The two regimes in 30 seconds
India lets you choose how your salary is taxed. The new regime (the default since 2023) has lower rates but allows almost no deductions. The old regime has higher rates but lets you subtract investments and expenses — 80C, health insurance, HRA, home loan interest and more — before tax is applied.
New regime slabs for FY 2026-27 (unchanged by Budget 2026): nil up to ₹4 lakh, 5% for ₹4–8 lakh, 10% for ₹8–12 lakh, 15% for ₹12–16 lakh, 20% for ₹16–20 lakh, 25% for ₹20–24 lakh, and 30% above ₹24 lakh — plus a ₹75,000 standard deduction for salaried taxpayers.
Old regime slabs: nil up to ₹2.5 lakh, 5% for ₹2.5–5 lakh, 20% for ₹5–10 lakh and 30% above ₹10 lakh, with a ₹50,000 standard deduction. Both regimes add a 4% health and education cess on the tax.
The ₹12 lakh rebate — why most salaried Indians now pay zero
Under the new regime, a Section 87A rebate of up to ₹60,000 wipes out the entire tax if your taxable income is ₹12 lakh or less. Add the ₹75,000 standard deduction, and a salary of up to ₹12.75 lakh results in zero income tax.
Earn slightly more and 'marginal relief' protects you: your tax can never exceed the amount by which your taxable income crosses ₹12 lakh. On a ₹12.85 lakh salary (₹12.10 lakh taxable), full slab tax would be about ₹61,500 — but marginal relief caps it at ₹10,000 plus cess. This calculator applies all of this automatically.
Who should pick which regime
The decision comes down to one question: are your total old-regime deductions big enough to beat the new regime's lower rates?
- Salary up to ₹12.75 lakh: the new regime is almost unbeatable — your tax is zero.
- Middle incomes (₹13–25 lakh): the old regime only wins if you claim heavy deductions — typically ₹4.5 lakh or more between HRA, 80C, home loan interest and insurance. Renters with big HRA claims and home-loan borrowers are the main candidates.
- You can switch every year if you're salaried — just pick the regime while filing your return (business income holders can switch back only once). Run this comparison each year before you file.
- Remember: choosing the new regime doesn't make PPF, ELSS or insurance bad products — you just no longer get a tax deduction for them.
Frequently asked questions
›Which tax regime is better for FY 2026-27?
For most salaried taxpayers the new regime wins — income up to ₹12.75 lakh is tax-free, and its lower slab rates beat the old regime unless you claim large deductions. The old regime generally wins only when total deductions (HRA, 80C, home loan interest, 80D, etc.) exceed roughly ₹4.5 lakh. Use the calculator above with your real numbers.
›Did Budget 2026 change the income tax slabs?
No. Budget 2026 made no changes to slab rates for FY 2026-27. The new regime keeps the slabs introduced in Budget 2025 (nil up to ₹4 lakh, up to 30% above ₹24 lakh), the ₹75,000 standard deduction, and the ₹60,000 Section 87A rebate for taxable income up to ₹12 lakh.
›Can I switch between old and new regime every year?
Salaried taxpayers can choose either regime every year at the time of filing their return, regardless of what they told their employer for TDS. Taxpayers with business or professional income can opt out of the new regime, but can return to it only once in a lifetime.
›Is HRA allowed in the new tax regime?
No. HRA exemption, LTA, 80C, 80D and most other deductions are available only in the old regime. The new regime allows the ₹75,000 standard deduction, employer NPS contributions under 80CCD(2), and a few minor items.
›What does marginal relief mean?
It prevents a small raise from causing a huge tax jump above the ₹12 lakh rebate limit. With marginal relief, your new-regime tax cannot exceed the amount by which your taxable income crosses ₹12 lakh — so ₹12.1 lakh taxable income pays at most ₹10,000 plus cess, not the full slab tax of about ₹61,500.
›Does this calculator include surcharge?
Yes. The calculation applies the current surcharge bands and marginal relief, followed by 4% cess. Special-rate income and individual exceptions are outside this simplified salary comparison, so high-income or complex returns should still be checked by a CA.