Skip to content
HRAreceipt.in

Tax Guide · 11 May 2026

Old vs New Tax Regime FY 2026-27: Where Is Your Break-Even?

The New Tax Regime gives a flat zero-tax ceiling of Rs. 12,75,000 for FY 2026-27 but disallows HRA, Section 80C, 80D, and Section 24(b). The Old Tax Regime keeps every deduction and starts taxing from Rs. 2,50,000. The break-even deduction is income-dependent — it rises from roughly Rs. 4 lakh at lower salaries to Rs. 7 lakh or more at higher ones, as the four worked examples below show.

In this section

Answers

View all 97 articles →

Myth

The old regime always wins because it allows HRA, 80C, 80D, and home-loan deductions.

Fact

Break-even runs on deductions actually claimed, not theoretical ones — and the tipping point rises with income. At Rs. 8–10 lakh gross it is near Rs. 4 lakh; at Rs. 15 lakh it is closer to Rs. 5–6 lakh; at Rs. 20 lakh or above it can exceed Rs. 7 lakh. The new regime wins below the tipping point, helped by the Rs. 60,000 Section 87A[2] rebate.

When does each regime win for FY 2026-27?

Short answer

The new regime under Section 115BAC[1] gives a flat zero-tax ceiling of Rs. 12,75,000; the old regime wins once your claimed deductions exceed the income-dependent break-even — roughly Rs. 4 lakh at lower salaries, rising to Rs. 7 lakh or more at higher ones.

  • The new regime is the default since FY 2023-24 (Finance Act 2023) and gives a Rs. 12,75,000 ceiling (Rs. 75,000 standard deduction plus the Rs. 60,000 Section 87A[2] rebate up to Rs. 12,00,000 taxable income).
  • It disallows HRA exemption, Section 80C, Section 80D, Section 24(b), and most other allowance-level deductions.
  • The old regime keeps every deduction but taxes from Rs. 2,50,000 with a smaller Rs. 50,000 standard deduction.
  • The break-even deduction is income-dependent: at Rs. 8–10 lakh gross it is near Rs. 4 lakh; at Rs. 15 lakh it is closer to Rs. 5–6 lakh; at Rs. 20 lakh or above it can exceed Rs. 7 lakh. Above your personal break-even the old regime wins; below it the new regime wins on lower rates and the Rs. 12 lakh rebate ceiling.
Compare both regimes from one set of inputs

What are the FY 2026-27 slabs in both regimes?

Short answer

Per the Finance Act 2025[8], new-regime tax is nil up to Rs. 4,00,000 with 30% only above Rs. 24,00,000; the old regime stays nil up to Rs. 2,50,000 with 30% from Rs. 10,00,001.

A 4% Health and Education Cess applies under both regimes, with surcharge above Rs. 50 lakh. High-income earners with modest deductions gain from the new regime's wider top band; mid-income earners with a full deduction stack favour the old regime.

New regime bandNew rateOld regime bandOld rate
Rs. 0 - Rs. 4,00,000NilRs. 0 - Rs. 2,50,000Nil
Rs. 4,00,001 - Rs. 8,00,0005%Rs. 2,50,001 - Rs. 5,00,0005%
Rs. 8,00,001 - Rs. 12,00,00010%Rs. 5,00,001 - Rs. 10,00,00020%
Rs. 12,00,001 - Rs. 16,00,00015%Above Rs. 10,00,00030%
Rs. 16,00,001 - Rs. 20,00,00020%Standard deduction Rs. 50,000-
Rs. 20,00,001 - Rs. 24,00,00025%Section 87A rebate Rs. 12,500-
Above Rs. 24,00,00030%Standard deduction Rs. 75,000-

New vs old regime slabs, FY 2026-27 / AY 2027-28. Source: Finance Act 2025; Section 115BAC, Income Tax Act 1961.

Full FY 2026-27 slab reference

How does the Section 87A rebate create a Rs. 12 lakh tax-free ceiling?

Short answer

Budget 2025 raised the new-regime Section 87A[2] rebate from Rs. 25,000 to Rs. 60,000, lifting the tax-free ceiling to Rs. 12,00,000 taxable income (Rs. 12,75,000 of salary with standard deduction).

