Quick Answer
Under the Income-tax Act, 2025 the new regime is the default for tax year 2026-27 (1 April 2026 to 31 March 2027). Tax is zero up to ₹12,00,000 of total income thanks to a ₹60,000 rebate, and the effective nil-tax threshold for salaried individuals is ₹12,75,000 after the ₹75,000 standard deduction. The old regime is available only on opt-out. For a salaried individual, the old regime beats the new regime only when total deductions (standard deduction plus Chapter VI-A) cross roughly ₹4,25,000 at ₹15 lakh income, ₹5,00,000 at ₹20 lakh, and ₹5,75,000 at ₹50 lakh and above.
Last Updated: 15 April 2026 | Applicable From: Tax Year 2026-27 (1 April 2026 onwards) | Reference: Income-tax Act, 2025 (30 of 2025), as amended by Finance Act, 2026
The choice between the new regime and the old regime is the single most consequential tax planning decision for most Indian individual taxpayers. Under the Income-tax Act, 2025, which received Presidential assent on 21 August 2025 and commenced unconditionally on 1 April 2026, the new regime is the default. If a taxpayer does nothing, their income for tax year 2026-27 and onwards is computed under the new regime slabs with the limited set of deductions allowed under the new regime. The old regime continues to be available, but only on an opt-out basis and, for taxpayers with business or profession income, only through the Form 10-IEA equivalent mechanism with one-time re-switching restrictions. This guide walks through the slabs, the deductions, the Form 10-IEA mechanics, the break-even maths at income levels from ₹7 lakh to ₹1 crore, and the practical decision framework for common taxpayer profiles — salaried individuals, business and profession income earners, senior citizens, HUFs, home-loan borrowers and NPS contributors.
Definition — Default Regime: Under the Income-tax Act, 2025, the new regime is the default method of computing tax for individuals, HUFs, AOPs, BOIs and artificial juridical persons. “Default” means that if the taxpayer does not affirmatively opt out, income is taxed under the new regime slabs with only the limited deductions allowed under that regime. A taxpayer who wants to be taxed under the old regime must opt out — salaried individuals can do so each year simply in the return; business and profession taxpayers must file the Form 10-IEA equivalent before the due date.
Under the Income-tax Act, 2025, the new regime is the default for tax year 2026-27 (1 April 2026 to 31 March 2027). For most taxpayers earning up to ₹12,75,000 as a salaried individual (after the ₹75,000 standard deduction), the new regime results in zero tax because of the ₹60,000 rebate for total income up to ₹12,00,000. Beyond that level, the decision turns on how much Chapter VI-A-equivalent deduction you can claim. Broadly, the old regime beats the new regime only if your total deductions (standard deduction plus Section 80C equivalent, Section 80D equivalent, Section 80CCD(1B) NPS, home loan interest, HRA, etc.) exceed roughly ₹4,25,000 at ₹15 lakh income, ₹5,00,000 at ₹20 lakh, ₹5,50,000 at ₹30 lakh, and ₹5,75,000 to ₹6,00,000 at ₹50 lakh and above. A taxpayer without these large deductions should stay in the default new regime.
The Income-tax Act, 2025 (30 of 2025) was enacted on 21 August 2025 and commenced unconditionally on 1 April 2026. It replaces the Income-tax Act, 1961 in its entirety and introduces a single terminology of “tax year” — the 12-month fiscal period from 1 April to 31 March — replacing the dual concept of previous year and assessment year used under the repealed Act. The first tax year under the new Act is tax year 2026-27 (1 April 2026 to 31 March 2027). Income earned during this period will be assessed under the 2025 Act.
