Comprehensive Guide
New vs Old Tax Regime: Complete Guide for FY 2026-27
Confused between New and Old Tax Regime? We break down the differences, deductions, and help you choose the one that saves you the most money.
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Introduction to Tax Regimes
Since Budget 2020, Indian taxpayers have had the choice between two tax regimes. The New Tax Regime offers lower tax rates but eliminates most deductions, while the Old Tax Regime has higher rates but allows for substantial tax savings through deductions like 80C, 80D, and HRA.
New Tax Regime Updates (Budget 2024-25)
The New Tax Regime is now the default option. In the latest budget, standard deduction was increased to ₹75,000 for salaried employees, and tax slabs were further beneficial for middle-income earners.
Detailed Comparison Table
Here is a comparison of tax slabs for both regimes for FY 2026-27 (AY 2026-27).
Deductions: What stays and what goes?
Under the Old Regime, you can claim 80C (up to 1.5L), 80D (Health Insurance), HRA, LTA, and interest on home loans. Under the New Regime, almost all of these are gone, EXCEPT for the Standard Deduction (₹75,000) and employer contribution to NPS (80CCD(2)).
Which one should you choose?
If your total deductions (80C + 80D + HRA etc.) exceed ₹3.75 Lakhs to ₹4.25 Lakhs (depending on income level), the Old Regime usually results in lower tax. If your deductions are minimal, the New Regime is almost always better.
Common Questions
Everything you need to know about this topic
Can I switch regimes every year?
Salaried individuals can switch every year at the time of filing ITR. However, individuals with business income can only switch back once in their lifetime.
Is standard deduction available in both?
Yes, from FY 2023-24 onwards, Standard Deduction of ₹50,000 (increased to ₹75,000 in July 2024 budget) is available to salaried taxpayers in both regimes.