Old vs New Tax Regime: Which Is Better in 2026?

New regime or old regime? The answer flips with your salary and deductions. Here are two worked examples with real FY 2025-26 maths — then run your own numbers in our old vs new regime calculator.

Example 1: ₹12 lakh salary, small deductions — NEW wins big

• Salary: ₹12,00,000, 80C ₹1,50,000, 80D ₹25,000, salaried
• New regime: taxable = 12,00,000 − 75,000 (standard deduction) = ₹11,25,000. Under ₹12 lakh, so the 87A rebate wipes it out → tax ₹0.
• Old regime: taxable = 12,00,000 − 50,000 − 1,50,000 − 25,000 = ₹9,75,000 → slab ₹1,07,500 + 4% cess = ₹1,11,800.
• Verdict: new regime wins by ₹1,11,800. With modest deductions, the 87A zero-tax zone beats everything the old regime offers.

Example 2: ₹20 lakh salary, heavy deductions — OLD fights back

• Salary: ₹20,00,000, 80C ₹1,50,000, 80D ₹1,00,000, home-loan interest ₹2,00,000, HRA exempt ₹3,00,000, NPS ₹50,000
• New regime: taxable = 20,00,000 − 75,000 = ₹19,25,000 → slab ₹1,85,000 + 4% cess = ₹1,92,400.
• Old regime: taxable = 20,00,000 − 50,000 − 1,50,000 − 1,00,000 − 2,00,000 − 3,00,000 − 50,000 = ₹11,50,000 → slab ₹1,57,500 + 4% cess = ₹1,63,800.
• Verdict: old regime wins by ₹28,600. Big HRA + home-loan interest + 80C is the classic combination where old still beats new.

The 2-minute rule of thumb

• Deductions below ~₹2 lakh total (just 80C + standard): new regime almost always wins, thanks to 87A up to ₹12L taxable.
• Deductions above ~₹4 lakh (HRA + home loan + 80C + NPS): run both — old frequently wins.
• Between ₹2–4 lakh: genuinely close. Calculate; don't guess.

What the calculator does not cover

Salary income, HRA, 80C/80D, home-loan interest, NPS and senior slabs for FY 2025-26. Business income (see Salary vs Business), capital gains (see Capital Gains calculator), rental and interest income need separate treatment. Verify before filing on incometax.gov.in.

Try your salary in the regime calculator — it takes 2 minutes and shows both taxes side by side.

New regime slabs (FY 2025-26 onward)

With the Section 87A rebate, there's no tax on income up to ₹12 lakh under the new regime. For salaried people, the ₹75,000 standard deduction lifts this to ₹12.75 lakh of salary. Income taxed at special rates, like capital gains, doesn't get this rebate.

Old regime slabs (unchanged)

The old regime keeps a ₹50,000 standard deduction and allows Section 80C, 80D, HRA, home loan interest and other deductions. The rebate makes income up to ₹5 lakh tax-free.

What you still get in the new regime

The new regime isn't "zero deductions". You still get:

• the ₹75,000 standard deduction (salaried and pensioners)
• employer's contribution to NPS under Section 80CCD(2), up to 14% of salary
• the deduction for family pension
• exemptions such as gratuity and leave encashment within limits

Switching between regimes

• Salaried people with no business income can choose either regime every year when filing the return.
• People with business or professional income can switch back from the new regime only once in their lifetime.
• The new regime is the default. To use the old regime, choose it in your return (and tell your employer at the start of the year so TDS is right).

The new Income-tax Act from April 2026

The Income-tax Act, 2025 replaced the 1961 Act from 1 April 2026. It uses simpler language and a "tax year" in place of "previous year" and "assessment year", but the choice between old and new regimes and the slab structure carried over. Returns for income earned up to March 2026 are still filed under the old Act's rules.

Frequently asked questions

Which regime is better for ₹10 lakh salary?

The new regime is almost always better at ₹10 lakh — your tax is nil after the standard deduction and rebate. Under the old regime you'd need large deductions to match.

Can I claim HRA in the new regime?

No. HRA exemption is available only under the old regime.

Does the new regime allow 80D for health insurance?

No. Section 80D deductions are available only in the old regime.

Can I change my regime after telling my employer?

Yes. Your employer's choice only affects TDS; you can choose either regime when you file your return (unless you have business income).

Worked example: ₹15 lakh salary

New regime: ₹15 lakh − ₹75,000 standard deduction = ₹14.25 lakh taxable. Tax is ₹20,000 (₹4–8 lakh at 5%) + ₹40,000 (₹8–12 lakh at 10%) + ₹33,750 (₹2.25 lakh at 15%) = ₹93,750, plus 4% cess = ₹97,500.

Old regime with ₹1.5 lakh under 80C, ₹25,000 under 80D and the ₹50,000 standard deduction: taxable income is ₹12.75 lakh. Tax is ₹12,500 + ₹1,00,000 + ₹82,500 = ₹1,95,000, plus cess = ₹2,02,800.

At ₹15 lakh, the new regime saves about ₹1.05 lakh in this case. The old regime only comes close if you also claim large HRA exemption and home loan interest — run your own numbers in the calculator before deciding.