Old vs New Tax Regime 2026-27 — Which One Should You Choose? Complete Comparison
By Parul Singh, GST Practitioner · Income Tax · Updated June 2026
Table of Contents
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New Tax Regime -- Slabs and Features
In my 15+ years as a tax consultant in Karol Bagh, the most common question I get every February-March is: old or new regime -- which is better? Since the new regime became the default from FY 2023-24, choosing the right regime has become even more critical.
Official Reference: Section 115BAC of the Income Tax Act 1961 (as amended by Finance Act 2023) provides the new tax regime. From FY 2023-24, the new regime is the default. Taxpayers who wish to opt for the old regime must file Form 10-IEA.
New Tax Regime slabs for FY 2026-27:
| Income Slab | Tax Rate |
|---|---|
| Up to ₹3,00,000 | Nil |
| ₹3,00,001 to ₹7,00,000 | 5% |
| ₹7,00,001 to ₹10,00,000 | 10% |
| ₹10,00,001 to ₹12,00,000 | 15% |
| ₹12,00,001 to ₹15,00,000 | 20% |
| Above ₹15,00,000 | 30% |
New Regime Features:
- Standard deduction of ₹75,000
- No tax up to ₹7 lakh (Section 87A rebate)
- Most 80-series deductions NOT allowed
- HRA and LTA exemption NOT available
Old Tax Regime -- Slabs and Features
| Income Slab | Tax Rate |
|---|---|
| Up to ₹2,50,000 | Nil |
| ₹2,50,001 to ₹5,00,000 | 5% |
| ₹5,00,001 to ₹10,00,000 | 20% |
| Above ₹10,00,000 | 30% |
Old Regime Features:
- Standard deduction of ₹50,000
- All 80-series deductions: 80C (₹1.5L), 80D, 80CCC, 80CCD, 80E, 80G
- HRA exemption available
- Home loan interest under Section 24 (₹2 lakh)
📍 Real Example -- Salaried in Connaught Place -- ₹15 Lakh CTC
Rahul, 32, earns ₹15 lakh CTC. He pays ₹18,000/month rent in Karol Bagh, has ₹1.5 lakh in 80C investments, ₹25,000 health insurance, and ₹2 lakh home loan interest. NEW REGIME: Tax ₹1,30,000. OLD REGIME: Tax ₹1,00,152. Old regime saves ₹29,848!
Side-by-Side Comparison
| Feature | Old Regime | New Regime |
|---|---|---|
| Basic exemption | ₹2,50,000 | ₹3,00,000 |
| Standard deduction | ₹50,000 | ₹75,000 |
| Section 80C | ₹1,50,000 | Not available |
| Section 80D | ₹25,000-1,00,000 | Not available |
| HRA exemption | Available | Not available |
| Home loan interest | ₹2,00,000 | Not available |
| Best for | Heavy deductions, HRA, home loan | Simple income, minimal deductions |
When to Choose Which Regime
💡 Pro Tip from Parul: As a general rule: If your total deductions (80C + 80D + HRA + home loan interest) exceed ₹3,75,000, the OLD regime is better. If below ₹2,50,000, the NEW regime is better. Use our Income Tax Calculator to compare both regimes instantly.
How to Switch Between Regimes
From FY 2023-24, the new regime is the default. To opt for the old regime:
- Salaried employees: File Form 10-IEA on the IT portal before the ITR due date
- Business/professionals: Can opt out once; re-entry allowed only once
- Submit Form 10-IEA every year if you want to continue with old regime
⚠️ Common Mistake: Many salaried employees do not know that Form 10-IEA must be filed BEFORE the ITR due date. If you file ITR under the old regime without submitting Form 10-IEA, your return will be processed under the new regime by default. This mistake can cost ₹30,000 to ₹50,000 in additional tax.
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Frequently Asked Questions
Which tax regime is default from FY 2023-24?
The new tax regime under Section 115BAC is the default. To use the old regime, file Form 10-IEA before the ITR due date.
Can I switch between regimes every year?
Salaried employees can switch every year. Business/professional income earners can opt out only once and re-enter only once.
Is HRA available in the new regime?
No. HRA exemption is not available in the new tax regime. This is a major disadvantage for salaried employees in rented accommodation.
What is Form 10-IEA?
It is the declaration form filed on the IT portal to opt for the old tax regime. Must be filed before the ITR due date. Without it, ITR is processed under the new regime by default.
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