saves money.
4. Check with your own figures in the income tax calculator. It tells you exactly how much more deduction the old regime needs.

How does the regime affect TDS on my salary?

Your employer takes income tax from your pay each month as TDS. It is not an extra tax, just your yearly tax collected bit by bit. The employer normally uses the new regime, the default, unless you tell them you want the old one.

TDS this month = (tax for the year − TDS already deducted this year) ÷ months left, including this one

On ₹15 lakh a year in the new regime with no other income, that is ₹97,500 ÷ 12 = ₹8,125 a month. In the old regime with no deductions declared, it is ₹2,57,400 ÷ 12 = ₹21,450 a month. If you pick the old regime, give your employer proof of rent, 80C, 80D and loan interest, or they may take the deductions off and raise TDS in the last months. The employer re-does the estimate every month, so a bonus or pay rise changes TDS for the rest of the year. The India TDS on salary calculator shows it month by month.

Salaried people with no business income can usually still choose the other regime when they file, so a wrong choice at work need not be final; confirm this with the Income Tax Department. Too much TDS comes back as a refund; too little has to be paid before you file.

Common mistakes

• Thinking ₹12 lakh salary is the limit. The ₹12 lakh limit is on taxable income. With the standard deduction, a salary up to ₹12.75 lakh pays nothing.
• Forgetting marginal relief. Going ₹25,000 over the limit costs ₹26,000 with cess, not ₹66,300.
• Investing just to save tax, then picking the new regime anyway. 80C does nothing in the new regime. Decide first.
• Treating each slab rate as the rate on your whole income. Being “in the 15% slab” means only the part above ₹12 lakh is taxed at 15%.
• Forgetting cess. 4% is added on top of tax and surcharge in both regimes.
• Not telling your employer your choice. If you want the old regime, say so early, or TDS will follow the new one.

Quick summary

• Tax year 2026-27: new regime is the default, slabs from 0% to 30% in ₹4 lakh steps.
• New regime: ₹75,000 standard deduction, nil tax up to ₹12 lakh taxable (₹12.75 lakh salary), marginal relief just above.
• Old regime: higher slabs, ₹50,000 standard deduction, but 80C, 80D, HRA, home-loan interest and more.
• 4% cess on top in both; surcharge from ₹50 lakh.
• The old regime wins only if your deductions pass the break-even, about ₹8 lakh at higher salaries.
• Salaried people can choose each year when filing.

This is general information, not tax advice; check your own case with the Income Tax Department or a tax professional before you file. To see what lands in your bank account each month after PF and professional tax as well, try the India salary calculator.

Rules checked against the Income-tax Act 2025 and Budget 2026 for tax year 2026-27, as used by our calculators (checked 9 October 2026). The TDS rules on this page (default regime at work, choosing again at filing) are not yet confirmed on the official pages.

This guide explains the rules in plain English for planning. It is not legal, financial or flight-operations advice; check your contract, the official source linked above, your employer or your operator.