Slabs, standard deduction and rebate under both regimes for FY 2026-27, three worked examples, and the deductions it takes for the old regime to win.
Every salaried employee in India picks a tax regime, and the choice decides how much tax the employer deducts each month. The new regime is the default. Budget 2026 kept the slabs from the year before, so the numbers below apply to FY 2026-27 (assessment year 2027-28), for resident individuals below 60.
The two regimes at a glance
| New regime | Old regime | |
|---|---|---|
| Slabs | Nil to ₹4 lakh, then 5% to 30% in ₹4 lakh steps; 30% above ₹24 lakh | Nil to ₹2.5 lakh, 5% to ₹5 lakh, 20% to ₹10 lakh, 30% above |
| Standard deduction | ₹75,000 | ₹50,000 |
| Rebate | Tax is nil up to ₹12 lakh of taxable income | Up to ₹12,500 if taxable income is ₹5 lakh or less |
| HRA, 80C, 80D, home loan interest | Not allowed | Allowed |
Both add 4% health and education cess. Just above ₹12 lakh, marginal relief under the new regime makes sure the tax is never more than the income above ₹12 lakh.
Three examples
Each example assumes ₹1,75,000 of old-regime deductions (₹1,50,000 under 80C and ₹25,000 for health insurance), which is common.
| Gross salary | New regime tax | Old regime tax |
|---|---|---|
| ₹10 lakh | ₹0 | ₹70,200 |
| ₹15 lakh | ₹97,500 | ₹2,02,800 |
| ₹25 lakh | ₹3,19,800 | ₹5,14,800 |
At these levels the new regime is clearly cheaper. At ₹10 lakh it costs nothing at all, because taxable income after the ₹75,000 standard deduction is under ₹12 lakh.
When the old regime still wins
The old regime only comes out ahead with large deductions. For a salary of ₹15 lakh, deductions beyond the standard deduction need to be more than about ₹5.4 lakh before the old regime is cheaper. That usually means full 80C, health insurance, a large HRA exemption and home loan interest together.
Employees paying high rent in one of the eight cities with the 50% HRA rate (Delhi, Mumbai, Chennai, Kolkata, Bengaluru, Pune, Hyderabad and Ahmedabad), with a home loan as well, are the most likely to benefit.
What HR should do
- Collect the regime choice early in the year. If an employee says nothing, deduct under the new regime.
- Ask for proofs only from old-regime employees. Under the new regime, rent receipts and 80C proofs do not change TDS.
- Explain the monthly effect. People notice the change in take-home pay more than the annual figure.
- Let employees check for themselves. Point them to the income tax calculator, which shows both regimes side by side.
An employee can still switch regime when filing their return, even if the employer deducted under the other one. For more detail, read the TDS section of the compliance guide.
Sources
General information, not legal or tax advice. Rules change, so check the source before you act.