Old vs New Tax Regime: How to Decide (AY 2026-27)
Since AY 2024-25, the New regime has been the default. It has lower slab rates but asks you to give up most deductions. The Old regime keeps the deductions but taxes at higher rates. Which one costs you less depends entirely on your own numbers — here's how to think about it.
What actually differs between the two
The two regimes are just two different rate-and-deduction packages applied to the same income:
- New regime — lower, wider slab rates, but you cannot claim most exemptions and Chapter VI-A deductions (no 80C, no 80D, no HRA exemption, no home-loan interest on a self-occupied house). The salary standard deduction and the employer's NPS contribution (80CCD(2)) are among the few still allowed.
- Old regime — higher slab rates, but you can claim the full set of exemptions and deductions: 80C, 80D, 80CCD(1B) NPS, HRA, home-loan interest, and so on.
Because the New regime is now the default, a salaried taxpayer who wants the Old regime must opt in when filing; those with business or professional income use Form 10-IEA to choose the Old regime. Always confirm the current opt-in mechanics on the official portal.
The trade-off in one sentence
The more you legitimately claim in deductions, the more the Old regime tends to favour you; the less you claim, the more the New regime's lower rates tend to win. The break-even point is different for every person, which is exactly why guessing is a bad idea.
Who tends to benefit from each
The New regime often wins if you don't have a home loan, don't pay rent that qualifies for HRA, and don't max out 80C/80D — for example, an early-career salaried employee with few investments.
The Old regime often wins if you have a sizeable home-loan interest deduction, claim significant HRA, and use the full 80C (₹1.5 lakh), 80D, and 80CCD(1B) headroom.
These are tendencies, not rules. Two people with the same salary can land on opposite answers.
How to decide properly
Don't pick a regime from a rule of thumb. Compute your tax under both regimes using your real figures — including the correct slabs, any surcharge, and the 4% health-and-education cess — and choose the lower one. You can do this on the official income-tax calculator, or let MyTaxLocker compute both side by side from your Form 16.
Compare both regimes from your Form 16
MyTaxLocker reads your Form 16 and shows your exact liability under the Old and New regime, side by side — so you choose with numbers, not guesswork.
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