Income Tax · 7 min read
Old vs New Tax Regime for AY 2026-27 — Which Saves You More?
By the India Law Simplified editorial team · Verified against primary government sources (bare Acts & official portals) · Last updated 2026-06-29
The new tax regime is now the default, but the old regime can still win if you claim large deductions. Here is how to decide for AY 2026-27 without the jargon.
1The headline difference
The new regime has lower slab rates but removes most deductions and exemptions. The old regime keeps deductions (80C, 80D, HRA, home-loan interest, etc.) but has higher slab rates. You pick whichever leaves you paying less.
2What the new regime gives you (AY 2026-27)
A ₹75,000 standard deduction on salary, revised slabs, and a Section 87A rebate that makes income up to ₹12 lakh effectively tax-free for resident individuals. The new regime is the default — you must actively opt for the old one if you want it.
3When the old regime still wins
If your deductions are large — full ₹1.5 lakh under 80C, ₹2 lakh home-loan interest, sizeable HRA, 80D medical insurance, NPS 80CCD(1B) — the old regime can beat the new one despite higher rates. Salaried people with a home loan and rent are the classic case to check.
4How to decide
Compute your tax both ways. The income tax portal shows a side-by-side comparison when you file, and our free Income Tax Calculator (AY 2026-27) does the same in seconds. Salaried taxpayers can switch regimes year to year; those with business income face restrictions on switching back.
Frequently asked questions
Which regime is the default for AY 2026-27?
The new regime is the default. If you want the old regime you must opt in (and business-income taxpayers must file Form 10-IEA within the due date).
Is income up to ₹12 lakh really tax-free?
Under the new regime for AY 2026-27, the Section 87A rebate makes income up to ₹12 lakh effectively tax-free for resident individuals; with the ₹75,000 standard deduction a salaried person's break-even is a little higher. Verify against your exact figures.
Is this tax advice?
No. The better regime depends on your numbers. Confirm with a CA or compute both ways before choosing.
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Related guides
Free tools for this
Income-tax regime calculator · Form 16 → ITR computation
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India Law Simplified is an AI-assisted research & drafting tool, not a substitute for a licensed advocate or CA. Verify all figures and steps with a professional before acting. Statutory limits and fees change with each Finance Act / notification.