The Finance Act 2025 widened the new-regime slabs and bumped the Section 87A rebate to ₹12 lakh of taxable income — making the new regime the default winner for most salaried Indians for FY 2026-27.
The new regime, at a glance
The first ₹4 lakh is tax-free, with 5% from ₹4-8L, 10% from ₹8-12L, then rising to 30% above ₹24L. A standard deduction of ₹75,000 applies, and the 87A rebate fully wipes out tax on taxable income up to ₹12 lakh. That means a salaried earner up to roughly ₹12.75L gross pays ₹0 income tax.
What the old regime still offers
The old regime keeps its 5% / 20% / 30% slabs but allows roughly ₹4.75 lakh of legitimate deductions: ₹50K standard, ₹1.5L 80C (PPF/ELSS/EPF), ₹50K NPS 80CCD(1B), ₹75K 80D health insurance covering self plus parents, HRA exemption, ₹2L home-loan interest under Section 24(b), and 80E education-loan interest.
The decision rule
Old wins only if your total legitimate deductions exceed ~₹3 lakh AND your taxable income falls in the ₹15-25 lakh band. Below ₹15L the new regime's wider slabs plus 87A win cleanly. Above ~₹50L the old regime can edge back ahead because deductions reduce the 30%-slab base more effectively.
The catch most people miss: HRA exemption disappears under the new regime, so urban renters paying high rent often lose ₹50K-₹2L of tax shield by switching. Plug your numbers into our Old vs New Regime calculator to see the exact delta.