The Big Change: ₹12 Lakh Is Now Tax-Free Under the New Regime
Budget 2025 changed the game. Under the new tax regime in FY 2026-27, a salaried person earning up to ₹12,75,000 gross pays zero income tax. Here's how:
- Standard deduction: ₹75,000
- Taxable income: ₹12,00,000 (after deduction)
- Section 87A rebate: Full tax waived if taxable income ≤ ₹12,00,000
Result: Zero tax.
This is a huge shift. In FY 2024-25, the same threshold was ₹7 lakh. The government is clearly pushing taxpayers toward the new regime.
New Regime Tax Slabs FY 2026-27
| Income Range | Tax Rate |
|---|---|
| Up to ₹4 lakh | Nil |
| ₹4L – ₹8L | 5% |
| ₹8L – ₹12L | 10% |
| ₹12L – ₹16L | 15% |
| ₹16L – ₹20L | 20% |
| ₹20L – ₹24L | 25% |
| Above ₹24L | 30% |
Plus 4% Health & Education Cess on the total tax.
Old Regime Tax Slabs FY 2026-27
| Income Range | Tax Rate |
|---|---|
| Up to ₹2.5L (₹3L for senior citizens) | Nil |
| ₹2.5L – ₹5L | 5% |
| ₹5L – ₹10L | 20% |
| Above ₹10L | 30% |
The old regime slabs haven't changed in years. But the deductions you can claim are generous — 80C, 80D, HRA, home loan interest, NPS, LTA, and more.
Real Examples: When Does Each Regime Win?
Example 1: Salary ₹10 Lakh, Standard 80C Investments
Old regime:
- Gross salary: ₹10,00,000
- Standard deduction: ₹50,000
- 80C (PF + ELSS): ₹1,50,000
- 80D (health insurance): ₹25,000
- Taxable income: ₹7,75,000
- Tax: ₹77,500 + cess = ₹80,600
New regime:
- Gross salary: ₹10,00,000
- Standard deduction: ₹75,000
- Taxable income: ₹9,25,000
- Tax: ₹37,500 + cess = ₹39,000
👉 New regime saves ₹41,600
Example 2: Salary ₹18 Lakh, With Home Loan + HRA
Old regime:
- Gross: ₹18,00,000
- Standard deduction: ₹50,000
- HRA: ₹1,50,000
- 80C: ₹1,50,000
- Home loan interest: ₹2,00,000
- 80D: ₹25,000
- NPS 80CCD(1B): ₹50,000
- Taxable income: ₹11,75,000
- Tax: ₹1,83,300 (including cess)
New regime:
- Gross: ₹18,00,000
- Standard deduction: ₹75,000
- Taxable income: ₹17,25,000
- Tax: ₹2,45,700 (including cess)
👉 Old regime saves ₹62,400
The Rule of Thumb
- Income ≤ ₹12.75 lakh: New regime is almost always better (zero tax).
- Income ₹12.75L – ₹18L: Depends on deductions. Calculate with your actual numbers.
- Income above ₹18L with high deductions (HRA + home loan + maxed 80C + NPS): Old regime often wins.
- Income above ₹18L, low deductions: New regime usually better.
Can You Switch Every Year?
Yes — salaried individuals with no business income can switch between regimes every year. Inform your employer at the start of the financial year. If you're filing ITR directly, you can choose your regime at the time of filing.
Business owners can only switch once (from new to old), so they need to be more careful.
Use the Calculator to Find Your Number
The old vs new regime debate has no universal winner — it depends on your specific salary, HRA situation, home loan, and investment habits. Use our free Old vs New Tax Regime Calculator to plug in your actual numbers and get the answer in seconds.
Also check our Income Tax Calculator for a detailed breakdown of your tax liability.