How to choose between India's new and old tax regime for FY 2026-27

Guide · Updated 2026-11-10

See how slab tax, the 87A rebate, surcharge and cess add up under each regime, when deductions make the old regime cheaper, and how to compare both in one go.

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Every year your employer asks: new regime or old? The India tax calculator answers it by working out your FY 2026-27 income tax both ways, side by side, from your salary, other income and deductions. It is for employees, pensioners and anyone filing their own return. Work out your HRA figure first with the HRA exemption calculator, and if you plan to cut old-regime tax by saving more, try the NPS calculator or the PPF calculator.

What it is

Income tax in India is charged in slabs: each slice of taxable income pays its own rate. The two regimes use different slices and deductions.

Taxable income = total income − deductions, rounded down to the nearest Rs 10.

• In the new regime, the only deduction for a salary is a flat Rs 75,000 standard deduction. Slabs start at 0% up to Rs 4 lakh and rise by 5 points every Rs 4 lakh, to 30% above Rs 24 lakh.
• In the old regime, the standard deduction is Rs 50,000, but you can also subtract HRA exemption, 80C (PF, PPF, ELSS, life cover), 80D (health insurance), home loan interest under 24(b) and your own NPS under 80CCD(1B), each up to its cap. The tax-free slice depends on age: Rs 2.5 lakh under 60, Rs 3 lakh from 60 to 79, Rs 5 lakh from 80.

After the slabs come three adjustments:

1. Section 87A rebate: if taxable income is Rs 12 lakh or less (new) or Rs 5 lakh or less (old), the slab tax is wiped out. Just over Rs 12 lakh in the new regime, marginal relief caps the tax at the amount your income goes over Rs 12 lakh.
2. Surcharge: an extra percentage of the tax for incomes above Rs 50 lakh, with its own relief at each step.
3. Health and Education Cess: 4% of tax plus surcharge.

So the total tax is (slab tax − rebate + surcharge) × 1.04.

How to use it

1. Choose your age band: under 60, 60 to 79, or 80 or over. This only changes the old regime.
2. Type your gross salary for the whole year, before any deduction.
3. Add other income taxed at slab rates, such as savings interest or rent after its own deductions.
4. Open the old regime deductions panel. Fill in your HRA exemption (from Form 16 or a payslip), 80C, 80D for your family, 80D for parents (tick the box if they are 60 or over), home loan interest and own NPS.
5. Read the line at the top of the results: it names the cheaper regime and what it saves a year and a month.
6. Compare the two columns row by row: taxable income, slab tax, rebate or relief, surcharge, cess, total tax and what is left after tax. The bar chart below shows both totals at a glance.

A worked example

Meera is 34 and earns Rs 20,00,000 a year. She rents in a city and claims a lot: HRA exemption Rs 2,40,000, full 80C Rs 1,50,000, 80D Rs 25,000 for her family, Rs 50,000 for her senior parents, home loan interest Rs 2,00,000 and NPS Rs 50,000.

New regime. Taxable income = Rs 20,00,000 − Rs 75,000 = Rs 19,25,000. Slab tax = Rs 20,000 (5% of the Rs 4–8 lakh slice) + Rs 40,000 (10% of Rs 8–12 lakh) + Rs 60,000 (15% of Rs 12–16 lakh) + Rs 65,000 (20% of the Rs 3,25,000 above Rs 16 lakh) = Rs 1,85,000. Cess adds Rs 7,400. Total: Rs 1,92,400.

Old regime. Her deductions add up to Rs 7,65,000 (including the Rs 50,000 standard deduction), so taxable income is Rs 12,35,000. Slab tax = Rs 12,500 (5% of Rs 2.5–5 lakh) + Rs 1,00,000 (20% of Rs 5–10 lakh) + Rs 70,500 (30% of Rs 2,35,000) = Rs 1,83,000. Cess adds Rs 7,320. Total: Rs 1,90,320.

The old regime wins, but only by Rs 2,080 a year, about Rs 173 a month. Drop the home loan and the new regime is ahead: the old regime pays off only when nearly every deduction is used in full.

A second, smaller case shows marginal relief. On a salary of Rs 12,85,000 with no deductions, new-regime taxable income is Rs 12,10,000. Slab tax would be Rs 61,500, but relief cuts it to Rs 10,000, the amount above Rs 12 lakh. With cess the bill is Rs 10,400. In this narrow band the marginal rate shown is above 100%: each extra Rs 1,000 adds slightly more than Rs 1,000 of tax, cess included.

Where it is used

• Declaring a regime to your employer at the start of the year, so the right TDS (tax deducted at source) comes off each month.
• Checking a job offer: compare take-home for two salaries in both regimes before you negotiate.
• Planning investments: see whether an extra Rs 50,000 in NPS changes which regime is cheaper, rather than investing only for the tax saving.

Common mistakes

• Typing your CTC instead of gross salary. CTC often includes the employer’s PF share and gratuity, which are not your taxable salary. Use the gross figure from your payslip or Form 16.
• Claiming the full HRA you receive. Only the exempt part counts, which depends on rent and city. Work it out first.
• Expecting deductions to help in the new regime. They are ignored there; only the Rs 75,000 standard deduction applies.
• Adding capital gains to other income. Gains on shares and property have their own rates; the tool covers slab-rate income only.

Questions people ask

Can I switch regime every year? Salaried people without business income can usually pick each year when they file. People with business income have tighter rules. Check the official source.

Why is my tax zero on Rs 12.5 lakh? The Rs 75,000 standard deduction brings taxable income to Rs 12 lakh or less, and the 87A rebate covers all the slab tax up to that point.

Does this include my employer’s TDS? No. It works out the tax for the year; compare it with the TDS on your Form 16 to see whether you will get a refund or owe more.

Is it tax advice? No. It is general education based on the FY 2026-27 rules. Rules change with each Budget, so check the official source or a tax professional before you file.