Old regime or new regime: how to choose in 5 minutes

How do you choose your tax regime in 5 minutes?

You only need two numbers. First, your total deductions if you filed under the old regime: HRA (House Rent Allowance) exemption if you pay rent, 80C investments (PF, PPF, ELSS, children's tuition, up to ₹1,50,000), 80D health insurance premiums, home loan interest (up to ₹2,00,000), and your own NPS contribution (up to ₹50,000). Second, your annual salary. Compare your deduction total against the breakeven figure for your salary in the table below. Deductions above the breakeven: old regime wins. Below it: new regime wins. That is the whole decision.

This article keeps the names everyone knows (80C, 80D, 87A). The Income-tax Act, 2025 replaced the 1961 Act on 1 April 2026 and renumbered all of them; the new references are in the table further down.

Before you decide, gather these in one sitting:

• Annual rent paid and your HRA amount from the salary annexure, to estimate the HRA exemption
• 80C total: employee PF (already on your payslip), PPF, ELSS, life insurance premiums, tuition fees
• Health insurance premiums for yourself, family and parents (80D)
• Home loan interest certificate from your bank, if any
• Any NPS contribution of your own
• Your annual gross salary from the offer letter or last year's Form 130 (earlier Form 16)

What are the FY 2026-27 slabs under each regime?

The new regime (section 202 of the Income-tax Act, 2025; earlier section 115BAC) is the default and has lower rates spread across more slabs, plus a bigger standard deduction and a far bigger rebate. The old regime has higher rates but lets you claim the full menu of deductions. Both add a 4% health and education cess on the tax.

The Finance Act, 2026 changed no individual rate, slab, rebate or standard deduction, so the figures for FY 2026-27 (tax year 2026-27 in the new Act's language) are the same as last year's.

What changed when the Income-tax Act, 2025 took over?

For a salaried employee, two things. The section and form numbers are new, which matters when you read your employer's declaration form or a tax notice. And the list of cities where the HRA exemption can go up to 50% of basic grew from four to eight, which matters a great deal if you rent in one of the four that joined.

Under Rule 279 of the Income-tax Rules, 2026 the 50% cities are Delhi, Mumbai, Kolkata, Chennai, Hyderabad, Pune, Ahmedabad and Bengaluru. Everywhere else the limit stays at 40% of basic. The rest of the HRA test is unchanged: the exemption is the least of the HRA you receive, rent paid minus 10% of basic, and the city percentage of basic.

At what deduction level does the old regime start winning?

Here is the breakeven, computed from the FY 2026-27 slabs. The right column shows the old regime deductions you would need beyond the ₹50,000 old regime standard deduction (HRA exemption plus 80C plus 80D plus home loan interest plus NPS and so on) for the old regime to merely equal the new regime's tax. Worked example at ₹18,00,000: new regime taxable income is ₹17,25,000 after the ₹75,000 standard deduction, and tax including cess is ₹1,50,800; the old regime only matches that once your deductions reach about ₹6,41,700.

These are point estimates for salary-only income; your exact breakeven shifts with other income and rounding, so confirm your own numbers with the income tax calculator on this site before you file.

Who almost always wins under the new regime?

If you do not pay rent (or your HRA exemption is small), have no home loan, and your 80C is mostly just your employee PF, the new regime wins at every income level: your deductions will be nowhere near the breakevens above. It also cannot be beaten for anyone whose salary is ₹12,75,000 or less, because the ₹75,000 standard deduction brings taxable income to ₹12,00,000 or under, and the rebate under section 156 (earlier 87A) then makes the tax nil. No investment proofs, no rent receipts, no January scramble.

The new regime is also the default. If you do nothing, your employer deducts TDS under it, and for most people that default is the right answer.

Who should still check the old regime?

The old regime survives for one profile: high rent in one of the eight 50% cities plus a full deduction stack. Take a ₹18,00,000 salary in Bengaluru with basic at 40% of salary (₹7,20,000), HRA at 50% of basic (₹3,60,000) and rent of ₹35,000 a month. The HRA exemption is ₹3,48,000. Add 80C at ₹1,50,000, home loan interest of ₹2,00,000, 80D of ₹25,000 and NPS of ₹50,000 and the stack totals ₹7,73,000, well past the ₹6,41,700 breakeven. Old regime tax works out to ₹1,12,216 against ₹1,50,800 under new: a saving of ₹38,584 a year, in exchange for collecting and defending every proof.

That is the honest picture: the old regime still pays, but only for the full stack. Take the home loan out of the same example and the deductions fall to ₹5,73,000, below the breakeven, and the new regime is ahead by ₹21,424. Run both sides in the calculator rather than assuming.

What are the rules for switching between regimes?

If you are salaried with no business income, you choose afresh every year. Tell your employer a regime for TDS at the start of the year, and you can still pick the other one when you file your return by the due date; the TDS declaration does not bind your final choice. The new regime is the default if you say nothing.

If you have business or professional income, the choice is stickier: opting for the old regime needs a separate declaration filed by the return due date (Form 10-IEA under the 1961 Act; the forms were renumbered in 2026, so use the one the income tax portal offers), and once you opt back into the new regime you cannot return to the old regime again. Salaried readers can experiment year by year; business owners should decide once, carefully, with a professional.

Whichever way you lean, spend five minutes in the income tax calculator on this site with your real deduction numbers before you lock your declaration. The breakeven table gets you close; the calculator gets you exact.