  • Section 87A is a rebate, not a deduction: tax is computed at slab rates, then the rebate is subtracted from tax payable.
  • At taxable income of Rs. 12,00,000 or less the rebate equals the tax and liability is zero; exceed it by Re. 1 and the rebate falls away in full, creating a marginal-relief band the calculator handles.
  • The old-regime Section 87A[2] rebate is Rs. 12,500, taking taxable income up to Rs. 5,00,000 to zero, so the old-regime salaried ceiling is Rs. 5,50,000 with the Rs. 50,000 standard deduction.
  • The rebate applies only to resident individuals (not non-residents, HUFs, or companies) and excludes capital gains taxed under Section 111A and Section 112A (long-term equity above Rs. 1.25 lakh).

Which old-regime deductions tip the balance?

Short answer

Five heads drive the old regime: Section 80C[3] Rs. 1,50,000, Section 80D, Section 24(b)[5] Rs. 2,00,000, Section 10(13A) HRA, and Section 80CCD(1B) Rs. 50,000, stacking Rs. 5,00,000 to Rs. 8,00,000 at full limits.

  • Section 80C caps Rs. 1,50,000 (shared, not per head) across EPF, PPF, ELSS, life insurance, home-loan principal, two-child tuition, NSC, 5-year tax-saving FD, and Sukanya Samriddhi.
  • Section 80D allows Rs. 25,000 for self plus family and Rs. 25,000 for parents (Rs. 50,000 if a parent is a senior citizen), with a Rs. 5,000 preventive check-up sub-limit inside the cap.
  • Section 24(b) allows Rs. 2,00,000 home-loan interest for self-occupied property; let-out interest is uncapped but house-property loss set-off is capped at Rs. 2,00,000 a year, residual carried forward up to 8 assessment years.
  • Section 10(13A) HRA[6] exemption is the minimum of actual HRA, rent minus 10% of basic, and 50% of basic for metros (40% non-metro), often Rs. 1,50,000 to Rs. 3,00,000 a year in high-rent metros.
  • Section 80CCD(1B) adds Rs. 50,000 for NPS over the 80C cap; the new regime concedes only a higher Rs. 75,000 standard deduction versus Rs. 50,000.
HRA exemption three-part formula, worked

Where is the break-even across four salary profiles?

Short answer

The winner turns on the deduction stack against income: the same Rs. 5,50,000 of HRA plus home loan wins under the old regime at Rs. 15,00,000 gross but loses to the new regime at Rs. 20,00,000, because the break-even deduction rises as income rises, all figures including 4% cess.

ProfileNew-regime final taxOld-regime final taxWinner
A: Rs. 8,00,000 gross, 80C Rs. 50,000 onlyRs. 0 (Rs. 7,25,000 taxable, Rs. 60,000 rebate)Rs. 54,600 (Rs. 7,00,000 taxable)NEW by Rs. 54,600
B: Rs. 15,00,000 gross, HRA 2L / 80C 1.5L / 80D 25k / 24(b) 2L / NPS 50kRs. 97,500 (Rs. 14,25,000 taxable)Rs. 80,600 (Rs. 8,25,000 taxable)OLD by Rs. 16,900
C: Rs. 30,00,000 gross, 80C 1.5L / 80D 25k onlyRs. 4,75,800 (Rs. 29,25,000 taxable)Rs. 6,70,800 (Rs. 27,75,000 taxable)NEW by Rs. 1,95,000
D: Rs. 20,00,000 gross, HRA 1.5L / 80C 1.5L / 80D 50k / 24(b) 2LRs. 1,92,400 (Rs. 19,25,000 taxable)Rs. 2,41,800 (Rs. 14,00,000 taxable)NEW by Rs. 49,400

Four worked profiles, old-regime deductions claimed in full as stated; final tax includes cess. Source: computed under FY 2026-27 slabs, Sections 115BAC and 87A.

Run your own numbers

What seven inputs does the calculator need?

Short answer

The browser-only Tax Optimization Calculator needs gross salary, salary structure, city tier, annual rent, Section 80C, Section 80D, and Section 24(b) interest; no salary or PAN data leaves your device.

