The new vs old tax regime 2026 — what actually changed
The core architecture has been stable since FY 2023-24, but FY 2025-26 brought one significant update: the Section 87A rebate under the new regime now covers tax liability up to ₹60,000, making income up to ₹12 lakh completely tax-free. Combined with the ₹75,000 standard deduction for salaried individuals, a salary of up to ₹12.75 lakh produces zero tax under the new regime. That single change drew over 70% of individual taxpayers to the new regime in FY 2024-25 — and it is the right choice for many of them.
But not for everyone. The new regime’s lower rates come at a cost: almost every deduction disappears. Section 80C, HRA exemption, home loan interest under Section 24b, health insurance under 80D, LTA — none of these apply. The old regime keeps all of them, at the cost of higher slab rates.
The decision reduces to one question: are your total deductions large enough that they bring your old-regime tax below your new-regime tax? If yes, stay old. If no, switch new.
The slabs side by side — FY 2025-26
| Income slab | New regime rate | Old regime rate (below 60) |
|---|---|---|
| Up to ₹2.5 lakh | Nil | Nil |
| ₹2.5–₹4 lakh | Nil | 5% |
| ₹4–₹8 lakh | 5% | 5% / 20%* |
| ₹8–₹10 lakh | 10% | 20% |
| ₹10–₹12 lakh | 10% | 30% |
| ₹12–₹16 lakh | 15% | 30% |
| ₹16–₹20 lakh | 20% | 30% |
| ₹20–₹24 lakh | 25% | 30% |
| Above ₹24 lakh | 30% | 30% |
Income Tax Department’s official guidance
*Old regime: 5% up to ₹5 lakh, 20% from ₹5–10 lakh. 4% health and education cess applies on computed tax under both regimes.
The new regime’s rates are clearly lower across the ₹8–₹24 lakh range. The old regime only wins when deductions reduce taxable income enough to offset those rate advantages.
Three people, three different answers — new vs old tax regime 2026
Rahul, ₹10 lakh salary, no deductions beyond standard. Under the new regime, after the ₹75,000 standard deduction his taxable income is ₹9.25 lakh. With the 87A rebate covering liability up to ₹60,000, he pays zero tax. Under the old regime at the same income with no 80C, no HRA, no 80D, his liability is approximately ₹75,000 after cess. Rahul should be in the new regime, clearly.
Priya, ₹14 lakh salary, significant deductions. She claims ₹1.5 lakh under 80C, ₹50,000 under 80D, and ₹1.8 lakh HRA exemption — a total of ₹3.8 lakh in deductions plus the ₹75,000 standard deduction. Under the old regime her taxable income drops to ₹8.45 lakh, producing a tax liability of approximately ₹88,000 after cess. Under the new regime at ₹14 lakh minus ₹75,000 standard deduction, her taxable income is ₹13.25 lakh and her liability is approximately ₹1,14,000. Priya saves about ₹26,000 by staying in the old regime.
Suresh, ₹20 lakh salary, home loan borrower. He claims ₹1.5 lakh in 80C, ₹2 lakh home loan interest under Section 24b, ₹25,000 in 80D, and ₹75,000 standard deduction — total ₹4.5 lakh in deductions. Old regime taxable income: ₹15.5 lakh, liability approximately ₹2,80,000. New regime taxable income: ₹19.25 lakh, liability approximately ₹2,96,000. Suresh saves ₹16,000 in the old regime — not massive, but real. If his home loan interest were ₹3 lakh instead of ₹2 lakh, the saving would be approximately ₹46,000.
The pattern: at lower incomes with minimal deductions, the new regime wins by a wide margin. At higher incomes with a home loan and maxed-out 80C and 80D, the old regime wins — and the margin grows with the size of the deductions.
tax calculator that shows both regimes simultaneously
The deductions that actually move the needle
Not all old-regime deductions have equal impact. Here is what actually makes a difference at different income levels:
HRA exemption is often the largest single deduction for salaried employees in metro cities. In Mumbai, Delhi, or Bengaluru, HRA exemption of ₹1.5–2.5 lakh per year is common for employees earning ₹10–20 lakh. This single deduction, at the 30% slab, saves ₹45,000–₹75,000 in tax.
Home loan interest under Section 24b allows up to ₹2 lakh deduction on self-occupied property. At the 30% slab, that is ₹60,000 in annual tax saving — more than the 87A rebate benefit of the new regime for many higher-income borrowers.
Section 80C at ₹1.5 lakh saves ₹45,000 at 30% slab. Most salaried employees already exhaust this through PF contributions and life insurance premiums alone — without needing to make any additional investment decision.
Section 80D health insurance