Is income up to Rs 12 lakh tax free in the new regime?

Under the new regime, the section 87A rebate of up to Rs 60,000 makes taxable income up to Rs 12 lakh tax free. For salaried people with the Rs 75,000 standard deduction, this works out to about Rs 12.75 lakh of salary.

Is HRA allowed in the new regime?

No. HRA exemption, 80C, 80D and home loan interest on a self-occupied house are generally available only in the old regime. Employer NPS contribution under 80CCD(2) is allowed in both.

Is the new regime the default?

Yes, the new regime is the default. If you want the old regime, you need to opt for it as per the rules.

Old vs New Tax Regime 2026-27: Which One Should You Choose?

Q: Which tax regime is better, old or new?

The new regime has lower slab rates and a rebate that makes income up to Rs 12 lakh tax free, so it suits people with few deductions. The old regime can be better if you claim large deductions such as 80C, 80D, HRA and home loan interest. Compare both with a calculator.

Q: Can I switch between old and new regime every year?

Salaried employees without business income can choose a regime each year. People with business or professional income have limited switching options. Check the latest rules on the income tax portal.

India has two income tax regimes. The new regime has lower rates but allows very few deductions. The old regime has higher rates but lets you reduce tax through deductions like 80C, 80D, HRA and home loan interest. Which one saves more depends on how much you can actually claim.

Quick answer: If your total deductions are small, the new regime usually wins. If you claim large deductions (home loan, HRA, 80C, 80D, NPS), the old regime can win. The only reliable way is to calculate both, which you can do free with the Income Tax Calculator.

Note: From 1 April 2026 the Income Tax Act, 2025 uses the term "Tax Year" instead of "Financial Year" and "Assessment Year". The slabs below are the ones shown on the official income tax portal when this guide was written. Always confirm on incometax.gov.in before filing.

New Regime Slabs

Taxable income	Tax rate
Up to Rs 4,00,000	Nil
Rs 4,00,001 to Rs 8,00,000	5%
Rs 8,00,001 to Rs 12,00,000	10%
Rs 12,00,001 to Rs 16,00,000	15%
Rs 16,00,001 to Rs 20,00,000	20%
Rs 20,00,001 to Rs 24,00,000	25%
Above Rs 24,00,000	30%

The standard deduction is Rs 75,000 for salaried people. A section 87A rebate of up to Rs 60,000 applies if taxable income is up to Rs 12 lakh, so tax is zero up to that level (about Rs 12.75 lakh salary for a salaried person). Add 4% health and education cess on the tax.

Old Regime Slabs (below 60 years)

Taxable income	Tax rate
Up to Rs 2,50,000	Nil
Rs 2,50,001 to Rs 5,00,000	5%
Rs 5,00,001 to Rs 10,00,000	20%
Above Rs 10,00,000	30%

The standard deduction is Rs 50,000. The rebate is Rs 12,500, so there is no tax if taxable income is up to Rs 5 lakh. Senior citizens get a higher basic exemption (Rs 3 lakh at 60+, Rs 5 lakh at 80+).

Deductions: What You Can Claim Where

Deduction	Old regime	New regime
Standard deduction	Rs 50,000	Rs 75,000
80C (PF, PPF, ELSS, LIC) up to Rs 1.5 lakh	Yes	No
80D health insurance	Yes	No
HRA exemption	Yes	No
Home loan interest (self-occupied, up to Rs 2 lakh)	Yes	No
NPS 80CCD(1B) up to Rs 50,000	Yes	No
Employer NPS 80CCD(2)	Yes	Yes

Worked Example: Rs 15 Lakh Salary

Assume a salaried person with Rs 15,00,000 income. Tax below includes 4% cess and is calculated with the slabs above.

Case	Taxable income	Approx. tax
New regime (no deductions except standard)	Rs 14,25,000	Rs 97,500
Old regime with only 80C (Rs 1.5 lakh)	Rs 13,00,000	Rs 2,10,600
Old regime with 80C, NPS Rs 50k, 80D Rs 25k and home loan interest Rs 2 lakh	Rs 10,25,000	Rs 1,24,800

Even with heavy deductions the old regime costs more in this example. At higher deductions, such as a large HRA claim on top of the above, the gap can close. Your own numbers decide it.

Compare both regimes for your salary

Enter your income and deductions and see old vs new tax side by side. Free and private.

Open Income Tax Calculator

How to Decide in 4 Steps

Step 1: Add up your real deductions

Count only what you actually pay: 80C investments, health insurance, HRA, home loan interest and NPS.

Step 2: Calculate both regimes

Use the Income Tax Calculator with the same income for both.

Step 3: Compare the final tax

Pick the regime with the lower tax. If the difference is small, the simpler new regime may save you paperwork.

Step 4: Tell your employer and file correctly

Inform your employer of your choice for TDS, and select the same regime while filing your ITR. Keep your documents ready as PDFs, and use Compress PDF if a portal limits file size.

Common Mistakes

Choosing a regime only because of last year's habit.
Counting deductions that you have not actually invested in or paid.
Forgetting that HRA and 80C do not work in the new regime.
Ignoring surcharge and cess when comparing.

This guide is for general information, not tax advice. Rules and slabs can change, so verify with the official income tax portal or a tax professional.

Frequently Asked Questions

The new regime suits people with few deductions. The old regime can be better when you claim large deductions such as 80C, 80D, HRA and home loan interest. Compare both with a calculator.

With the section 87A rebate of up to Rs 60,000, taxable income up to Rs 12 lakh is tax free. For a salaried person with the Rs 75,000 standard deduction, that is about Rs 12.75 lakh salary.

Salaried employees without business income can choose each year. People with business or professional income have limited switching options. Check the latest rules on the income tax portal.

No. HRA, 80C, 80D and self-occupied home loan interest are generally for the old regime. Employer NPS under 80CCD(2) is allowed in both.

Yes. If you want the old regime, you must opt for it as per the rules.