Old vs New Tax Regime — Which saves more?
Compare your tax and monthly in-hand salary under both regimes instantly with the latest FY 2026-27 slabs, ₹75,000 standard deduction, and Section 87A rebate.
New vs Old Tax Regime 2026-27: Which Saves You More?
For FY 2026-27 (AY 2027-28), the Income Tax Department of India continues to offer two regimes to salaried individuals — the New Tax Regime (default) and the Old Tax Regime. Choosing the wrong one can cost you anywhere from ₹20,000 to ₹1,50,000 extra every year. This calculator compares both regimes instantly using the latest FY 2026-27 slab rates, standard deduction, and Section 87A rebate.
The New Regime now offers significantly wider slabs — 0% up to ₹4 lakh, 5% up to ₹8 lakh, 10% up to ₹12 lakh, and so on. Combined with the enhanced ₹75,000 standard deduction and Section 87A rebate, salaried employees earning up to ₹12.75 lakh pay zero tax. The Old Regime retains higher slab rates but allows deductions under Section 80C, 80D, 80CCD(1B), and HRA exemption.
If your total deductions (80C + HRA + 80D + NPS + standard deduction) are below ₹3.75 lakh, the New Regime almost always wins. If they exceed ₹3.75 lakh, the Old Regime wins. Use the calculator above for your exact number.
New Tax Regime Slabs FY 2026-27
The New Tax Regime slab rates for FY 2026-27 have been simplified and widened to benefit middle-income earners. Here are the exact slabs:
| Income Slab (Annual) | Rate | Tax on Slab |
|---|---|---|
| Up to ₹4,00,000 | Nil | ₹0 |
| ₹4,00,001 – ₹8,00,000 | 5% | Up to ₹20,000 |
| ₹8,00,001 – ₹12,00,000 | 10% | Up to ₹40,000 |
| ₹12,00,001 – ₹16,00,000 | 15% | Up to ₹60,000 |
| ₹16,00,001 – ₹20,00,000 | 20% | Up to ₹80,000 |
| ₹20,00,001 – ₹24,00,000 | 25% | Up to ₹1,00,000 |
| Above ₹24,00,000 | 30% | — |
Add 4% Health and Education Cess on the computed tax after rebates. Salaried employees also receive a flat ₹75,000 standard deduction, making the effective tax-free income ₹4,75,000 without rebate and ₹12,75,000 with Section 87A rebate.
Old Tax Regime Slab Rates Explained
| Income Slab (Annual) | Below 60 | 60–80 | 80+ |
|---|---|---|---|
| Up to ₹2,50,000 | Nil | Nil | Nil |
| ₹2,50,001 – ₹3,00,000 | 5% | Nil | Nil |
| ₹3,00,001 – ₹5,00,000 | 5% | 5% | Nil |
| ₹5,00,001 – ₹10,00,000 | 20% | 20% | 20% |
| Above ₹10,00,000 | 30% | 30% | 30% |
The real power of the Old Regime lies in its deductions:
- Section 80C: Up to ₹1,50,000 for EPF, PPF, ELSS, LIC, home loan principal
- Section 80D: Up to ₹25,000 for self and family + ₹50,000 for senior parents
- Section 80CCD(1B): Extra ₹50,000 for NPS Tier-1 contribution
- Section 10(13A): HRA exemption — least of (actual HRA, rent minus 10% basic, 50% of basic in metros)
- Section 24(b): Home loan interest up to ₹2,00,000
Break-Even Deduction Threshold FY 2026-27
The break-even threshold is the minimum total deductions required for the Old Regime to beat the New Regime. Here is the approximate threshold across income levels:
| Annual CTC | Break-Even Deductions | Best Choice Below Threshold |
|---|---|---|
| ₹7.5 L – ₹10 L | ₹2.10 L – ₹2.60 L | New Regime |
| ₹12 L – ₹15 L | ₹3.00 L – ₹3.75 L | New Regime |
| ₹15 L – ₹25 L | ₹3.75 L – ₹4.25 L | Depends on HRA + home loan |
| Above ₹25 L | ₹4.00 L+ | Old Regime usually wins |
Section 87A Rebate: Zero Tax Up to ₹12 Lakh
One of the most powerful provisions for FY 2026-27 is the enhanced Section 87A rebate. Under the New Tax Regime, salaried individuals with net taxable income up to ₹12,00,000 pay zero income tax. When you add the ₹75,000 standard deduction, this means salaried employees earning up to ₹12,75,000 CTC pay zero tax.
Additionally, marginal relief protects you if your income slightly exceeds ₹12 lakh — your tax is capped at the amount exceeding ₹12 lakh, preventing any sudden spike in liability. For example, at ₹12,10,000 income, your tax is capped at ₹10,000 instead of around ₹61,500.
