The “which regime” question trips up most salaried taxpayers every year. For FY 2026-27, the answer depends on one number: your break-even deduction threshold. Below it, the new regime wins. Above it, the old regime wins. This post works out that threshold, walks through the slab math, and shows you how to check your own situation in 30 seconds.
The short answer
- New regime (default): lower slab rates, higher ₹7L Section 87A rebate, ₹75,000 standard deduction for salaried taxpayers. Simplest — no need to plan deductions. Best for taxpayers whose total deductions (80C + 80D + 80CCD(1B) + 24(b) + HRA exemption) are below the break-even discussed below.
- Old regime: higher slab rates, ₹5L Section 87A rebate, ₹50,000 standard deduction, but you get Section 80C (₹1.5L), 80D, 80CCD(1B), 24(b) home-loan interest (up to ₹2L), HRA exemption, and more. Best when your deduction stack is large.
- The switch-over gross income varies with your deduction stack. For a salaried taxpayer claiming ₹1.5L under 80C alone, the new regime wins up to ~₹12L; past ~₹15L, the old regime with a full stack (80C + 80D + 80CCD(1B) + 24(b)) typically wins.
Slabs — new regime (FY 2026-27)
The new regime slabs after the Budget 2024 rationalisation, unchanged for FY 2026-27:
- ₹0 – ₹3,00,000: 0%
- ₹3,00,001 – ₹7,00,000: 5%
- ₹7,00,001 – ₹10,00,000: 10%
- ₹10,00,001 – ₹12,00,000: 15%
- ₹12,00,001 – ₹15,00,000: 20%
- Above ₹15,00,000: 30%
Plus a flat 4% Health & Education Cess on the tax (not on income) and a surcharge on very high incomes (10% from ₹50L, 15% from ₹1Cr, 25% from ₹2Cr — 37% surcharge was removed in the new regime).
Slabs — old regime (FY 2026-27, under-60)
- ₹0 – ₹2,50,000: 0%
- ₹2,50,001 – ₹5,00,000: 5%
- ₹5,00,001 – ₹10,00,000: 20%
- Above ₹10,00,000: 30%
Senior citizens (60-79) get a ₹3L basic exemption, super-seniors (80+) get ₹5L. Plus 4% cess and the same surcharge schedule.
Section 87A rebate — the quiet gamechanger
Section 87A gives a full rebate on the computed tax if your taxable income after deductions is:
- New regime: up to ₹7,00,000 → effective tax is ₹0.
- Old regime: up to ₹5,00,000 → effective tax is ₹0.
This is why you’ll see “no tax up to ₹12.75 lakh” headlines for salaried taxpayers in the new regime — ₹12.75L gross minus the ₹75,000 standard deduction = ₹12L taxable, which with marginal relief comes within the ₹7L rebate ceiling band.
The break-even deduction threshold
To choose between regimes, compute the total deductions that would equalise the two tax liabilities at your gross income. For a salaried taxpayer with ₹X gross:
- New-regime tax: apply slabs to (X − ₹75,000), add 4% cess.
- Old-regime tax: apply slabs to (X − ₹50,000 − your deductions), add 4% cess.
- The break-even happens when (2) equals (1). Solving gives you the deduction amount required to tie.
Rule of thumb (salaried, under-60):
- Gross ₹10L → old regime needs roughly ₹2.25L of deductions to beat new regime.
- Gross ₹15L → old regime needs roughly ₹3.75L of deductions.
- Gross ₹25L → old regime needs roughly ₹4.5L of deductions.
If you routinely claim 80C (₹1.5L) + 80D (₹25K-₹75K) + home-loan interest 24(b) (up to ₹2L) + 80CCD(1B) NPS (₹50K) = stack in the ₹4.25- ₹4.75L range, the old regime is usually better from ~₹15L gross onwards.
Worked example: ₹15L salary
Take a salaried professional with ₹15,00,000 gross and the following deductions available in the old regime:
- Section 80C: ₹1,50,000 (EPF + ELSS + LIC premium)
- Section 80D: ₹25,000 (self + family health insurance)
- Section 80CCD(1B): ₹50,000 (NPS additional)
- Section 24(b): ₹2,00,000 (home-loan interest)
- Total deductions: ₹4,25,000
New regime (default) — tax calculation
- Gross: ₹15,00,000
- Standard deduction: ₹75,000 → Taxable ₹14,25,000
- Tax: 0 on first 3L + 5% × 4L (₹20,000) + 10% × 3L (₹30,000) + 15% × 2L (₹30,000) + 20% × 2.25L (₹45,000) = ₹1,25,000
- Cess 4% → ₹5,000
- Total tax (new regime): ₹1,30,000
Old regime — tax calculation
- Gross: ₹15,00,000
- Standard deduction: ₹50,000
- Chapter VI-A deductions: ₹4,25,000
- Taxable income: ₹10,25,000
- Tax: 0 on first 2.5L + 5% × 2.5L (₹12,500) + 20% × 5L (₹1,00,000) + 30% × 0.25L (₹7,500) = ₹1,20,000
- Cess 4% → ₹4,800
- Total tax (old regime): ₹1,24,800
The old regime saves ₹5,200 here. Add an EPF voluntary contribution or an additional NPS tier to increase that margin. But if you stop at just 80C ₹1.5L (no 80D / 80CCD / 24(b)), the new regime wins by ₹15,000+ at the same gross.
When switching matters
- Non-salaried (business / profession): old regime lets you carry forward unabsorbed depreciation and other business losses — limited ability under the new regime.
- Partial-year employment (joined mid-year): the new regime’s ₹7L rebate makes the “no tax” ceiling easier to stay under. Usually the better choice.
- HRA-heavy salary packages: old regime allows HRA exemption under Section 10(13A); new regime does not. If HRA exemption alone clears ₹1.5L+, the old regime often wins.
- Home-loan borrowers: the ₹2L 24(b) interest deduction is available only under the old regime. A new home loan changes the math materially.
One-time vs year-to-year
Salaried taxpayers can switch between regimes every year. Non- salaried (business / profession) can switch back to the old regime only once after opting out. Choose carefully if you’re self- employed.
How to run your own numbers
Plug your gross and deductions into the Income Tax Calculator — it shows both regimes side-by-side, highlights which saves more, and breaks down the slabs, 87A rebate, surcharge marginal relief, and cess for each. Salary structure affects the outcome; if you want to check your in-hand after PF + gratuity + professional tax, use the Salary Calculator.
Sources
- Income Tax Department (incometaxindia.gov.in) — slabs, rebate u/s 87A, standard deduction, surcharge schedule.
- Finance Act 2024 — Budget 2024 rationalisation of the new- regime slabs.
- CBDT Circular 5/2024 — employer TDS guidance on new regime default.