The two regimes that individual and HUF taxpayers must choose between are the “new regime” (the default concessional rate regime carried forward from the Section 115BAC regime of the repealed Act, embedded directly into the 2025 Act without the need for an election to benefit from it) and the “old regime” (the legacy slab structure with Chapter VI-A deductions, available only if the taxpayer opts out of the default). The slabs, rebate levels and standard deduction applicable for tax year 2026-27 reflect the Budget 2025 announcements that were implemented through the Finance Act, 2026 amendments to the 2025 Act.
| Total Income (₹) | Rate (New Regime — Default) |
|---|---|
| Up to 4,00,000 | Nil |
| 4,00,001 to 8,00,000 | 5% |
| 8,00,001 to 12,00,000 | 10% |
| 12,00,001 to 16,00,000 | 15% |
| 16,00,001 to 20,00,000 | 20% |
| 20,00,001 to 24,00,000 | 25% |
| Above 24,00,000 | 30% |
Health and education cess of 4 percent applies on the aggregate of tax and surcharge. Surcharge applies at 10 percent for total income between ₹50,00,000 and ₹1,00,00,000, 15 percent for ₹1,00,00,000 to ₹2,00,00,000, 25 percent for ₹2,00,00,000 to ₹5,00,00,000 and 25 percent (capped) above ₹5,00,00,000 — the 37 percent top-bracket surcharge was abolished under the new regime.
| Total Income (₹) | Rate (Old Regime — On Opt-Out) |
|---|---|
| Up to 2,50,000 | Nil |
| 2,50,001 to 5,00,000 | 5% |
| 5,00,001 to 10,00,000 | 20% |
| Above 10,00,000 | 30% |
| Deduction | Limit | New Regime | Old Regime |
|---|---|---|---|
| Standard deduction (salaried/pension) | ₹75,000 / ₹50,000 | Yes (₹75,000) | Yes (₹50,000) |
| Section 80C equivalent (EPF, PPF, ELSS, LIC, tuition, home loan principal) | ₹1,50,000 | No | Yes |
| Section 80CCD(1B) equivalent — additional NPS | ₹50,000 | No | Yes |
| Section 80CCD(2) equivalent — employer NPS | 14% of salary | Yes | Yes |
| Section 80D equivalent — health insurance | ₹25,000 / ₹50,000 / ₹1,00,000 | No | Yes |
| Section 80E equivalent — education loan interest | No cap, 8 yrs | No | Yes |
| Section 80G equivalent — donations | 50% / 100% | No | Yes |
| Section 80TTA/80TTB — savings/senior interest | ₹10,000 / ₹50,000 | No | Yes |
| HRA exemption | Per formula | No | Yes |
| LTA exemption | Actual / 2 in block of 4 | No | Yes |
| Section 24(b) equivalent — self-occupied home loan interest | ₹2,00,000 | No | Yes |
| Family pension deduction | ₹25,000 | Yes | Yes |
| Agniveer Corpus Fund | Actual | Yes | Yes |
The critical observation is that the new regime retains only three material deductions: the enhanced ₹75,000 standard deduction, employer NPS contribution under Section 80CCD(2) equivalent, and the family pension deduction. Everything else — the popular 80C basket, 80D health insurance, 80CCD(1B) additional NPS, 80E education loan, 80G donations, HRA, LTA and home loan interest — is available only under the old regime. Any regime-choice decision is fundamentally a comparison between the value of these lost deductions (under the old regime slabs) and the benefit of the lower new regime slabs plus the larger rebate and standard deduction.
The following table is computed for a salaried individual resident in India for tax year 2026-27. “Gross income” means salary before any deduction. New regime tax assumes the ₹75,000 standard deduction and no other deduction. Old regime “break-even deductions” is the total of standard deduction plus all Chapter VI-A-equivalent deductions and HRA/home loan interest that would make old regime tax equal to new regime tax.
| Gross Income | New Regime Tax (incl. cess) | Break-even Total Deductions (Old Regime) | Practical Verdict |
|---|---|---|---|
| ₹7,00,000 | Nil (rebate) | Nil (old regime cannot beat zero) | New regime |
| ₹10,00,000 | Nil (rebate) | ~₹2,25,000 to break even with any old regime tax | New regime |
| ₹12,00,000 | Nil (rebate)* | ~₹3,00,000 | New regime |
| ₹15,00,000 | ~₹1,05,000 | ~₹4,25,000 | Old regime wins if deductions ≥ ₹4.25L |
| ₹20,00,000 | ~₹2,00,000 | ~₹5,00,000 | Old regime wins if deductions ≥ ₹5.00L |
| ₹30,00,000 | ~₹4,85,000 | ~₹5,50,000 | Old regime wins if deductions ≥ ₹5.50L |
| ₹50,00,000 | ~₹10,85,000 | ~₹5,75,000 | Old regime wins if deductions ≥ ₹5.75L |
| ₹1,00,00,000 | ~₹27,50,000 (incl. 10% surcharge and cess) | ~₹6,00,000 | Old regime wins if deductions ≥ ₹6.00L |
*At total income of exactly ₹12,00,000 under the new regime, the ₹60,000 rebate wipes out the tax; marginal relief protects incomes marginally above this level. Figures are rounded for illustration; exact tax depends on the precise composition of income, surcharge application and the cess.
