Every year, the same question starts circulating in every office WhatsApp group — old regime or new regime? HR sends a form, your colleagues start sharing screenshots, and everyone is suddenly an expert. Then most people just go with whatever their friend chose.
Here's the thing — there's no universally correct answer, and it depends entirely on your specific deductions. It also changes whenever the Budget changes the rates, which is exactly what happened recently — the gap between the two regimes is now much wider than it used to be. Let me show you how to actually work this out for your situation.
What changed, and why this article needed an update
The new regime is the default — if you don't tell your employer which regime you want, they deduct TDS under the new regime automatically. You can still switch to old regime when filing your ITR.
The big change for FY 2026-27: the Section 87A rebate threshold moved from ₹7 lakh to ₹12 lakh of taxable income, and the slabs themselves were restructured (0% up to ₹4L, then 5/10/15/20/25/30% in ₹4L bands up to ₹24L+). Combined with the ₹75,000 standard deduction, that means anyone with taxable income up to about ₹12.75 lakh under the new regime now pays zero income tax — regardless of whether they have any deductions at all. That single change moved the old-vs-new breakeven point dramatically, which is why an older version of this comparison would now give you the wrong answer.
The core difference in one sentence
New regime = lower tax rates, no deductions allowed. Old regime = higher tax rates, but you can claim HRA, 80C, home loan interest, health insurance, and more. The question is whether your deductions are large enough to overcome the higher rates — and under the current slabs, they need to be larger than most people assume.
Example 1 — ₹12 lakh salary
Take someone earning ₹12L CTC, paying ₹20,000/month rent, investing ₹1.5L in PPF/ELSS, and paying health insurance:
| Item | Old Regime | New Regime |
|---|---|---|
| Gross income | ₹12,00,000 | ₹12,00,000 |
| Standard deduction | −₹50,000 | −₹75,000 |
| HRA exemption | −₹1,20,000 | Not allowed |
| Section 80C | −₹1,50,000 | Not allowed |
| Section 80D | −₹25,000 | Not allowed |
| Taxable income | ₹8,55,000 | ₹11,25,000 |
| Tax payable (incl. 4% cess) | ≈ ₹86,800 | ₹0 |
Under FY 2026-27 rules, the new regime wins by a wide margin at this income — the ₹11.25L taxable income falls entirely under the ₹12L rebate threshold, so tax is zero even with no deductions claimed at all. A few years ago, the old regime's deductions would have won this comparison; that's no longer true.
Example 2 — ₹20 lakh salary, with a home loan
Higher earners with a home loan are where the old regime still has its best shot. Same rent/80C/80D as above, plus ₹2L of home loan interest under Section 24:
| Item | Old Regime | New Regime |
|---|---|---|
| Gross income | ₹20,00,000 | ₹20,00,000 |
| Deductions claimed | ₹5,45,000 (std + HRA + 80C + 80D + home loan) | ₹75,000 (std only) |
| Taxable income | ₹14,55,000 | ₹19,25,000 |
| Tax payable (incl. 4% cess) | ≈ ₹2,58,960 | ≈ ₹1,92,400 |
Even here, with a home loan and every common deduction stacked up, the new regime still comes out roughly ₹66,000 ahead. That would have been unthinkable under the old ₹7L-rebate version of the new regime.
So when does the old regime actually win now?
Based on the math above, the old regime only pulls ahead when your total eligible deductions (HRA + 80C + 80D + home loan interest + NPS 80CCD(1B), etc.) are unusually large relative to your income — think ₹6-7 lakh or more in deductions on an income in the ₹18-22L range. That's a narrow, specific combination: typically someone with a large home loan, maxed-out 80C and 80D, an NPS contribution, and high HRA-eligible rent, all at once.
We're intentionally not giving you a single "breakeven rupee figure" here — it depends on exactly which deductions you're eligible for, and getting it wrong in a blog post is worse than not giving a number. The reliable way to know for certain: use our Income Tax Calculator — plug in your actual salary and deductions and it computes tax under both regimes side by side, using the current FY 2026-27 slabs.
Who should definitely go new regime
If your taxable income (after the ₹75,000 standard deduction) is under roughly ₹12 lakh, the new regime is very likely your best — and simplest — choice, regardless of your deduction situation. No paperwork, no proofs, no declarations, and in most such cases, zero tax.
Who should at least check the old regime
If you have a home loan, have maximised 80C, have health insurance (80D), contribute to NPS under 80CCD(1B), and pay significant HRA-eligible rent — all at the same time — it's worth running both numbers through the calculator before assuming the new regime wins by default.
One thing people still miss: LTA (Leave Travel Allowance). If your salary structure includes it, you can claim it tax-free twice in a 4-year block, but only under the old regime.