For most salaried Indians in 2026, the new vs old tax regime question now favours the new (default) regime: income up to ₹12,00,000 is effectively NIL via the enhanced Section 87A rebate, and salaried earners get a ₹75,000 standard deduction (so roughly ₹12.75L is tax-free). The old regime wins only when your deductions are genuinely large — and the bar is higher than most people assume.
This guide explains the 2026 slabs, what each regime allows, the real break-even on deductions, and worked examples at ₹10L, ₹15L and ₹25L so you can pick with confidence.
The big change: the new regime is now the default
Since Budget 2025, the new tax regime is the default for FY2025-26 (assessment year 2026-27). You have to actively opt out to use the old regime. Two features make it hard to beat:
- Income up to ₹12,00,000 pays effectively NIL tax thanks to the enhanced rebate under Section 87A. For a salaried person, the ₹75,000 standard deduction pushes the effective tax-free salary to about ₹12.75 lakh.
- Lower, wider slab rates all the way up, so even high earners pay less on the slab structure itself than under the old regime.
The trade-off: the new regime disallows almost every deduction and exemption — no Section 80C (₹1.5 lakh), no 80D health insurance, no HRA, no NPS 80CCD(1B), and no home-loan interest set-off on a self-occupied house. You essentially trade deductions for lower rates and a bigger rebate.
The old regime keeps higher slab rates but lets you claim all of those deductions. So the question is simple to state and slightly fiddly to answer: do your deductions save you more than the new regime's lower rates and rebate?
New regime tax slabs for FY2025-26
| Income slab (after standard deduction) | Tax rate |
|---|---|
| Up to ₹4,00,000 | NIL |
| ₹4,00,001 – ₹8,00,000 | 5% |
| ₹8,00,001 – ₹12,00,000 | 10% |
| ₹12,00,001 – ₹16,00,000 | 15% |
| ₹16,00,001 – ₹20,00,000 | 20% |
| ₹20,00,001 – ₹24,00,000 | 25% |
| Above ₹24,00,000 | 30% |
A 4% health and education cess applies on the tax in both regimes. The ₹12L rebate means that even though slabs technically start charging at ₹4L, anyone with taxable income up to ₹12L ends up paying nothing.
The old regime, by contrast, still has a ₹2.5 lakh basic exemption, then 5% to ₹5L, 20% to ₹10L, and 30% above ₹10L — with the old 87A rebate only zeroing out tax up to ₹5L of taxable income. Salaried taxpayers get a ₹50,000 standard deduction under the old regime.
What each regime lets you claim
| Feature | New regime (default) | Old regime |
|---|---|---|
| Standard deduction (salaried) | ₹75,000 | ₹50,000 |
| Income effectively NIL up to | ₹12L (₹12.75L salaried) | ₹5L taxable |
| Section 80C (₹1.5L) | No | Yes |
| Section 80D (health insurance) | No | Yes |
| HRA exemption | No | Yes |
| Home-loan interest (self-occupied, 80C/24b) | No | Yes |
| NPS 80CCD(1B) extra ₹50k | No | Yes |
| Employer NPS 80CCD(2) | Yes | Yes |
| Slab rates | Lower | Higher |
For a deep dive on the deductions that survive only under the old regime, see our guides on Section 80C investments and home-loan tax benefits under 80C and 24b.
The break-even logic (read this before you decide)
The old regime is only worth the paperwork when your total deductions — 80C + 80D + HRA + home-loan interest + NPS — are large enough that the tax you save by shrinking your taxable income beats what the new regime already gives you for free.
A common myth is that "₹5-6 lakh of deductions" always tips it to the old regime. That is not true at higher incomes. Because the new regime's top slab and the old regime's top slab are both 30%, every rupee of deduction in the old regime saves you only ~31.2% (with cess) — and you have to claw back a lot of ground first. The worked examples below show exactly where the line sits.
Worked example 1: ₹10 lakh salary
New regime: ₹10,00,000 − ₹75,000 standard deduction = ₹9,25,000 taxable. That is below ₹12L, so the 87A rebate wipes the tax to ₹0.
Old regime: even with ₹50,000 standard deduction and a healthy ₹3,50,000 of deductions, taxable income is ₹6,00,000 → tax of about ₹32,500 plus cess. To merely reach ₹0 you would need roughly ₹4.5 lakh of deductions (to get taxable income down to ₹5L and trigger the old 87A rebate).
Verdict: the new regime wins outright at ₹10L. The best the old regime can do is tie at zero, and only if you pour in ₹4.5L+ of deductions you may not even have. Below ₹12.75L of salary, the new regime is almost unbeatable.
Worked example 2: ₹15 lakh salary
New regime: ₹15,00,000 − ₹75,000 = ₹14,25,000 taxable → tax of ₹93,750 (about ₹97,500 with cess).
