Choosing Between Old and New Tax Regime for AY 2026-27
The New Tax Regime under Section 115BAC is the default tax regime in India. However, salaried taxpayers and professionals retain the legal option to choose the Old Tax Regime if their cumulative deductions (80C, 80D, HRA, home loan interest) exceed the breakeven threshold.
New Tax Regime Slabs (Default)
- Up to ₹3,00,000: Nil
- ₹3,00,001 to ₹7,00,000: 5%
- ₹7,00,001 to ₹10,00,000: 10%
- ₹10,00,01 to ₹12,00,000: 15%
- ₹12,00,001 to ₹15,00,000: 20%
- Above ₹15,00,000: 30%
- Full Tax Rebate under Section 87A: Taxable income up to ₹7 Lakhs pays zero tax.
- Standard Deduction: ₹75,000 for salaried employees and pensioners.
Old Tax Regime Slabs
- Up to ₹2,50,000: Nil
- ₹2,50,001 to ₹5,00,000: 5% (Rebate under 87A up to ₹5 Lakhs)
- ₹5,00,001 to ₹10,00,000: 20%
- Above ₹10,00,000: 30%
- Allows Section 80C (₹1.5L), 80D (₹25k-₹1L), HRA exemption, and ₹2 Lakh home loan interest under Section 24(b).
The Breakeven Rule
If your total eligible deductions exceed ₹3.75 Lakhs to ₹4.25 Lakhs (depending on your salary bracket), the Old Regime saves more tax. For individuals with minimal investments or home loans, the New Regime offers lower tax rates with zero paperwork.