Old vs New Tax Regime: Which is Better in 2026?
Comparing the old vs new tax regimes in India. Learn the tax slabs, exemptions, deductions, and use our salary tax calculator to find which regime saves you more money.
The Great Indian Tax Debate: Old vs. New Regime
Every financial year, salaried employees in India face the same dilemma: Should I choose the Old Tax Regime or the New Tax Regime?
The New Tax Regime offers lower tax rates but strips away almost all exemptions and deductions. The Old Tax Regime keeps tax rates higher but lets you reduce your taxable income using HRA, LTA, Section 80C, 80D, and home loan interest deductions.
Here is the ultimate guide to understanding the difference in 2026, comparing the slabs, and figuring out which regime saves you more money.
Comparing the Tax Slabs in 2026
The tax slabs under the two regimes are fundamentally different. Under the New Tax Regime, the slabs have been widened significantly for FY 2025-26 / AY 2026-27 to make it the default and most attractive choice for the vast majority of taxpayers.
New Tax Regime Slabs (FY 2025-26 / AY 2026-27)
| Income Slab | Tax Rate |
|---|---|
| Up to ₹4,00,000 | Nil |
| ₹4,00,001 to ₹8,00,000 | 5% |
| ₹8,00,001 to ₹12,00,000 | 10% |
| ₹12,00,001 to ₹16,00,000 | 15% |
| ₹16,00,001 to ₹20,00,000 | 20% |
| ₹20,00,001 to ₹24,00,000 | 25% |
| Above ₹24,00,000 | 30% |
Note: A standard deduction of ₹75,000 is available under the New Tax Regime for salaried individuals. Because the Section 87A rebate covers taxable incomes up to ₹12,00,000, anyone with a gross salary of up to ₹12,75,000 pays ₹0 tax.
Old Tax Regime Slabs
| 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% |
Note: A standard deduction of ₹50,000 is available under the Old Tax Regime, and the Section 87A rebate only covers taxable incomes up to ₹5,00,000.
Exemptions Lost in the New Regime
If you choose the New Tax Regime, you must give up over 70 tax exemptions and deductions. The most common ones include:
- House Rent Allowance (HRA) — Exemption on rent paid if you live in rented accommodation.
- Section 80C — Up to ₹1.5 lakh deduction for investments in EPF, PPF, ELSS, LIC, and principal repayment of home loans.
- Section 80D — Deduction on health insurance premiums (up to ₹25,000 for self, ₹50,000 for senior citizen parents).
- Section 24(b) — Interest deduction on home loans up to ₹2,00,000 for self-occupied properties.
- Leave Travel Allowance (LTA) — Exemption on domestic travel expenses.
How to Choose: A Scenario Comparison
Let's take a look at a salaried employee earning ₹12,00,000 per annum:
Scenario A: Salaried individual with zero deductions
- New Tax Regime: Taxable income is ₹11,25,000 (after the ₹75,000 standard deduction). Since this is under the ₹12,00,000 rebate threshold, the Section 87A rebate applies. Net Tax = ₹0.
- Old Tax Regime: Taxable income is ₹11,50,000 (after the ₹50,000 standard deduction). Net Tax = ₹1,63,800 (including 4% education cess).
- Winner: New Tax Regime saves ₹1,63,800.
Scenario B: High earner with ₹20,00,000 per annum salary and ₹4,00,000 in deductions
- New Tax Regime: Taxable income is ₹19,25,000. Under the new slabs, the tax is ₹2,57,400 (including 4% cess).
- Old Tax Regime: Taxable income is ₹15,50,000 (after standard deduction + ₹4,00,000 deductions). Net Tax is ₹2,99,000 (including 4% cess).
- Winner: New Tax Regime saves ₹41,600.
The Easiest Way to Decide
Don't spend hours in Excel trying to calculate this manually. You can use our free Income Tax Calculator. Simply enter your gross salary, enter your HRA and investment values, and it will calculate your tax under both regimes side-by-side using the latest FY 2025-26 rules, showing you exactly how much money you save under each option.
Try it free