Old vs new tax regime, worked through
The two regimes for FY 2026-27
Each regime taxes income in bands (slabs). These are the rates for a resident individual under 60:
New regime
| Taxable income | Rate |
|---|---|
| Up to ₹4,00,000 | Nil |
| ₹4,00,001 to ₹8,00,000 | 5% |
| ₹8,00,001 to ₹12,00,000 | 10% |
| ₹12,00,001 to ₹16,00,000 | 15% |
| ₹16,00,001 to ₹20,00,000 | 20% |
| ₹20,00,001 to ₹24,00,000 | 25% |
| Above ₹24,00,000 | 30% |
Old regime
| Taxable income | Rate |
|---|---|
| Up to ₹2,50,000 | Nil |
| ₹2,50,001 to ₹5,00,000 | 5% |
| ₹5,00,001 to ₹10,00,000 | 20% |
| Above ₹10,00,000 | 30% |
- Standard deduction from a salary: ₹75,000 in the new regime, ₹50,000 in the old.
- Rebate: no tax at all on taxable income up to ₹12,00,000 in the new regime, and up to ₹5,00,000 in the old (section 87A of the Income-tax Act, 1961; section 156 of the Income-tax Act, 2025, which applies from April 2026). With the standard deduction, a salary of up to ₹12,75,000 pays no tax in the new regime.
- Cess: 4% of the tax, in both.
- Surcharge on incomes above ₹50 lakh: 10%, 15% above ₹1 crore and 25% above ₹2 crore in both; above ₹5 crore 37% in the old regime and still 25% in the new.
Just above ₹12 lakh: marginal relief
Without relief, earning one rupee over the rebate limit would cost tens of thousands in tax. Marginal relief limits the tax to the income above ₹12,00,000. On a salary of ₹13,00,000:
- taxable income: ₹13,00,000 − ₹75,000 = ₹12,25,000;
- tax on the slabs: ₹63,750;
- income above ₹12,00,000: ₹25,000, so the tax is limited to ₹25,000;
- with 4% cess: ₹26,000 for the year.
Relief stops mattering once the slab tax is lower than the income above the limit, from a salary of ₹13,45,589.
One salary, both ways
A salary of ₹18,00,000 with the full 80C of ₹1,50,000 and a health insurance premium of ₹25,000:
| New regime | Old regime | |
|---|---|---|
| Salary | ₹18,00,000 | ₹18,00,000 |
| Standard deduction | −₹75,000 | −₹50,000 |
| 80C (EPF, PPF, ELSS and others) | not allowed | −₹1,50,000 |
| 80D (health insurance) | not allowed | −₹25,000 |
| Taxable income | ₹17,25,000 | ₹15,75,000 |
| Tax on the slabs | ₹1,45,000 | ₹2,85,000 |
| Cess, 4% | ₹5,800 | ₹11,400 |
| Tax for the year | ₹1,50,800 | ₹2,96,400 |
The new regime is ₹1,45,600 lower on these figures. The deductions the old regime allows here come to ₹2,25,000, against the new regime's lower rates.
How much would the old regime need?
For each salary below, the deductions the old regime would need, beyond its standard deduction, to cost no more than the new regime. Deductions include 80C (at most ₹1,50,000), 80D, the HRA exemption, professional tax and the others the old regime allows.
| Salary | New regime tax | Old regime needs deductions of |
|---|---|---|
| ₹10,00,000 | ₹0 | ₹4,50,000 |
| ₹12,00,000 | ₹0 | ₹6,50,000 |
| ₹15,00,000 | ₹97,500 | ₹5,43,750 |
| ₹20,00,000 | ₹1,92,400 | ₹7,08,334 |
| ₹30,00,000 | ₹4,75,800 | ₹8,00,000 |
| ₹50,00,000 | ₹10,99,800 | ₹8,00,000 |
How Pocket works it out
Pocket's Tax page works out the year's tax under both regimes from your salary entries: the gross, the TDS taken, and the old regime's deductions, including the HRA exemption from the rent in your spending and professional tax. It says which regime is lower on your figures and by how much, and shows the working. Founder Pro adds the tax optimiser. It is a planning estimate for salary income, not a tax return or tax advice: the Income Tax Department's own calculator, at incometaxindia.gov.in, and a chartered accountant have the final word.
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