What changed for FY 2026-27?
The law, not the rates. The Income-tax Act 2025 replaces the 1961 Act from 1 April 2026 and calls the period a "tax year" instead of a financial year and assessment year. Both regimes survive with the same slabs, rebate and deductions as FY 2025-26. Under the new regime, tax is nil up to ₹4 lakh, then 5% to ₹8 lakh, 10% to ₹12 lakh, 15% to ₹16 lakh, 20% to ₹20 lakh, 25% to ₹24 lakh and 30% above, with the Section 87A rebate wiping out tax for residents earning up to ₹12 lakh. Salaried people get a ₹75,000 standard deduction on top. The old regime keeps its 2.5, 5 and 10 lakh thresholds and the full menu of deductions. Deadlines are unchanged: 31 July for most individuals.
How much in deductions do you need for the old regime to win?
Roughly ₹5.5 lakh at ₹16 lakh of salary and about ₹8 lakh at ₹24 lakh, on top of the standard deduction. Here is why. At ₹16 lakh a salaried person pays about ₹1.09 lakh under the new regime after the ₹75,000 standard deduction. Under the old regime, with a ₹50,000 standard deduction, the tax equals that only when other deductions reach about ₹5.6 lakh. Reaching that needs ₹1.5 lakh of 80C, ₹2 lakh of home loan interest, ₹25,000 to 50,000 of 80D and a sizeable HRA claim. Most people without a home loan and high rent do not get there. Above ₹24 lakh the target rises further because the new regime's 25% slab and lower surcharge keep pulling ahead.
Who should still choose the old regime?
Three groups. First, people paying interest on a home loan for a house they live in, because the ₹2 lakh deduction under Section 24 does not exist in the new regime for self-occupied property. Second, tenants in expensive cities with a large HRA exemption, especially when combined with a full 80C and a family health policy under 80D. Third, anyone whose employer structures pay around LTA, meal cards and other old-regime perks. For each, add up the actual deductions for the year and compare tax under both regimes before filing; the return form lets you see both. If you have business income, remember the choice is sticky: leaving the old regime for the new one is allowed only once.
Can you switch between regimes every year?
Salaried taxpayers and pensioners can. Each year, when you file the return, you pick the regime that gives the lower tax, whatever you told your employer for TDS. Any excess TDS comes back as a refund. If you have income from business or profession, the rule is stricter: the new regime is the default, opting for the old regime needs Form 10-IEA before the return due date, and once you switch back to the new regime you cannot choose the old regime again. Freelancers using presumptive taxation under 44ADA count as business income for this rule. So a consultant with a big home loan should think carefully before leaving the old regime, because the door closes behind them.