Under the Income-tax Act, 2025 framework, the opt-out mechanism depends on whether the taxpayer has business or profession income.
A taxpayer who has income under the head “profits and gains of business or profession” and who wants to be taxed under the old regime must file Form 10-IEA (or its equivalent under the Income-tax Act, 2025 rules) before the due date for furnishing the return of income for the relevant tax year. Once filed, the election applies until the taxpayer withdraws it. The critical restriction is the one-time re-switch rule: a business/profession taxpayer who has opted out and then switches back to the new regime can re-opt back into the old regime only once during their lifetime as long as they continue to have business/profession income. This is an asymmetric protection designed to prevent year-on-year regime arbitrage based on deduction swings.
A taxpayer who does not have any business or profession income — a pure salaried individual, a pensioner, a rental-income-only taxpayer, or a capital-gains-only taxpayer — can switch regimes on a year-on-year basis. No separate Form 10-IEA is required each year. The election is made simply by indicating the chosen regime in the return of income for that year. If the taxpayer does nothing, the default new regime applies.
For a salaried individual the decision is mechanical: compute new regime tax and old regime tax each year and pick the lower. There is no downside to switching because the election can be revised each year. For a business or profession income earner, the decision is strategic. Because re-entry to the old regime is effectively a one-time option, business taxpayers should commit to the regime they expect to be better across a multi-year horizon, not just the current year. A chartered accountant running a consultancy practice with relatively stable deductions should prefer the regime that wins across five years; a seasonal business with volatile profits and deductions should usually default to the new regime and only opt out if they are confident the old regime wins consistently.
The new regime does not provide a higher basic exemption for senior citizens (60 to 80 years) or super-senior citizens (above 80 years). All individuals face the same Nil-up-to-₹4,00,000 entry slab. Under the old regime, senior citizens have a basic exemption of ₹3,00,000 and super-senior citizens have ₹5,00,000. Additionally, under the old regime, senior citizens can claim the Section 80TTB equivalent deduction of ₹50,000 on interest from banks and post offices (vs. the ₹10,000 Section 80TTA equivalent for non-seniors) and higher Section 80D health insurance limits. A retired senior with pension, interest income and meaningful medical insurance spend is often better off in the old regime. A senior with income below ₹12,00,000 and no large deductions can stay in the new regime and benefit from the ₹60,000 rebate.
A Hindu Undivided Family is eligible for both regimes. The slabs, rates and rebate mechanism are applied to the HUF in the same way as an individual, with one important exception: the Section 87A-equivalent rebate (₹60,000 new regime, ₹12,500 old regime) is available only to resident individuals, not to HUFs. An HUF cannot rely on the ₹60,000 rebate to bring tax to zero up to ₹12,00,000. For an HUF with meaningful deductions under the old regime, the opt-out is often worthwhile at mid-income levels.
A home loan is the single biggest swing factor in the regime decision. Interest on a self-occupied home loan is deductible up to ₹2,00,000 per year under the Section 24(b) equivalent, and the principal repayment qualifies within the ₹1,50,000 Section 80C cap — but only under the old regime. For a taxpayer in the 20-30 percent bracket, these two deductions alone generate tax savings of ₹70,000 to ₹1,05,000 per year. A salaried taxpayer with a home loan should always run the break-even maths carefully before defaulting to the new regime.
NPS has two distinct tax components. The self-contribution under Sections 80CCD(1) and 80CCD(1B) is only available under the old regime (up to ₹1,50,000 within the 80C cap plus an additional ₹50,000 under 80CCD(1B)). The employer contribution under Section 80CCD(2) equivalent — up to 14 percent of salary for both Government and private sector employees — is available under both regimes. This asymmetry means that a salaried employee whose employer offers corporate NPS with a full 14 percent contribution benefit captures a substantial NPS advantage without needing to opt out of the new regime. Only taxpayers who rely heavily on the additional ₹50,000 self-contribution have an NPS-specific reason to prefer the old regime.