  • Gross annual salary (CTC minus employer PF) and the salary structure (basic, HRA, DA, special allowances), since HRA exemption depends on basic, not gross.
  • City tier sets the HRA cap under Section 10(13A): the eight metros (Delhi, Mumbai, Kolkata, Chennai, Bengaluru, Hyderabad, Pune, Ahmedabad) raise the exemption ceiling to 50% of basic salary, versus 40% everywhere else; the calculator uses the FY 2026-27 eight-city list.
  • Actual annual rent paid, which feeds the third leg of the HRA minimum (rent paid minus 10% of basic); leave at zero if no rent is paid.
  • Section 80C capped at Rs. 1,50,000, Section 80D premiums (with senior-citizen flag), and Section 24(b) interest capped at Rs. 2,00,000 for self-occupied property.
  • Edge cases: NPS Section 80CCD(1B) Rs. 50,000 add-on, Section 89(1) arrears relief with a Form 10E reminder, senior-citizen age, and surcharge bands above Rs. 50 lakh.
Open the Tax Optimization Calculator

What changed for FY 2026-27 versus FY 2024-25?

Short answer

Budget 2025[8] made three new-regime changes effective FY 2025-26 and continuing into FY 2026-27; the old regime stayed unchanged.

  • Slab compression: the lowest taxable bracket now starts at Rs. 4,00,000 (was Rs. 3,00,000) and the 30% slab at Rs. 24,00,000 (was Rs. 15,00,000), easing incomes between Rs. 15,00,000 and Rs. 24,00,000 most.
  • The new-regime Section 87A rebate rose to Rs. 60,000 (was Rs. 25,000), pushing the tax-free ceiling from Rs. 7,00,000 to Rs. 12,00,000 of taxable income.
  • The salaried tax-free ceiling is now Rs. 12,75,000, combining the Rs. 12,00,000 rebate ceiling with the Rs. 75,000 standard deduction.
  • The old regime is unchanged: nil to Rs. 2,50,000, 5% to Rs. 5,00,000, 20% to Rs. 10,00,000, 30% above, with a Rs. 12,500 rebate and Rs. 50,000 standard deduction.
  • The Rs. 60,000 rebate flips many Rs. 8,00,000 to Rs. 13,00,000 salary cases to the new regime, so prior-year guidance no longer transfers cleanly.

How do Form 10-IEA, Section 89(1) arrears, and the year-of-switch trap work?

Short answer

ITR-3 / ITR-4 filers with business income must file Form 10-IEA[7] before the due date to opt into the old regime; the choice is annual and switching back is once-in-a-lifetime for them.

  • Salaried filers with no business income switch to the old regime inside the ITR-1 / ITR-2 flow each year; business and professional income filers must file Form 10-IEA before the original due date, after which switching back is allowed only once in a lifetime.
  • Section 89(1)[9] relieves salary arrears by notionally taxing them at the slab of the relevant year, but Form 10E must be filed on the e-Filing portal first or the relief is disallowed.
  • Regime choice is annual with no mid-year switch, so confirm it with your employer before April 1 so TDS runs under the chosen regime.
  • Old-regime employees claiming HRA must submit rent receipts plus the landlord PAN for annual rent above Rs. 1,00,000, alongside Form 12BB; rent receipt plus a payment receipt carrying the UTR is the two-document rule.
Generate a tax-compliant rent receipt

References

  1. 1.Section 115BAC, Income Tax Act 1961 — Income Tax Department — Statutory basis for the new tax regime
  2. 2.Section 87A, Income Tax Act 1961 — Income Tax Department — Rebate up to Rs. 60,000 (new regime) / Rs. 12,500 (old regime)
  3. 3.Section 80C, Income Tax Act 1961 — Income Tax Department — Rs. 1.5 lakh deduction for old-regime investments and payments
  4. 4.Section 80D, Income Tax Act 1961 — Income Tax Department — Health-insurance premium deduction (old regime)
  5. 5.Section 24(b), Income Tax Act 1961 — Income Tax Department — Home-loan interest deduction up to Rs. 2 lakh (old regime, self-occupied)
  6. 6.Section 10(13A), Income Tax Act 1961 — Income Tax Department — HRA exemption (old regime only)
  7. 7.Form 10-IEA — Income Tax e-Filing Portal — Old-regime opt-in form for taxpayers with business or professional income
  8. 8.Finance Act 2025 — Ministry of Finance — Slab compression and Rs. 60,000 Section 87A rebate, effective FY 2025-26 onward
  9. 9.Section 89(1), Income Tax Act 1961 — Income Tax Department — Relief on salary arrears, subject to Form 10E filing

References & related

Primary sources

Related guides