How In-Hand Salary Is Calculated from CTC
Many employees confuse CTC with in-hand salary. In reality, monthly in-hand salary is much lower because several components are deducted:
- Employee EPF: 12% of basic salary (typically 40% of CTC)
- Professional Tax: ₹200 per month, state-specific
- Income Tax (TDS): Monthly deduction based on your chosen tax regime
- Employer EPF and Gratuity: Part of CTC but not paid in hand monthly
For example, on a ₹12,00,000 CTC, the monthly in-hand is typically around ₹73,000 to ₹75,000 depending on your tax regime and EPF contribution. Our calculator above shows you the exact figure for your inputs.
Real Example: ₹12 Lakh Salary Tax Calculation
New Tax Regime (Default)
- Gross CTC: ₹12,00,000
- Less: Standard Deduction: ₹75,000
- Net Taxable Income: ₹11,25,000
- Tax: 0–4L (Nil) + 4–8L (₹20,000) + 8–11.25L (₹32,500) = ₹52,500
- Add 4% Cess: ₹2,100
- Total Tax: ₹54,600
Old Tax Regime (with ₹3.45 L Deductions)
- Gross CTC: ₹12,00,000
- Less: Standard Deduction: ₹50,000
- Less: Section 80C: ₹1,50,000
- Less: HRA Exemption: ₹1,20,000
- Less: Section 80D: ₹25,000
- Net Taxable: ₹8,55,000
- Tax: 0–2.5L (Nil) + 2.5–5L (₹12,500) + 5–8.55L (₹71,000) = ₹83,500
- Add 4% Cess: ₹3,340
- Total Tax: ₹86,840
For ₹12 lakh CTC with ₹3.45 lakh deductions, the New Regime saves ₹32,240 because the FY 2026-27 New Regime slabs are wider than the Old Regime benefits at this income level.
Which Regime Should You Choose?
- Choose New Regime if: Total deductions below ₹3.75 lakh; no home loan; prefer monthly liquidity; want simple, paperless filing
- Choose Old Regime if: Metro-city HRA above ₹2 lakh per year; home loan interest above ₹1.5 lakh; total 80C + NPS + 80D crosses ₹2 lakh; income above ₹25 lakh
- Salaried employees: Switch between regimes every financial year at ITR filing
- Business owners: Switch only once from New to Old — choose carefully
Frequently Asked Questions
Can I switch between Old and New Tax Regime every year?
Yes. Salaried employees without business income can freely switch between Old and New Tax Regimes every financial year when filing their Income Tax Return. However, business owners and professionals can switch only once from New to Old Regime.
Is Section 80C available in the New Tax Regime for FY 2026-27?
No. Deductions under Chapter VI-A such as Section 80C (PPF, ELSS, EPF), Section 80D (health insurance), Section 80CCD(1B) (NPS), and HRA exemption under Section 10(13A) are not allowed under the New Regime. Only the ₹75,000 standard deduction and employer NPS contribution under Section 80CCD(2) are permitted.
What is the standard deduction for salaried employees in FY 2026-27?
₹75,000 flat under the New Tax Regime and ₹50,000 under the Old Tax Regime. The higher standard deduction in the New Regime is designed to simplify tax filing without requiring investment proofs.
Up to what income is tax zero under the New Regime in 2026-27?
With the ₹75,000 standard deduction and the enhanced Section 87A rebate, salaried individuals earning up to ₹12,75,000 CTC pay zero tax under the New Regime. Marginal relief protects slightly higher incomes from sudden tax spikes.
How is HRA exemption calculated in the Old Regime?
HRA exemption under Section 10(13A) is the lowest of three amounts: (a) actual HRA received, (b) rent paid minus 10% of basic salary, (c) 50% of basic salary for metro cities or 40% for non-metro cities.
What is the break-even deduction for Old vs New Regime in 2026-27?
For CTC above ₹15 lakh, the break-even threshold is approximately ₹3.75 lakh in total deductions. If your total deductions exceed ₹3.75 lakh, the Old Regime typically results in lower tax. Below that, the New Regime usually wins.
Does the New Regime allow any deductions at all?
Yes. The New Regime allows the ₹75,000 standard deduction, employer NPS contribution under Section 80CCD(2), and a few specified allowances. Most Chapter VI-A deductions are not available.
How do I calculate my monthly in-hand salary from CTC?
Monthly in-hand salary = (CTC − Employee EPF − Professional Tax − Annual Income Tax) ÷ 12. Employee EPF is 12% of basic salary (typically 40% of CTC). Professional tax is around ₹200 per month.
What is the effective tax-free income in FY 2026-27?
Under the New Regime, effective tax-free income is ₹12,75,000 for salaried individuals (₹12 lakh taxable income plus ₹75,000 standard deduction). Under the Old Regime, it depends on your deductions.
Is this calculator updated for the latest FY 2026-27 slabs?
Yes. This calculator uses the latest FY 2026-27 slab rates, ₹75,000 standard deduction, enhanced Section 87A rebate up to ₹12 lakh taxable income, marginal relief, and 4% cess as per the latest Union Budget provisions.
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