Life insurance premiums, ELSS mutual fund investments, PPF, EPF, NSC, Sukanya Samriddhi and similar instruments qualify for the Section 80C equivalent deduction of ₹1,50,000 only under the old regime. Health insurance premiums qualify for the Section 80D equivalent deduction (₹25,000 for self/family under 60, ₹50,000 where any member is a senior citizen, additional ₹25,000 or ₹50,000 for parents) only under the old regime. A taxpayer already committed to annual insurance, ELSS, home loan and NPS spend should sum the effective deductions and run the break-even calculation. If the package exceeds the break-even for their income level, the old regime saves tax.
CA V. Viswanathan: For tax year 2026-27 under the Income-tax Act, 2025, my default advice to salaried clients is simple: if your gross income is up to ₹12,75,000, stay in the new regime — you will pay zero tax and the discussion is over. If your gross income is between ₹12,75,000 and ₹15,00,000 and you have a home loan or active insurance and NPS investments, run the old regime maths carefully because the break-even is surprisingly close at ~₹4,25,000 of deductions. From ₹15,00,000 to ₹30,00,000 the old regime wins only for those who fully maximise a diversified deduction package of ₹4,50,000 to ₹5,50,000 — usually this means a combination of full ₹1,50,000 Section 80C, ₹50,000 Section 80CCD(1B), ₹50,000 Section 80D and a live home loan generating ₹2,00,000 of interest. Above ₹50,00,000 the old regime still wins for home-loan borrowers, but the margin shrinks because the surcharge applies to both regimes symmetrically and the absolute deduction cap of around ₹6,00,000 is small relative to the tax base. For clients with business or profession income, I almost always recommend the new regime as the default because the one-time re-switch restriction on Form 10-IEA penalises mistakes. The one clear old-regime exception is a senior citizen with significant interest income, health insurance and home loan — there the old regime’s higher basic exemption, Section 80TTB ₹50,000 interest deduction and enhanced 80D limits combine to beat the new regime comfortably. And remember, the decision must be re-run every year: what was optimal in tax year 2026-27 may not be optimal in tax year 2027-28 as your home loan interest shrinks, your deductions change, and your income changes.
Which regime is the default under the Income-tax Act, 2025 for tax year 2026-27?
The new regime is the default for tax year 2026-27. If a taxpayer does nothing, income is computed under the new regime slabs (Nil/5/10/15/20/25/30 percent across ₹4L/₹8L/₹12L/₹16L/₹20L/₹24L). A rebate of up to ₹60,000 zero-rates tax up to ₹12,00,000, and the effective nil-tax threshold for salaried individuals is ₹12,75,000 after the ₹75,000 standard deduction.
Is there an old regime at all under the Income-tax Act, 2025?
Yes, but only on opt-out. The old regime slabs are Nil up to ₹2,50,000, 5% to ₹5,00,000, 20% to ₹10,00,000 and 30% above. The full Chapter VI-A-equivalent deductions — 80C up to ₹1,50,000, 80D health insurance, 80CCD(1B) NPS up to ₹50,000, home loan interest up to ₹2,00,000, HRA, LTA — are available only under the old regime.
How does Form 10-IEA work?
A taxpayer with business or profession income who wants the old regime must file Form 10-IEA (or its 2025 Act equivalent) before the return due date. The election applies until withdrawn. A business taxpayer who switches back to the new regime can re-enter the old regime only once. Salaried taxpayers without business income can switch each year in the return itself.
At what income level is tax zero under the new regime?
Total income up to ₹12,00,000 attracts zero tax for resident individuals because of the ₹60,000 rebate under the Section 87A equivalent. Salaried individuals get an effective nil-tax threshold of ₹12,75,000 after the ₹75,000 standard deduction. A marginal relief provision protects incomes marginally above ₹12,00,000.
How many deductions are needed for the old regime to beat the new regime at ₹15 lakh?
