The new tax regime is the default. It has lower slab rates and a rebate that makes income up to ₹12 lakh tax-free, but it removes most deductions. The old regime keeps deductions like 80C (now Section 123), HRA and home-loan interest.
Key takeaways
- New regime: no tax up to ₹12 lakh of taxable income thanks to the ₹60,000 rebate; salaried people also get a ₹75,000 standard deduction (effectively ₹12.75 lakh).
- Old regime: rebate up to ₹5 lakh income; standard deduction ₹50,000.
- The old regime helps only if your deductions are large — typically ₹4–5 lakh+ for middle incomes.
- Salaried employees can choose each year; those with business income have limited switching.
New regime slabs (tax year 2026-27)
| Income | Rate |
|---|---|
| Up to ₹4 lakh | Nil |
| ₹4–8 lakh | 5% |
| ₹8–12 lakh | 10% |
| ₹12–16 lakh | 15% |
| ₹16–20 lakh | 20% |
| ₹20–24 lakh | 25% |
| Above ₹24 lakh | 30% |
Old regime slabs (below 60)
| Income | Rate |
|---|---|
| Up to ₹2.5 lakh | Nil |
| ₹2.5–5 lakh | 5% |
| ₹5–10 lakh | 20% |
| Above ₹10 lakh | 30% |
Plus 4% health and education cess in both regimes.
Deductions available only in the old regime
| Deduction | Limit |
|---|---|
| 80C / Section 123 (PPF, ELSS, EPF, life insurance, home-loan principal, tuition) | ₹1.5 lakh |
| 80CCD(1B) NPS | ₹50,000 |
| 80D health insurance | ₹25,000–₹1 lakh |
| Home-loan interest (self-occupied) | ₹2 lakh |
| HRA, LTA | As per rules |
| 80TTA / 80TTB | ₹10,000 / ₹50,000 |
Still available in the new regime: standard deduction, employer's NPS contribution (up to 14% of salary), and some exemptions.
A quick way to decide
- Compute tax under the new regime on gross income − ₹75,000.
- Compute tax under the old regime after all deductions.
- Choose the lower — many employers' portals and the ITR utility show both.
Your action checklist
- Estimate your income and eligible deductions for the year.
- Compare tax under both regimes before declaring to your employer.
- Keep proofs of investments, rent, insurance and loan certificates.
- Pay advance tax on time if you have non-salary income.
- Check AIS/Form 26AS before filing your return.
FAQs
Does the new regime affect PPF or EPF tax-free status?
No — interest and maturity stay tax-free; only the investment deduction is lost.
Can I switch every year?
Salaried individuals without business income can choose each year when filing.
Related: mutual fund taxation · FD taxation.
