New vs Old Tax Regime After Budget 2026 — Which One Makes Sense Now?
The Union Budget 2026, presented by Finance Minister Nirmala Sitharaman, brought a stable first approach to income tax. While the tax rates and slabs themselves didn't change from last year the big news is the New Income Tax Act 2025 which kicks in on April 1, 2026. This new law makes the New Tax Regime the default choice for everyone. If you want the Old Regime you now have to opt-out of the new one. Here is a detailed guide to help you choose the best path for your wallet.
New vs Old Tax Regime After Budget 2026
The New Tax Regime
The New Tax Regime is designed for people who don't want to maintain a file full of investment proofs (like LIC receipts or rent slips). It offers lower tax rates but takes away most deductions.
Key Highlights for 2026-27:
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Zero Tax Limit: If your total taxable income is up to ₹12 lakh you pay Zero Tax thanks to a full rebate (Section 87A).
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Standard Deduction: Salaried employees get a flat ₹75000 off their gross salary.
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Effective Tax-Free Salary: If you earn up to ₹12.75 lakh you effectively pay no tax (12.75L - 75K = 12L).
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Marginal Relief: If you earn slightly over ₹12 lakh (say ₹12.1 lakh) the government ensures the tax you pay isn't more than the extra money you earned.
New Tax Regime Slabs (FY 2026-27 / AY 2027-28)
The Old Tax Regime
The Old Regime is still available, but it hasn't been updated in years. It has higher tax rates, but it allows you to reduce your taxable income using various investments.
Popular Deductions (Only in Old Regime):
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Section 80D: Up to ₹25000 - ₹50000 (Health Insurance).
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Section 24(b): Up to ₹2 lakh (Home Loan Interest).
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HRA: Exemption on house rent paid.
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LTA: Leave Travel Allowance.
The Slabs (Old Regime):
The Breaking Point: How to Decide?
To decide which is better you need to find your Total Deductions. This is the sum of your section 80C, section 80D, HRA and Home Loan interest.
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If your income is up to ₹12.75 Lakh: The New Regime is a clear winner. You pay zero tax without needing to invest a single rupee. To match this in the Old Regime you would need massive deductions that are almost impossible for most people.
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If your income is ₹15 Lakh: In the New Regime your tax (after standard deduction) is roughly ₹1.05 lakh. To get the same tax in the Old Regime you would need deductions of at least ₹4 lakh.
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If your income is Above ₹20 Lakh: The New Regime is generally better unless you have a very large home loan (over ₹2 lakh interest) and a high HRA component.
What is the New Income Tax Act 2025?
This is the structural change announced in Budget 2026.
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Simplified Language: The law is now 50% shorter and much easier to read.
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Tax Year Concept: It removes the confusion between Assessment Year and Previous Year. Now there is just one Tax Year.
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Easier Refunds: You can now claim TDS refunds even if you file your return after the deadline.
Detailed Comparison: New vs Old Tax Regime (FY 2026-27)
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