Old or new tax regime: which one saves you more in FY 2026-27?
The two regimes are built on opposite logic. One rewards you for investing in tax-saving instruments. The other keeps things simple but strips out most of the deductions. Pick the wrong one and you could be handing over a few thousand rupees extra every month.
1. How the two actually differ
The old regime is built around deductions. Section 80C covers PPF, EPF, ELSS, and insurance. Section 80D handles health insurance. HRA covers your rent. The catch is that the slab rates sitting on top are higher.
The new regime flips that. Almost every exemption is gone, but the slab rates drop across the board. For FY 2026-27, the ₹75,000 standard deduction is one of the few things that survives in both.
2. Latest tax slabs comparison (FY 2026-27)
Here are the exact tax slabs and rates under both regimes for the current financial year. Select a tab below to compare:
| Income slabs (₹) | Tax rate |
|---|---|
| 0 - 4,00,000 | Nil |
| 4,00,001 - 8,00,000 | 5% (rebate up to ₹12 lakh) |
| 8,00,001 - 12,00,000 | 10% (rebate up to ₹12 lakh) |
| 12,00,001 - 16,00,000 | 15% |
| 16,00,001 - 20,00,000 | 20% |
| 20,00,001 - 24,00,000 | 25% |
| Above 24,00,000 | 30% |
3. Working out your break-even point
There is a simple way to decide. Find your break-even deduction limit, the point where your total deductions get large enough that the old regime starts winning.
Take someone earning ₹10 lakh a year. Once total deductions through 80C, HRA, and the rest cross roughly ₹2.5 lakh, the old regime usually comes out ahead. Stay below that and the new regime wins, purely because its baseline rates are lower.
4. What to weigh before you commit
A few things to check before you tell payroll your choice:
- Carrying a big home loan and paying rent? Between Section 24b interest and HRA, the old regime almost always pulls ahead.
- Want your money liquid instead of parked in PPF or ELSS for years? The new regime fits that better.
- One more thing worth knowing. You declare a preference to your employer, but the final call stays with you when you file your return.