Which is better for me: the old or the new tax regime?

How the two regimes differ

The new regime (section 115BAC of the Income-tax Act, 1961, now section 202 of the Income-tax Act, 2025) is the default. It has lower slab rates but allows very few deductions. The old regime has higher rates but keeps the familiar deductions and exemptions.

New-regime slabs for tax year 2026-27 are: 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%. Health and education cess of 4% applies in both regimes.

A quick rule of thumb

Add up the deductions and exemptions you can actually prove: 80C (now 123) investments, health insurance under 80D (now 126), HRA, home-loan interest and so on. If the total is small, the new regime is almost always better. In our worked examples, a salaried person earning ₹15 lakh with ₹1.75 lakh of deductions pays about ₹97,500 under the new regime against about ₹2,02,800 under the old one. The old regime usually comes out ahead only when deductions run into several lakhs, for example a large HRA claim together with a home loan.

Can I switch every year?

• Salaried and other non-business taxpayers can choose either regime each year, when filing the return by the due date. The choice you give your employer for TDS does not bind you at filing.
• People with business or professional income must opt out of the new regime on or before the due date of the return. For returns under the 1961 Act (FY 2025-26 and earlier) this is done by filing Form 10-IEA before the return. Under the 2025 Act (tax year 2026-27 onwards) there is no separate form: the option under section 202(4) is exercised in the return of income itself (rule 136 of the Income-tax Rules, 2026). Having opted out, they can return to the new regime only once.
• A return filed after the due date (a belated return) is taxed under the new regime.

Before you decide

Run both calculations on your own figures with the income tax calculator. Remember that the 1961 Act governs returns for FY 2025-26, while tax year 2026-27 onwards falls under the Income-tax Act, 2025. The rates above apply under both.