Every year around June someone forwards me a spreadsheet comparing the two regimes and asks which is better. The honest answer for FY 2026-27 is that the comparison matters far less than it did three years ago, because the new regime has quietly absorbed most of what made the old one attractive.
The slabs you are actually choosing between
| Total income | Tax under the new regime |
|---|---|
| Up to ₹4,00,000 | Nil |
| ₹4,00,001 – ₹8,00,000 | 5% of the amount above ₹4,00,000 |
| ₹8,00,001 – ₹12,00,000 | ₹20,000 + 10% above ₹8,00,000 |
| ₹12,00,001 – ₹16,00,000 | ₹60,000 + 15% above ₹12,00,000 |
| ₹16,00,001 – ₹20,00,000 | ₹1,20,000 + 20% above ₹16,00,000 |
| ₹20,00,001 – ₹24,00,000 | ₹2,00,000 + 25% above ₹20,00,000 |
| Above ₹24,00,000 | ₹3,00,000 + 30% above ₹24,00,000 |
Alongside those rates sit two things that do most of the work: a standard deduction of ₹75,000 for salaried taxpayers and pensioners, and a Section 87A rebate of up to ₹60,000, which takes tax to nil for net taxable income up to ₹12,00,000. Surcharge under the new regime is capped at 25%, against 37% under the old.
When the old regime still wins
The old regime is not dead. It survives where you have genuinely large, genuinely claimable deductions — and the operative word is claimable, not theoretically available.
The profile that still benefits typically has several of the following running at once: a substantial home loan with real interest under Section 24(b), a fully-used 80C basket, meaningful 80D premiums for self and parents, HRA that actually stands up to scrutiny, and NPS contributions under 80CCD(1B).
One or two of these rarely does it. The old regime's higher rates and lower exemption threshold mean the deductions have to be large in aggregate before they overtake the new regime's simpler arithmetic.
The deductions have to be real, documented and large in aggregate. A home loan alone usually does not tip it.
The mistake that costs more than the choice
People agonise over the regime and then get the mechanics wrong. Two things matter more than the comparison itself.
Salaried taxpayers can switch each year. The declaration you give your employer in April sets your TDS, but it does not bind your return. If your circumstances changed, you can still choose the other regime when filing — you simply have a refund or a shortfall to settle.
Business income is different. Opting out of the new regime and back in is restricted for taxpayers with business or professional income. This is not a decision to make casually each year, and it is worth taking advice before exercising the option.
A practical way to decide
Before you build another spreadsheet
- Add up the deductions you can actually evidence — not the ones you intend to make.
- If that total is comfortably under ₹4 lakh, the new regime almost certainly wins. Stop there.
- If it is well above, run both. The old regime may still be ahead.
- If you have business income, model it once properly — you do not get to change your mind freely.
The regime choice is worth getting right, but it is a one-afternoon exercise, not a year-round preoccupation. The compounding money is in advance tax, TDS compliance and capital gains planning — not in relitigating this comparison every June.
This article is general guidance as at 15 July 2026 and is not advice on any specific situation. References reflect the Income-tax Act, 2025 (in force from 1 April 2026), the CGST and IGST Acts as amended, and GST rates effective 22 September 2025. Please obtain advice on your own facts before acting.