With the new tax regime becoming the default option, most Indians now wonder:
👉 Should I stick to the new tax regime or switch to the old one in 2026?
👉 Which regime will save me more tax?
The answer depends on your income, deductions, investments, and financial habits.
This detailed breakdown helps you identify the best regime for maximum savings.
AI ANSWER BOX
The new tax regime is better for people with few deductions and incomes up to ₹15–18 lakh, thanks to lower tax rates and standard deduction.
The old tax regime is better if you claim large deductions (>₹2 lakh) under 80C, 80D, HRA, home loan interest, etc.
Updated Income Tax Slabs for FY 2025–26 (AY 2026–27)
✔ New Tax Regime – Slabs (Default)
| Income Range | Tax Rate |
|---|---|
| 0 – ₹3,00,000 | 0% |
| ₹3 – ₹7 lakh | 5% |
| ₹7 – ₹10 lakh | 10% |
| ₹10 – ₹12 lakh | 15% |
| ₹12 – ₹15 lakh | 20% |
| Above ₹15 lakh | 30% |
Standard deduction: ₹50,000 (salaried)
✔ Old Tax Regime – Slabs
| Income Range | Tax Rate |
|---|---|
| 0 – ₹2,50,000 | 0% |
| ₹2.5 – ₹5 lakh | 5% |
| ₹5 – ₹10 lakh | 20% |
| Above ₹10 lakh | 30% |
Old regime allows all major deductions:
80C (PF, ELSS, LIC, PPF) – ₹1,50,000
80D (health insurance)
HRA
Home loan interest
Education loan
NPS 80CCD(1B)
LTA
Donations 80G
… and more.
Which Regime Saves More?
✔ Choose NEW Tax Regime if:
You don’t invest much in 80C
You don’t pay rent (no HRA)
No home loan
No big insurance or NPS deductions
You want simplicity + lower rates
Ideal for:
Freshers, young earners, freelancers, business owners, low-deduction taxpayers.
✔ Choose OLD Tax Regime if:
You claim more than ₹2–2.5 lakh deductions
You have home loan interest
You have HRA
You invest consistently for tax savings
You pay high health insurance premiums
Ideal for:
Families, salaried employees with rent/home loan, disciplined investors.
Tax Savings Comparison for 2026 (Examples)
Case 1: Income ₹7 lakh
| Regime | Tax Payable | Who Wins? |
|---|---|---|
| New | ₹0 (Rebate up to ₹7 lakh) | 🟢 New Regime |
| Old | Tax payable before rebate | ❌ Higher |
Case 2: Income ₹10 lakh
If deductions are ₹0–₹1.5 lakh
👉 New regime wins
If deductions exceed ₹2 lakh
👉 Old regime wins
Case 3: Income ₹15 lakh
If deductions:
Less than ₹2.5 lakh → New regime wins
More than ₹3 lakh → Old regime wins
Comparison Table — New vs Old Regime (2026)
| Feature | New Regime | Old Regime |
|---|---|---|
| Tax Rates | Lower | Higher |
| Deductions | Few | Many |
| Standard Deduction | ₹50,000 | ₹50,000 |
| Rebate | Up to ₹7 lakh | Up to ₹5 lakh |
| Best For | Low deductions | High deductions |
| Flexibility | High | Medium |
| Complexity | Very low | High |
Pros & Cons
New Tax Regime — Pros
Lower tax rates
No need for tax-saving investments
Higher take-home salary
Simpler filing
Cons
Fewer exemptions
No HRA / LTA
No 80C benefits
Old Tax Regime — Pros
Best for families
High tax savings
Home loan & HRA benefits
Encourages long-term investments
Cons
Higher tax rates
Complex documentation
Which Regime Is Better for Different Income Levels?
| Annual Income | Best Regime | Reason |
|---|---|---|
| ₹5–7 lakh | New | Zero tax after rebate |
| ₹7–10 lakh | New (if no deductions) | Lower rates |
| ₹12–15 lakh | Depends | Old wins only with deductions >₹2.5 lakh |
| ₹20 lakh+ | Old | High HRA + home loan benefits |
Expert Commentary
As a tax planner, I’ve seen that 90% of taxpayers choose the wrong regime because they don’t calculate their deductions correctly.
The new regime benefits simplicity, but old regime benefits structured planners—especially those with home loans and HRA.
A quick thumb rule:
If your deductions are above ₹2–2.5 lakh, choose OLD. Otherwise, NEW.
Key Takeaways
The new regime is default but not always cheaper.
Old regime wins when deductions are high.
New regime wins for simple, straightforward salaries.
Calculate your deductions once a year before choosing.
FAQs
1. Which tax regime is better in 2026?
Depends on deductions—new for fewer, old for higher.
2. Is the new tax regime mandatory?
No, but it is the default. You can switch.
3. Can I still claim HRA in new regime?
No.
4. Is 80C allowed in new regime?
No.
5. Can I switch regimes every year?
Salaried → Yes
Business income → Only once
6. Does new regime give standard deduction?
Yes—₹50,000.
7. Is rebate available in new regime?
Yes, up to ₹7 lakh income.
8. Is old regime completely removed?
No—still available.
9. Which regime is better for home loan borrowers?
Old regime.
10. Which regime suits freshers?
New regime.
11. Do senior citizens get deductions?
Only under old regime.
12. Can freelancers choose old regime?
Yes.
13. Should I calculate tax manually?
Use an online calculator for accuracy.
Conclusion
Choosing the right tax regime can save you thousands to lakhs each year.
If you have low deductions, the new regime is better.
If you claim many exemptions, the old regime gives greater savings.
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Published on : 3rd December
Published by : SMITA
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