How to choose between old and new tax regime (2026)
A practical decision framework for choosing between India's old and new income tax regimes — calculation examples for ₹6L, ₹12L, ₹25L, and ₹50L incomes, and the break-even points where each regime wins.
Tecnior Editorial
Compliance team
Every March, every Indian salaried employee makes the same decision twice: which regime do I declare for FY 2026-27, and which regime do I file my return under? They do not have to be the same — declarations during the year govern TDS deduction; the return at year-end can switch (subject to one-time-switch rules for business income).
Here is the working framework we share with HR teams running payroll on OfficHR.
The headline rates
New regime (default from FY 2023-24 onwards)
| Slab | Rate |
|---|---|
| Up to ₹3L | 0% |
| ₹3L – ₹7L | 5% |
| ₹7L – ₹10L | 10% |
| ₹10L – ₹12L | 15% |
| ₹12L – ₹15L | 20% |
| Above ₹15L | 30% |
Rebate u/s 87A available up to total income of ₹7L → effective tax zero.
Old regime
| Slab | Rate |
|---|---|
| Up to ₹2.5L | 0% |
| ₹2.5L – ₹5L | 5% |
| ₹5L – ₹10L | 20% |
| Above ₹10L | 30% |
Rebate u/s 87A available up to ₹5L → effective tax zero.
Surcharge applies in both regimes (10% above 50L, 15% above 1Cr, 25% above 2Cr; new regime caps at 25% even at 5Cr+). Cess at 4% applies on top.
What you give up when you pick new regime
The new regime is simpler — it eliminates most exemptions and deductions. You cannot claim:
- HRA exemption u/s 10(13A)
- LTA exemption
- Standard deduction (₹50,000 — available in new regime from FY 2023-24)
- Section 80C (₹1.5L for PF, life insurance, ELSS, principal home loan, kids' tuition)
- Section 80D (medical insurance)
- Section 80E (education loan interest)
- Home loan interest u/s 24 for self-occupied property
What you keep in the new regime:
- Standard deduction of ₹75,000 (up from ₹50k from FY 2024-25)
- Employer contribution to NPS u/s 80CCD(2) up to 14% of basic + DA
- Section 80CCH (Agniveer fund)
- Set-off of business losses (if any)
Worked examples
Assumptions: salaried, single income, no other heads.
₹6,00,000 income
Old regime, after standard ₹50k + 80C ₹1.5L + 80D ₹25k:
- Taxable: ₹6,00,000 − ₹2,25,000 = ₹3,75,000
- Tax: ₹6,250, but rebate 87A → zero
New regime, after standard ₹75k:
- Taxable: ₹6,00,000 − ₹75,000 = ₹5,25,000
- Tax: ₹11,250, but rebate 87A (up to ₹7L) → zero
Both regimes nil — pick new for simplicity.
₹12,00,000 income
Old regime, after standard ₹50k + 80C ₹1.5L + HRA ₹2L + 80D ₹25k:
- Taxable: ₹12,00,000 − ₹4,25,000 = ₹7,75,000
- Tax: ₹67,500 + cess = ₹70,200
New regime, after standard ₹75k:
- Taxable: ₹12,00,000 − ₹75,000 = ₹11,25,000
- Tax: ₹56,250 + cess = ₹58,500
New wins by ~₹12k. Old wins only if you have HRA + 80C + 80D actually claimed; without HRA, new wins by more.
₹25,00,000 income
Old regime, after ₹50k + 80C ₹1.5L + HRA ₹4L + 80D ₹50k + 80CCD(1B) ₹50k:
- Taxable: ₹25,00,000 − ₹7,00,000 = ₹18,00,000
- Tax: ₹3,52,500 + cess = ₹3,66,600
New regime, after standard ₹75k:
- Taxable: ₹25,00,000 − ₹75,000 = ₹24,25,000
- Tax: ₹3,52,500 + cess = ₹3,66,600
Almost identical — depends on whether you actually claim that ₹7L of deductions.
₹50,00,000 income
The 10% surcharge kicks in. Old regime with full exemptions (HRA ₹6L, 80C ₹1.5L, 80D ₹50k, NPS 80CCD(1B) ₹50k) typically saves ~₹50–80k vs new regime. Old wins at this income level if exemptions are real.
Decision matrix
| Income | HRA available | 80C used | 80D used | Recommendation |
|---|---|---|---|---|
| ≤ ₹7L | — | — | — | New |
| ₹7L–₹15L | Yes (≥ ₹1.5L) | Yes | Yes | Old (marginal) |
| ₹7L–₹15L | Limited | Limited | No | New |
| ₹15L–₹50L | Yes (full HRA) | Yes (full) | Yes | Compare |
| > ₹50L | Yes (full HRA) | Yes (full) | Yes | Old often wins |
| Any income | No HRA / no 80C | — | — | New |
What HR should do
- Run both regimes for every employee in payroll software. Manual estimates are wrong more often than they are right at incomes between ₹10L and ₹25L.
- Capture declarations early — by April 15. Late declarations trigger excess TDS that you have to refund through the year.
- Show employees the comparison. OfficHR's investment-declaration portal shows side-by-side projection so the employee picks based on real numbers, not gut.
- Lock the regime once payroll is run. Re-opening mid-year is allowed but messy. Most teams lock by April 30.
The OfficHR approach
Every payroll cycle in OfficHR computes both regimes for every employee. The employee sees the comparison in their portal; HR sees the regime choice frozen in the payroll cycle. If anyone wants to switch regimes (allowed once for salaried employees in their lifetime under specific conditions), the HR override is one click and is captured in the audit log.
Try the regime preview in a free trial — it works on your existing payroll structure, no migration required.
This article is informational, not tax advice. For complex situations (capital gains, business income, NRI status), consult a chartered accountant.