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Old vs New Tax Regime: A 2026 Decision Framework
From FY 2023-24, the new tax regime under Section 115BAC became the default. The old regime — with its Section 80C/80D/HRA/LTA deductions — is now opt-in. Each year, salaried individuals must declare their choice to the employer for TDS, and can switch when filing the ITR.
New Regime Slabs (AY 2026-27)
- Up to Rs 3,00,000 — Nil
- Rs 3,00,001 - Rs 7,00,000 — 5%
- Rs 7,00,001 - Rs 10,00,000 — 10%
- Rs 10,00,001 - Rs 12,00,000 — 15%
- Rs 12,00,001 - Rs 15,00,000 — 20%
- Above Rs 15,00,000 — 30%
Plus: standard deduction of Rs 75,000 (salaried), Section 87A rebate up to Rs 25,000 (taxable income up to Rs 7 lakh — effectively zero tax for Rs 7L income).
Old Regime Slabs (Unchanged)
- Up to Rs 2,50,000 — Nil
- Rs 2,50,001 - Rs 5,00,000 — 5%
- Rs 5,00,001 - Rs 10,00,000 — 20%
- Above Rs 10,00,000 — 30%
Plus deductions: 80C (Rs 1.5L), 80D (Rs 25K-Rs 1L), 80CCD(1B) NPS (Rs 50K), HRA, LTA, home-loan interest 24(b) (Rs 2L), standard deduction Rs 50K.
When the Old Regime Still Wins
- Total deductions exceed roughly Rs 3.75-4.25 lakh annually
- You have a sizeable home-loan interest payout (up to Rs 2L)
- You claim HRA in a metro plus full 80C plus NPS Rs 50K plus 80D health insurance
When the New Regime Wins
- Income up to Rs 7 lakh — fully tax-free via Section 87A rebate
- Renters with no HRA component in CTC
- You don't have a home loan and don't max out 80C / NPS
- You want simplicity — no investment-proof submission, no documentation
Worked Example
Salary Rs 18L, deductions: 80C Rs 1.5L + 80D Rs 25K + HRA Rs 1.8L + 24(b) Rs 2L = Rs 5.55L. Old regime tax: ~Rs 1.55L. New regime tax: ~Rs 1.78L. Old wins by Rs 23K.
Educational only — not advice. Run your actual numbers on the IT Department tax calculator before opting. ARN-314872.