Old vs new tax regime, FY 2026-27:
compare the final tax, not the slab rates

Old vs new tax regime: which is better?

There is no regime that is better for everyone. The one that costs you less is the one with the lower final tax after your own income, deductions, rebate and surcharge are applied. Headline slab rates alone do not show you that.

Each regime allows a different set of deductions and exemptions, so the same income can produce two different taxable incomes. The comparison is therefore personal: it depends on what you can claim and document, and on how large those amounts are.

This page gives you the method. It does not quote slab limits or rebate amounts, so take those from the official income-tax portal for FY 2026–27, which is assessed in AY 2027–28.

Start with one question: do I have enough documented deductions to make the old regime's paperwork worth it? The comparison answers it with numbers instead of a guess.

The result can also flip from year to year. A year with a large documented deduction, such as a home-loan interest certificate or high rent, can favour one regime, and a year without it the other. Repeat the comparison every year instead of carrying forward last year's answer.

How to compare the two regimes, step by step

1. 1Write down your gross income for FY 2026–27 by source: salary, interest, rent and other income.
2. 2List every deduction and exemption you can document, with the proof beside it.
3. 3On the official portal, mark which of those items each regime actually allows for the year.
4. 4Compute taxable income twice: once with the old regime's allowed items, once with the new regime's.
5. 5Apply each regime's slabs, then rebate, surcharge and cess, in that order.
6. 6Subtract tax already deducted or paid, and compare the final amount payable or refundable.

Compare the final liability, not gross salary or slab rates. A lower rate applied to a higher taxable income can still cost more.

Do the comparison on paper or in a spreadsheet, using the same figures on both sides so that only the regime rules differ.

If a deduction is capped, use the amount you can actually claim, not the amount you spent. A receipt for more than the permitted amount does not change the result.

Worked example: ₹15,00,000 gross salary

Take a salaried employee with ₹15,00,000 of gross salary. Eligible deductions differ between the regimes, so the example keeps them as D₁ for the old regime and D₂ for the new regime. Fill both from your own proofs and the portal's rules.

To see how sensitive the result is, add ₹1,00,000 to D₁ and recompute only the old regime. Taxable income falls by ₹1,00,000, so the tax falls by ₹1,00,000 times your marginal slab rate, plus cess on the saving. Keep adding until the two regimes tie: that value of D₁ is your break-even.

Below the break-even, the regime without those deductions tends to win. Above it, the one that lets you use them does. Your own proofs decide which side you are on.

Repeat the exercise with a second salary figure if you expect a raise or bonus. Higher income can change which band the extra money falls in, and with it the answer.

Apply the break-even to your marginal rate. If your last rupees of income sit in a lower band, each extra rupee of deduction saves less, which pushes the break-even further out.

A comparison sheet to copy

A sheet like this doubles as a record. Save it with your supporting documents so your reasoning for choosing a regime is clear when you review the return later.

Fill the sheet in pencil first. Documents arrive late and amounts get corrected, so expect to revise the deduction lines more often than the rest.

What to gather before you compare

A comparison is only as good as the deduction list. Collect the documents first, then check each one against the portal for each regime.

• Investment and insurance proofs for the year, with dates and amounts.
• Rent receipts and landlord details, if you pay house rent.
• The interest certificate from your lender, if you have a housing loan.
• Your employer's Form 16 or salary break-up showing what has already been exempted or deducted.
• Statements for savings and deposit interest, which is income in either regime.

Employers often ask for investment declarations early in the year. Using this sheet before you submit one means you tell payroll the regime that matches the numbers, not the one that sounds simpler.

If your documents are incomplete, run the comparison twice: once with what you hold today and once with what you expect to hold by year end. If the same regime wins in both, the choice is easy; if not, you know how much more evidence you need.

Mistakes people make when comparing regimes

• Judging by the lowest slab rate rather than the final tax payable.
• Using a chart for AY 2026–27 as if it applied to AY 2027–28; FY 2026–27 income is assessed in AY 2027–28.
• Assuming a deduction applies in both regimes without checking.
• Skipping rebate and surcharge; work through them for each regime separately.
• Assuming you can switch freely. If you have business income, switching can carry special restrictions, so confirm before you choose.
• Letting employer TDS decide the matter: tax deducted is not the same as tax due, so reconcile when you file.

Rerun the comparison after any large change in your year, such as a new job, a home loan or a change in rent. Each of these moves a deduction in or out and may change the better regime.

Where the difference between the two regimes is small, other factors matter more: how much paperwork you are willing to keep, how certain your deduction amounts are, and how you would feel about a change in rules next year.

The income tax new regime page works through the new-regime calculation in more detail, including the order of rebate, surcharge and cess.