India’s Old vs New Tax Regime Options for AY 2026‑27

Taxpayers in India must decide between the traditional Old Tax Regime, which allows a range of exemptions and deductions such as Section 80C investments, home‑loan interest, HRA and LTA, and the New Tax Regime that offers lower slab rates with few deductions. The Old Regime applies higher rates but reduces taxable income through deductions; the New Regime, introduced by the Finance Act 2020, became the default from AY 2024‑25 for individuals, HUFs, AOPs, BOIs and AJP taxpayers, though taxpayers may still opt for the old structure.

Experts use a “break‑even deduction” to identify the investment threshold where liabilities under both regimes equalize. For example, a salaried individual earning ₹12.5 million would need to claim around ₹4.75 million of eligible deductions under the Old Regime to match the New Regime liability; lower investment levels favour the New system. Common deductions considered include Section 80C (PPF, EPF, ELSS, life‑insurance), Section 80D (health‑insurance), Section 80CCD(1B) (voluntary NPS), and Section 24(b) (home‑loan interest). Company NPS contributions and standard deductions apply in both regimes and are excluded from the break‑even calculation.