Old vs New Tax Regime for AY 2026-27: Which One Should You Choose?

For AY 2026-27, the new tax regime has become attractive for many taxpayers because of revised slabs and the higher Section 87A rebate. But it is not automatically better for everyone.

Start with the Income Tax Calculator, then review facts before filing.

New regime slabs for AY 2026-27

Eligible resident individuals may get Section 87A rebate up to Rs. 60,000 where total income under the new regime does not exceed Rs. 12 lakh. Section 87A marginal relief is also relevant just above Rs. 12 lakh where conditions are satisfied. This is different from surcharge marginal relief, which applies in higher-income surcharge situations.

What is commonly lost in the new regime?

The new regime generally requires giving up several deductions/exemptions, including:

• HRA exemption;
• Section 80C;
• Section 80D;
• many Chapter VI-A deductions;
• set-off of house-property loss against other income.

Specified deductions such as employer NPS contribution under Section 80CCD(2) may still be relevant. Home-loan interest and house-property treatment should be checked carefully because the new regime restricts set-off of loss from house property against other income; the outcome depends on whether the property is self-occupied or let-out and on the applicable law.

Standard deduction

Official Income Tax Department material states standard deduction for salary is Rs. 50,000 generally, with a higher Rs. 75,000 under Section 115BAC(1A) new regime.

Practical scenarios

Salaried person with few deductions

The new regime may be better where there is limited HRA, 80C, 80D or home-loan deduction.

Salaried person with HRA and investments

The old regime can still be competitive where HRA exemption, 80C, 80D and other deductions are substantial. Use the HRA Calculator and 80C Calculator.

Higher-income taxpayer

Compare both regimes after surcharge, cess, NPS and special-rate income. Do not decide only from slab rates, and do not confuse Section 87A marginal relief with surcharge marginal relief.

Business/profession taxpayer

Switching rules may be more restrictive for taxpayers with business/professional income. Review before opting out or switching.

Official references

• Salaried Individuals AY 2026-27, Income Tax Department
• Computation of Tax for Individual, Income Tax Department
• Deductions from Salary, Income Tax Department

This article is reviewed in July 2026. It is general information, not a substitute for a case-specific tax computation.