Old regime: with ₹50,000 standard deduction, your taxable income is ₹14,50,000 minus whatever else you claim. To get the old-regime tax down to ₹93,750, you need taxable income of about ₹9,06,250 — which means total deductions of roughly ₹5,43,750.
| Old-regime deductions | Old taxable | Old tax (+cess) | Beats new (₹97,500)? |
|---|---|---|---|
| ₹3,50,000 | ₹11,00,000 | ₹1,48,200 | No |
| ₹4,50,000 | ₹10,00,000 | ₹1,17,000 | No |
| ₹5,43,750 | ₹9,06,250 | ~₹97,500 | Break-even |
| ₹6,00,000+ | below ₹8,50,000 | lower | Yes |
Verdict: at ₹15L you need about ₹5.4 lakh of genuine deductions just to break even. That is achievable for someone paying big HRA in a metro plus full 80C plus 80D plus NPS — but if your deductions are ₹4-4.5L, the new regime still wins.
Worked example 3: ₹25 lakh salary (the one most people get wrong)
New regime: ₹25,00,000 − ₹75,000 = ₹24,25,000 taxable → tax of ₹3,07,500 (about ₹3,19,800 with cess).
Now the correction that trips up most calculators. People assume "₹6 lakh of deductions" makes the old regime worth it at ₹25L. It does not.
| Old-regime deductions | Old taxable | Old tax (+cess) | Beats new (₹3,07,500)? |
|---|---|---|---|
| ₹6,00,000 | ₹18,50,000 | ₹3,82,200 | No — higher |
| ₹8,00,000 | ₹16,50,000 | ₹3,19,800 | Break-even |
| ₹10,00,000 | ₹14,50,000 | ₹2,57,400 | Yes |
With ~₹6L of deductions, old-regime taxable income is ₹18.5L → tax of about ₹3,67,500 (₹3,82,200 with cess) — which is higher than the new regime's ₹3,07,500. You do not break even at ₹25L until your deductions reach roughly ₹8 lakh, and the old regime only starts genuinely saving money beyond that.
Verdict: at ₹25L the old regime needs about ₹8 lakh of deductions just to match the new regime — far more than the "₹5-6 lakh" rule of thumb. Realistically that means a big home-loan interest claim (up to ₹2L on a self-occupied house), full HRA, ₹1.5L of 80C, ₹50k NPS and ₹50k-75k of 80D stacked together. If you can't hit ₹8L, stay on the new regime.
So who should pick which?
- New regime (most people): salary up to ~₹12.75L (NIL tax), anyone renting modestly or without a home loan, young earners with thin 80C, and high earners whose deductions fall short of the break-even.
- Old regime (a minority): people with a large self-occupied home-loan interest claim, high metro HRA, maxed 80C + NPS + 80D — and whose total deductions clear the break-even for their income band (~₹5.4L at ₹15L, ~₹8L at ₹25L).
Don't decide from a rule of thumb — run both regimes through your actual numbers each year, because your rent, EMIs and investments change. A quick way to map tax against your wider money goals is our financial life planner, and you can revisit the full 2026 income-tax slabs for the new regime any time.
How this affects loans and big purchases
Your regime choice changes your take-home pay, which directly affects loan eligibility (lenders assess FOIR on net income). If a home loan is on the cards, the old regime's interest deduction can tilt the maths — weigh it alongside the EMI itself using our EMI calculator and check what you'd qualify for with a free eligibility check on /apply — it's a soft pull with no impact on your credit score. To understand how a home loan's interest set-off works in practice, read home-loan tax benefits under 80C and 24b.
Tax rules, slabs and rebates vary by individual circumstances and change with each Budget — verify your final position with a tax professional or the income-tax portal before filing. RupeeQuik connects you to RBI-regulated lending partners and does not provide tax advice.
Frequently Asked Questions
Is income up to ₹12 lakh really tax-free in 2026?
Yes, under the new (default) regime, taxable income up to ₹12,00,000 pays effectively NIL tax because of the enhanced Section 87A rebate. For salaried people the ₹75,000 standard deduction lifts the effective tax-free salary to about ₹12.75 lakh. The rebate does not apply under the old regime, where tax is only zeroed up to ₹5 lakh of taxable income.
Which regime is the default if I do nothing?
The new regime is the default for FY2025-26. If you want the old regime (to claim 80C, HRA, home-loan interest, etc.), you must actively choose it when filing. Salaried taxpayers can switch each year; those with business income face restrictions on switching back.
At ₹25 lakh, do ₹6 lakh of deductions make the old regime worth it?
No. At ₹25L, ~₹6 lakh of deductions leaves old-regime taxable income at ₹18.5L and tax of about ₹3,67,500 — higher than the new regime's ₹3,07,500. You need roughly ₹8 lakh of deductions just to break even, and more than that to actually save money.
Does the standard deduction apply in both regimes?
Yes, but the amounts differ. Salaried taxpayers get a ₹75,000 standard deduction under the new regime and ₹50,000 under the old regime. It applies automatically to salary and pension income — you don't need to invest anything to claim it.
Can I claim my home-loan interest under the new regime?
For a self-occupied house, no — the new regime disallows the Section 24(b) interest deduction. This is one of the main reasons borrowers with large home-loan interest sometimes still prefer the old regime. Interest on a let-out property has different treatment; confirm your specific case with a tax adviser.
