Old vs New Tax Regime: Which Saves You More?

The new regime under Section 115BAC is now the default. You have to actively opt out to use the old one, which reverses how this worked a few years ago.

Where the new regime stands

For FY 2025-26 and FY 2026-27, Budget 2026 left the slabs unchanged from those introduced in Budget 2025.

The structure: nil up to ₹4 lakh, then 5% to ₹8 lakh, 10% to ₹12 lakh, 15% to ₹16 lakh, 20% to ₹20 lakh, 25% to ₹24 lakh, and 30% above that. Plus 4% health and education cess.

The headline feature is the rebate — up to ₹60,000, meaning zero tax for resident individuals with taxable income up to ₹12 lakh. With the ₹75,000 standard deduction, salary up to roughly ₹12.75 lakh can end up tax-free.

What you give up

Under the new regime you generally lose 80C (PPF, ELSS, EPF contributions, life insurance), 80D, HRA, LTA, home loan interest on a self-occupied property, and the NPS self-contribution deductions.

One survives: 80CCD(2), your employer's NPS contribution, works under both.

The actual decision

It reduces to a single comparison: is your total old-regime deduction claim large enough to outweigh the new regime's lower rates and larger rebate?

Below roughly ₹12 lakh of income the new regime is difficult to beat, because the rebate produces zero tax outright. Above that, it depends on how much you genuinely claim — not what you could theoretically claim.

The old regime tends to win for people with a substantial home loan, significant HRA in a metro, a full 80C, and health insurance premiums. That combination adds up, and for those taxpayers the old regime can still be materially better.

Don't guess — calculate

Add up your actual deductions from last year's return, then run both regimes against your expected income. Several free calculators do this, and salaried taxpayers can generally switch each year, so it's worth redoing when circumstances change.

One note on section numbers

The Income Tax Act 2025 renumbers familiar sections — 80C becomes 123, 87A becomes 202, and so on. The substance is largely unchanged, but older articles referencing the old numbers can be confusing.

To total your actual deductible spending, StatementOrganizer.com will pull it from your statements.

References

• Income tax slabs and rates for 2026 — Fincart
• Income Tax Slabs FY 2025-26 (AY 2026-27) — Bajaj Finserv
• NPS tax rules and benefits — Zerodha Varsity

This article is for general information only and is not tax advice. Slabs, rebate amounts and deduction rules stated were current for FY 2025-26 and FY 2026-27 at the time of writing and change with each Union Budget. Section numbering changes under the Income Tax Act 2025. Consult a chartered accountant before choosing a regime.