Every salaried person makes this choice once a year, usually in April when the employer asks, and again when the return is filed. The new regime is the default: if you say nothing, it applies. Choosing the old regime is a positive step, and for most people on a salary it is no longer the better one. Here is how to tell.
What the new regime gives you
Lower rates and a large rebate, in exchange for giving up most deductions. For tax year 2026-27 the slabs are:
| Taxable income | 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% |
Two things sit on top of the slabs. A standard deduction of ₹75,000 comes off salary before any of this applies. And a rebate wipes out the tax entirely where taxable income is ₹12,00,000 or less, with relief tapering just above that so a small step over the line does not produce a large bill. In practice, a salary of about ₹12.75 lakh with no other income pays no tax under the new regime.
What you give up: house rent allowance exemption, the ₹1,50,000 of investments under the old section 80C, health insurance premium, the interest on a home loan for a self-occupied house, and most of the smaller deductions.
What the old regime gives you
Higher rates — 5% from ₹2,50,000, 20% from ₹5,00,000 and 30% from ₹10,00,000 — a standard deduction of ₹50,000, and a rebate only up to ₹5,00,000 of income. In return, every deduction you can document counts: HRA, ₹1,50,000 of eligible investments, up to ₹2,00,000 of home-loan interest, ₹50,000 of NPS on top, health insurance, and the rest.
Where the crossover usually falls
The old regime only wins when the deductions it allows are large. As a rough rule for tax year 2026-27, as reviewed on 16 September 2026:
- Salary up to about ₹12.75 lakh, no other income: the new regime, because it charges nothing. The old regime cannot beat zero.
- Salary between ₹13 lakh and ₹25 lakh: the old regime needs roughly ₹4 lakh to ₹5.5 lakh of deductions before it pulls ahead — typically a home loan on a self-occupied house plus full 80C plus HRA in a metro. Without a home loan it rarely gets there.
- Above ₹25 lakh: the deductions have to be larger still, and the surcharge is also lower under the new regime at the highest incomes.
These are tendencies, not rules. The only reliable answer is your own numbers.
Three things people get wrong
- Counting deductions they cannot prove. Rent without receipts and the landlord's PAN, or an insurance premium paid by someone else, do not survive a query. Count only what you can document.
- Forgetting other income. Interest, dividends and capital gains are taxed in both regimes and can push a salary that was under the rebate line over it.
- Assuming the choice is permanent. A salaried person can switch every year. Someone with business income cannot switch back freely once they leave the new regime, which is a reason to decide carefully if you have both.
Under the Income-tax Act, 2025, which applies from tax year 2026-27, the section numbers have changed; the deductions above are described by what they cover rather than by number. The note on the 2025 Act lists the common renumberings.
This note is general information, not advice on anyone's facts. Send an enquiry about a specific matter.