Approximately ₹4,25,000 of total deductions (standard deduction plus Chapter VI-A). Usually this means full ₹1,50,000 Section 80C, ₹50,000 Section 80CCD(1B), ₹25,000-₹50,000 Section 80D and either ₹1,00,000+ of home loan interest or a meaningful HRA claim.
What deductions are allowed under the new regime?
Only the ₹75,000 standard deduction (salaried/pension), employer NPS contribution under Section 80CCD(2) equivalent up to 14% of salary, ₹25,000 family pension deduction, and Agniveer Corpus Fund contribution. Section 80C, 80D, 80CCD(1B), 80E, 80G, HRA, LTA and home loan interest are not available.
What are the new regime slabs for tax year 2026-27?
Nil up to ₹4,00,000; 5% on ₹4,00,001-₹8,00,000; 10% on ₹8,00,001-₹12,00,000; 15% on ₹12,00,001-₹16,00,000; 20% on ₹16,00,001-₹20,00,000; 25% on ₹20,00,001-₹24,00,000; 30% above ₹24,00,000. Plus 4% cess and applicable surcharge.
How does NPS contribution affect the regime choice?
Self-contribution under 80CCD(1) and 80CCD(1B) is available only under the old regime. Employer contribution under 80CCD(2) — up to 14% of salary — is available under both regimes. A salaried employee with corporate NPS can capture the 14% benefit in the default new regime without opting out.
How does a home loan affect the regime choice?
Section 24(b) interest deduction up to ₹2,00,000 on a self-occupied home loan is available only under the old regime, and home loan principal qualifies within the ₹1,50,000 80C cap. For a 20-30% bracket taxpayer these two benefits alone save ₹70,000 to ₹1,05,000. A home-loan borrower should always model the old regime before defaulting to the new.
Do senior citizens get a better deal under the new regime?
No. The new regime does not provide a higher basic exemption for seniors (60-80) or super-seniors (above 80). The old regime gives ₹3,00,000 / ₹5,00,000 basic exemption, 80TTB ₹50,000 on interest and higher 80D limits. A retired senior with pension and interest income plus medical insurance spend is usually better off in the old regime.
Can an HUF opt out to the old regime?
Yes. HUFs are eligible for both regimes. However, the Section 87A equivalent rebate (₹60,000 new regime, ₹12,500 old regime) is only available to resident individuals, not to HUFs. An HUF cannot zero-rate tax up to ₹12,00,000 and therefore often benefits from the old regime at mid-income levels if meaningful deductions are available.
What is the break-even level of deductions for the old regime?
Approximate thumb-rule total deductions needed for old regime to beat new regime at selected gross income levels: ₹7L — zero (new regime is zero); ₹10L — ~₹2.25L; ₹12L — ~₹3L; ₹15L — ~₹4.25L; ₹20L — ~₹5L; ₹30L — ~₹5.5L; ₹50L — ~₹5.75L; ₹1Cr — ~₹6L.
How is the Section 87A rebate applied under the new regime?
A resident individual with total income ≤ ₹12,00,000 gets a rebate equal to tax payable or ₹60,000, whichever is lower, effectively zero-rating tax. Marginal relief protects taxpayers with income marginally above ₹12,00,000. Rebate is not available to HUFs, non-residents or companies.
Can a salaried taxpayer without business income switch regimes every year?
Yes. Salaried taxpayers without any business or profession income can switch between the new and old regimes on a year-on-year basis simply by indicating the chosen regime in the return. No Form 10-IEA is required. The one-time re-switch restriction applies only to taxpayers with business/profession income.
How does insurance and ELSS affect the regime choice?
Life insurance premiums and ELSS qualify for 80C (₹1,50,000) only under the old regime. Health insurance qualifies for 80D (₹25,000 to ₹1,00,000) only under the old regime. A taxpayer committed to significant annual insurance and ELSS spend should run the break-even calculation — if the package exceeds the threshold for their income, the old regime saves tax.
What is the practical decision framework for choosing a regime?
Step 1 compute new regime tax. Step 2 list all eligible old regime deductions. Step 3 compute old regime tax. Step 4 pick the lower. Step 5 file Form 10-IEA before the return due date if you have business income and want the old regime; salaried individuals simply indicate the regime in the return. Step 6 re-run the comparison every tax year.