Old vs New Tax Regime: Which One Is Better?
There is no single answer for everyone. The right regime depends on your income, deductions, house-rent situation, investments, insurance, home-loan interest and other eligible benefits. Compare the final tax rather than choosing a regime only because its highest rate looks lower.
What changed for AY 2026-27?
For AY 2026-27, the Income Tax Department lists the new-regime slabs starting with nil tax up to ₹4 lakh and a 30% rate above ₹24 lakh. The department also states that the section 87A rebate under the new regime is increased to ₹60,000 for eligible resident individuals with total income up to ₹12 lakh.
How the Income Tax Calculator Works
An income tax calculator is useful because your annual salary or total income is not always the same as your taxable income. The calculation normally starts with income, applies the deductions and exemptions that are actually available under the selected regime, and then applies the relevant slab rates. The final tax can also be affected by a rebate, health and education cess, surcharge and income that is taxed at a special rate.
Our calculator is designed as a quick comparison tool rather than a substitute for an ITR. Enter your income and eligible deductions, compare the two regimes, and then review the result against your Form 16, AIS, TIS and other income records before filing.
Taxable income is different from your CTC
Your CTC can include employer contributions, gratuity, insurance and other components that are not simply added to your monthly take-home pay. Likewise, taxable income can include salary, interest, rent, capital gains and other sources. For an accurate tax calculation, consider your total taxable income rather than using only the amount credited to your bank account.
New Tax Regime Slabs for AY 2026-27
For AY 2026-27, the Income Tax Department lists these new-regime slabs for individuals: up to ₹4 lakh at nil, ₹4–8 lakh at 5%, ₹8–12 lakh at 10%, ₹12–16 lakh at 15%, ₹16–20 lakh at 20%, ₹20–24 lakh at 25%, and income above ₹24 lakh at 30%. The department also states that the section 87A rebate is ₹60,000 for eligible resident individuals with total income up to ₹12 lakh under the new regime.
| Taxable income | New-regime rate |
|---|---|
| Up to ₹4 lakh | Nil |
| ₹4 lakh–₹8 lakh | 5% |
| ₹8 lakh–₹12 lakh | 10% |
| ₹12 lakh–₹16 lakh | 15% |
| ₹16 lakh–₹20 lakh | 20% |
| ₹20 lakh–₹24 lakh | 25% |
| Above ₹24 lakh | 30% |
Old Regime vs New Regime: What Should You Compare?
The old regime can be attractive when you have substantial eligible deductions and exemptions, such as HRA exemption, section 80C investments, eligible health-insurance deductions and certain home-loan interest benefits. The new regime generally uses lower slab rates but has fewer deductions. The correct choice depends on your own numbers.
- Choose the old regime for comparison if you have significant eligible deductions and exemptions.
- Compare the new regime if you have relatively few deductions and want the simpler lower-rate structure.
- Do not compare only headline rates: compare the final tax after eligible deductions, rebate and cess.
What Is Section 87A Rebate?
A rebate is different from a deduction. A deduction reduces taxable income, while a rebate reduces tax after the slab calculation. For AY 2026-27, the Income Tax Department says the new-regime section 87A rebate has been increased to ₹60,000 for eligible resident individuals with total income up to ₹12 lakh. Special-rate income can have separate treatment, so a simple calculator should not be treated as a final tax computation for every taxpayer.
Tax Cess, Surcharge and Special-Rate Income
Health and Education Cess is charged at 4% on income tax plus applicable surcharge. Higher-income taxpayers can also be subject to surcharge. Some income, including certain capital gains and specified other income, can be taxed under special provisions rather than the normal slab calculation. This is why a quick calculator may produce an estimate that differs from a final ITR computation.
Documents to Check Before Filing Your ITR
- Form 16 and salary slips
- Annual Information Statement (AIS) and Taxpayer Information Summary (TIS)
- Form 26AS for tax-credit information
- Bank statements and interest certificates
- Home-loan interest certificate, if applicable
- Investment and insurance records for eligible deductions under the chosen regime
- Capital-gain statements for shares, mutual funds or property where applicable
Example: Why Two People With the Same Salary Can Pay Different Tax
Imagine two employees with similar annual salary but different financial situations. One may pay rent and have eligible deductions under the old regime, while the other may have few deductions and prefer the new regime. Their gross salary can be similar while their taxable income and final tax are different. This is the main reason a regime comparison is more useful than a generic “tax on salary” number.