Income Tax Slabs 2026-27 — New vs Old Regime Comparison
By Parul Singh, GST Practitioner · Income Tax · Updated June 2026
Table of Contents
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New Tax Regime -- FY 2026-27 (AY 2027-28)
Every February, my Karol Bagh office fills with salaried employees asking which regime to choose. After analyzing 1,000+ returns, the answer depends on your deductions. The new tax regime (Section 115BAC) has been the default regime since FY 2023-24. It offers lower tax rates but fewer deductions and exemptions.
Official Reference: Section 115BAC of the Income Tax Act 1961, introduced by the Finance Act 2020 and modified by Finance Act 2023, provides the new tax regime with reduced rates but restricted deductions. The Budget 2024 further increased the standard deduction to ₹75,000 and adjusted slabs.
| Income Slab (₹) | Tax Rate |
|---|---|
| 0 - 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% |
- Standard deduction: ₹75,000 (salaried & pensioners)
- Rebate u/s 87A: Up to ₹60,000 (effective tax-free income up to ₹12 lakh for salaried)
- Surcharge: 10% above ₹50L, 15% above ₹1Cr, 25% above ₹2Cr
- Cess: 4% Health & Education Cess on tax + surcharge
📍 Real Example -- Salaried Employee, ₹12 Lakh CTC
Ravi, working at a bank in Connaught Place, earns ₹12,00,000 CTC.
• Gross income: ₹12,00,000
• Standard deduction: ₹75,000
• Taxable income: ₹11,25,000
• Tax: ₹4,00,001-8,00,000 @5% = ₹20,000 + ₹8,00,001-11,25,000 @10% = ₹32,500
• Total tax: ₹52,500
• After 87A rebate (₹52,500): ₹0
• Net tax = ZERO
• Gross income: ₹12,00,000
• Standard deduction: ₹75,000
• Taxable income: ₹11,25,000
• Tax: ₹4,00,001-8,00,000 @5% = ₹20,000 + ₹8,00,001-11,25,000 @10% = ₹32,500
• Total tax: ₹52,500
• After 87A rebate (₹52,500): ₹0
• Net tax = ZERO
Old Tax Regime -- FY 2026-27
The old regime allows all traditional deductions and exemptions. It benefits taxpayers who have significant investments under Section 80C, home loan interest, HRA, and other deductions. In my experience, if your total deductions exceed ₹3.75 lakh, the old regime saves you money.
| Income Slab (₹) | Tax Rate |
|---|---|
| 0 - 2,50,000 | Nil |
| 2,50,001 - 5,00,000 | 5% |
| 5,00,001 - 10,00,000 | 20% |
| Above 10,00,000 | 30% |
- Section 80C: Up to ₹1.5 lakh (PPF, ELSS, LIC, NPS, home loan principal)
- Section 80D: Up to ₹25,000 (₹50,000 for senior citizens) medical insurance
- HRA exemption: For salaried staying in rented accommodation
- Section 24(b): Up to ₹2 lakh home loan interest
- Standard deduction: ₹50,000
Official Reference: Section 80C of the Income Tax Act allows deduction up to ₹1.5 lakh for specified investments. Section 80D allows up to ₹25,000/₹50,000 for medical insurance premium. Section 24(b) allows up to ₹2 lakh deduction for home loan interest on self-occupied property.
Side-by-Side Comparison
| Feature | New Regime | Old Regime |
|---|---|---|
| Basic exemption | ₹4,00,000 | ₹2,50,000 |
| Standard deduction | ₹75,000 | ₹50,000 |
| Section 80C | Not available | Up to ₹1.5L |
| HRA exemption | Not available | Available |
| Home loan interest | Not available | Up to ₹2L u/s 24(b) |
| Rebate 87A | Up to ₹60,000 | Up to ₹12,500 |
| Default regime | Yes | Must opt-in |
Tax Calculation Examples
Let me show you with real numbers -- these are the kinds of calculations I do every day for clients in my Delhi office:
Example 1: Salaried, ₹10 lakh income, minimal deductions
| New Regime | Old Regime | |
|---|---|---|
| Gross income | ₹10,00,000 | ₹10,00,000 |
| Standard deduction | ₹75,000 | ₹50,000 |
| Sec 80C | -- | ₹1,00,000 |
| Taxable income | ₹9,25,000 | ₹8,50,000 |
| Tax | ₹40,000 | ₹72,500 |
| After rebate | ₹0 | ₹60,000 |
Winner: New Regime -- saves ₹60,000 thanks to the 87A rebate.
📍 Real Example -- Dwarka Homeowner, ₹18 Lakh Salary
Sunita, a manager in Dwarka, earns ₹18 lakh. She has: PPF ₹1.5L (80C), home loan interest ₹2L (24b), medical insurance ₹35K (80D), HRA exemption ₹1.2L. Total deductions: ₹5,55,000.
Old Regime: Taxable = ₹18L - ₹50K - ₹5.55L = ₹11.95L → Tax = ₹1,73,500 + 4% cess = ₹1,80,440
New Regime: Taxable = ₹18L - ₹75K = ₹17.25L → Tax = ₹2,13,750 + 4% cess = ₹2,22,300
Old Regime saves ₹41,860!
Old Regime: Taxable = ₹18L - ₹50K - ₹5.55L = ₹11.95L → Tax = ₹1,73,500 + 4% cess = ₹1,80,440
New Regime: Taxable = ₹18L - ₹75K = ₹17.25L → Tax = ₹2,13,750 + 4% cess = ₹2,22,300
Old Regime saves ₹41,860!
How to Choose the Right Regime
- Choose New Regime if: Income below ₹12L (salaried), minimal investments, want simplicity
- Choose Old Regime if: You claim ₹3.75L+ in deductions, have home loan, significant 80C investments
- Use our Income Tax Calculator to compare both regimes with your actual income and deductions
💡 Pro Tip from Parul: Salaried employees can switch regimes every year. So try both and pick the one that saves more. Business owners and professionals: once you opt out of the new regime, you can opt back in only once. Choose carefully the first time.
Common Mistakes in Choosing Tax Regime
⚠️ Common Mistake: The biggest mistake I see: people choose the old regime because their parents or friends did, without actually calculating. At ₹10 lakh income with less than ₹2.5L deductions, the new regime saves ₹30,000-60,000. Always calculate BOTH before choosing.
💡 Pro Tip from Parul: Need help choosing the right regime and filing your ITR? I offer professional ITR filing starting at ₹999 -- including regime comparison, deduction optimization, and e-verification. Call/WhatsApp: +91 95401 04776
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Frequently Asked Questions
What is the tax-free income limit under the new regime?
Under the new tax regime for FY 2026-27, salaried individuals can earn up to ₹12 lakh tax-free (after standard deduction of ₹75,000 and section 87A rebate). For non-salaried, the limit is ₹4 lakh before tax kicks in.
Can I switch between tax regimes every year?
Salaried individuals can switch between regimes every year when filing ITR. However, business owners and professionals who opt for the old regime can switch to new only once, and must continue with new unless they opt out again.
Is NPS deduction available under new regime?
Under the new regime, only the employer's NPS contribution under Section 80CCD(2) is allowed (up to 14% of basic salary). The employee's own NPS deduction under Section 80CCD(1) is NOT available in the new regime.
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