Every year, salaried people and business owners face the same question: should I stay in the new tax regime, or opt for the old one with all its deductions? For many people the new regime now wins easily. But not for everyone — and the only reliable way to know is to compare the actual tax under both.
This guide uses the figures for FY 2026–27 (the year from 1 April 2026 to 31 March 2027) that our old vs new regime calculator uses. The Finance Act 2026 left personal slabs, the standard deduction and the rebate unchanged from the previous year. From 1 April 2026 the Income-tax Act, 2025 applies, so familiar section numbers such as 80C, 80D and 87A have new numbers in the new law; the amounts discussed here are the same.
The two regimes in one paragraph each
The new regime is the default. It has lower slab rates and a larger rebate, but most deductions and exemptions are not allowed. You do not need to do anything to be in it.
The old regime has higher slab rates, but lets you claim deductions such as Section 80C investments, health insurance under 80D, house rent allowance (HRA) and home-loan interest. You have to choose it.
Slab rates for FY 2026–27
New regime (all ages)
| Taxable income | Rate |
|---|---|
| Up to ₹4,00,000 | Nil |
| ₹4,00,001 – ₹8,00,000 | 5% |
| ₹8,00,001 – ₹12,00,000 | 10% |
| ₹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% |
Old regime (below 60 years)
| Taxable income | Rate |
|---|---|
| Up to ₹2,50,000 | Nil |
| ₹2,50,001 – ₹5,00,000 | 5% |
| ₹5,00,001 – ₹10,00,000 | 20% |
| Above ₹10,00,000 | 30% |
In the old regime the nil band is ₹3,00,000 for people aged 60–79 and ₹5,00,000 for those aged 80 and above. In both regimes a 4% health and education cess is added to the tax, and surcharge applies at higher incomes (above ₹50 lakh).
The rebate that changes everything
Under the new regime, a rebate of up to ₹60,000 applies if your taxable income is ₹12,00,000 or less, which brings the tax to nil. With the ₹75,000 standard deduction, a salaried person with salary income of up to about ₹12.75 lakh typically pays no tax. Just above ₹12 lakh, marginal relief limits the tax so it is not more than the income above ₹12 lakh. (The rebate generally does not apply to income taxed at special rates, such as certain capital gains.)
Under the old regime the rebate is up to ₹12,500, for taxable income of ₹5,00,000 or less.
What each regime allows
Allowed in the new regime
- Standard deduction of ₹75,000 for salaried people and pensioners
- Employer’s contribution to your NPS account (within limits)
- A few other specific items, such as family pension deduction
Only in the old regime
- Standard deduction of ₹50,000
- 80C investments (PPF, ELSS, life insurance, EPF, principal on home loan) up to ₹1,50,000
- 80D health insurance (₹25,000 for yourself, more for senior citizens)
- HRA exemption and leave travel allowance
- Home-loan interest on a self-occupied house, up to ₹2,00,000
- Your own additional NPS contribution, donations and other deductions
A note on HRA: the exemption is 50% of salary for metro cities and 40% elsewhere. The classic list of metros is Delhi, Mumbai, Kolkata and Chennai. Commentary on the new Income-tax Rules suggests the list may have been widened to include cities such as Bengaluru from FY 2026–27; we are still confirming the official position, so please check the current rule (or ask us) before relying on the 50% figure for a Bengaluru rent.
Two worked examples
Example 1 — salary of ₹12 lakh with modest deductions
Gross salary ₹12,00,000; 80C investments ₹1,50,000; health insurance ₹25,000; age below 60.
- New regime: taxable income ₹11,25,000 after the standard deduction. Slab tax is fully covered by the rebate. Tax: ₹0.
- Old regime: taxable income ₹9,75,000 after ₹2,25,000 of deductions. Slab tax ₹1,07,500 plus 4% cess. Tax: ₹1,11,800.
The new regime wins by more than ₹1.1 lakh.
Example 2 — salary of ₹20 lakh with large deductions
Gross salary ₹20,00,000; age below 60.
- New regime: taxable income ₹19,25,000. Slab tax ₹1,85,000 plus cess. Tax: ₹1,92,400.
- Old regime with ₹6,75,000 of deductions (₹50,000 standard deduction, ₹1,50,000 under 80C, ₹25,000 under 80D, ₹2,00,000 HRA exemption, ₹2,00,000 home-loan interest and ₹50,000 own NPS): taxable income ₹13,25,000. Slab tax ₹2,10,000 plus cess. Tax: ₹2,18,400.
Even with ₹6.75 lakh of deductions, the new regime is about ₹26,000 cheaper here. At this salary, the old regime only comes out ahead if total deductions and exemptions (including the standard deduction) are more than roughly ₹7.6 lakh.
These are simplified examples without surcharge, other income or special-rate income. Run your own numbers in our regime calculator — it shows the working step by step.
Who usually benefits from which regime
The new regime usually suits you if:
- your taxable income is up to about ₹12 lakh (₹12.75 lakh of salary);
- you do not pay rent or a home loan, or your deductions are small;
- you prefer not to lock money into tax-saving products just to save tax.
The old regime can still win if:
- you have a large home-loan interest claim and pay high rent with HRA, plus full 80C and 80D;
- your income is in the higher slabs and your total deductions are well above the break-even for your income.
Switching rules: salaried vs business income
If you have no business or professional income (for example, salary, pension, rent, interest), you can typically choose the regime each year when you file your return, as long as you file by the normal due date. Telling your employer your choice at the start of the year only affects TDS from your salary; the final choice is made in the return.
If you have business or professional income, the rules are stricter. Opting out of the new regime requires filing the prescribed form before the due date, and you generally get only one chance to come back to the new regime later. Plan this with your accountant rather than year by year.
Because the new Income-tax Act has changed form names and section numbers, check the current form and deadline when you file.
The bottom line
For most salaried people in Bengaluru earning up to about ₹12.75 lakh, the new regime means no tax at all. Above that, compare both with real figures — and do it before you commit money to tax-saving investments in January. Our team files income-tax returns from ₹1,999 for salaried people, with a regime comparison included.