Can I switch between old and new tax regime every year?

Salaried employees (without business income) can switch between old and new regimes every financial year. You inform your employer at the start of the year; the switch takes effect for TDS. You can also change at ITR filing time.

Old vs new tax regime FY 2026-27: which is better for you?

Q: Which tax regime is better for salaried employees in FY 2026-27?

For most salaried employees without large deductions (home loan, full 80C, significant HRA), the new tax regime is better in FY 2026-27 because of its lower slab rates and higher ₹75,000 standard deduction. The old regime wins only when total deductions exceed roughly ₹3.5–4 lakh.

Updated June 2026 · FY 2026-27 (AY 2027-28)

Every April, salaried employees face the same decision: which tax regime should I choose? The new tax regime has been the default since FY 2023-24, but the old regime is still available for those who benefit from deductions. This guide helps you figure out which one saves more tax for your income level and financial situation.

The two regimes at a glance

New regime (default)

Lower slab rates
Standard deduction: ₹75,000
87A rebate up to ₹60,000
Tax-free up to ₹12,75,000 (salaried)
No 80C, HRA, or home-loan deductions
Simpler — fewer things to declare

Old regime

Higher slab rates
Standard deduction: ₹50,000
87A rebate up to ₹12,500
Tax-free up to ₹5L (after deductions)
80C, HRA, 24(b), 80D allowed
More paperwork and declarations

New regime slabs (FY 2026-27)

Taxable income	Rate	Tax on slab
Up to ₹4,00,000	0%	Nil
₹4,00,001 – ₹8,00,000	5%	₹20,000
₹8,00,001 – ₹12,00,000	10%	₹40,000
₹12,00,001 – ₹16,00,000	15%	₹60,000
₹16,00,001 – ₹20,00,000	20%	₹80,000
₹20,00,001 – ₹24,00,000	25%	₹1,00,000
Above ₹24,00,000	30%	—

Section 87A rebate: up to ₹60,000 for taxable income ≤ ₹12,00,000. 4% cess on tax. Standard deduction: ₹75,000.

Old regime slabs (FY 2026-27)

Taxable income	Rate	Tax on slab
Up to ₹2,50,000	0%	Nil
₹2,50,001 – ₹5,00,000	5%	₹12,500
₹5,00,001 – ₹10,00,000	20%	₹1,00,000
Above ₹10,00,000	30%	—

Section 87A rebate: ₹12,500 for taxable income ≤ ₹5,00,000. 4% cess on tax. Standard deduction: ₹50,000. Deductions: 80C (max ₹1.5L), 80D, HRA, Section 24(b) home-loan interest (max ₹2L).

Side-by-side tax comparison

Here is the tax payable under each regime for a salaried employee at various gross salary levels, with no old-regime deductions claimed:

Gross salary	New regime tax	Old regime tax	New regime saves
₹8,00,000	₹0	₹26,000	₹26,000
₹10,00,000	₹5,200	₹54,600	₹49,400
₹12,00,000	₹0	₹83,200	₹83,200
₹15,00,000	₹97,500	₹1,71,600	₹74,100
₹20,00,000	₹2,96,400	₹3,51,000	₹54,600
₹25,00,000	₹4,94,000	₹5,46,000	₹52,000

Assumes no old-regime deductions. Includes 4% cess. New regime advantage shrinks as you add deductions in old regime.

When does the old regime win?

The old regime wins when your total deductions are large enough to offset its higher slab rates. The key deductions are:

Section 80C: Up to ₹1.5 lakh (EPF, ELSS, PPF, LIC, principal repayment on home loan)
HRA exemption: Variable — use the HRA calculator to find yours
Section 24(b): Home-loan interest up to ₹2 lakh for self-occupied property
Section 80D: Health insurance premium (₹25,000 self + ₹25,000 parents)
NPS additional deduction: ₹50,000 under 80CCD(1B)

Rough breakeven: if your total deductions under old regime exceed ~₹3.5 lakh, the old regime likely wins. Below that, new regime is generally better. Use our salary calculator to compare your exact numbers.

Frequently asked questions

Which tax regime is better for salaried employees in FY 2026-27?

For most salaried employees without large deductions, the new regime is better because of its lower rates and ₹75,000 standard deduction. The old regime wins primarily for those with a home loan (80C + 24b interest) and significant HRA. The breakeven is roughly ₹3.5–4 lakh in total old-regime deductions.

Can I switch between regimes every year?

Salaried employees (without business income) can switch regimes every financial year. Inform your employer at the start of the year for TDS. You can also change at ITR filing time — though if you switch to old regime at filing after your employer deducted under new regime, you may need to pay the difference as self-assessment tax.

Does the new regime allow any deductions at all?

Very few. The new regime allows: the ₹75,000 standard deduction, employer NPS contributions under 80CCD(2), gratuity exemption, leave encashment exemption, and a few other specific exemptions. It does not allow 80C, 80D, HRA, or home-loan interest deductions.

What happens if I don't inform my employer about my regime choice?

The new tax regime is the default. If you don't inform your employer, they will deduct TDS under the new regime. You can still switch to the old regime when filing your ITR and claim any additional refund due.

Disclaimer: Tax comparisons are illustrative and based on standard assumptions. Individual situations vary. Surcharge for incomes above ₹50 lakh is not included. This is not tax advice — consult a CA for your specific situation.