Old vs New Tax Regime for AY 2026-27: Slabs, the ₹12.75 Lakh Salary Threshold and Form 10-IEA

For a salaried person with ₹15,00,000 a year and the usual deductions (₹1,50,000 under section 80C, ₹25,000 of health insurance under section 80D and ₹1,80,000 of HRA exemption), the new regime costs ₹97,500 in tax for AY 2026-27 and the old regime ₹1,46,640. The new regime wins by ₹49,140 even with those deductions. This guide shows the slabs behind that result, the salary level at which each regime wins, and the rules for switching.

AY 2026-27 is the return you file in 2026 for income earned from 1 April 2025 to 31 March 2026 (FY 2025-26). The new regime under section 115BAC is the default; you get the old regime only if you choose it.

Slabs for AY 2026-27

New regime (section 115BAC)

The same slabs apply at every age under the new regime.

Old regime

Health and education cess of 4% is added to the tax in both regimes. Surcharge applies above ₹50 lakh of income: 10%, then 15% above ₹1 crore and 25% above ₹2 crore. The old regime has a further 37% rate above ₹5 crore; the new regime stops at 25%.

What Each Regime Allows

Under the new regime, interest on a loan for a let-out house can still be set against that house's rent, but a loss from house property can't be set against salary or other income.

Why Salary up to ₹12.75 Lakh Pays No Tax

Under the new regime, a salary of ₹12,75,000 with no other income works out like this:

Three conditions sit behind this:

• Total income, not salary. The ₹12,00,000 limit applies to taxable income from all sources. ₹30,000 of savings bank or FD interest on top of the ₹12,75,000 salary takes taxable income to ₹12,30,000, past the rebate limit.
• Residents only. Non-residents don't get the rebate.
• Special-rate income is outside it. The rebate doesn't reduce tax on income taxed at special rates, such as capital gains on listed shares and equity funds under sections 111A and 112A.

Just above ₹12 lakh: marginal relief

At ₹12,10,000 of taxable income, slab tax is ₹61,500 (₹60,000 plus 15% of ₹10,000). Marginal relief limits the tax to the income above ₹12,00,000, which is ₹10,000, plus 4% cess: ₹10,400 in all. The relief stops mattering once slab tax falls below the excess income, at about ₹12,70,588 of taxable income (₹13,45,588 of salary).

Which Regime Wins at Your Salary

Under the old regime, deductions reduce taxable income; under the new regime, only the ₹75,000 standard deduction does. The question is how much you need to deduct under the old regime before it beats the new one.

The table below gives that break-even for a salaried resident below 60 with no other income. "Deductions needed" includes the ₹50,000 standard deduction plus everything else claimed under the old regime (80C, 80D, HRA, home loan interest and so on).

From ₹24,75,000 to ₹50,00,000 of salary, both regimes tax each extra rupee at 30%, so the gap stays the same and the break-even stays at ₹8,50,000 of total deductions. With only the standard deduction, the new regime saves ₹2,40,000 of tax (₹2,49,600 with cess) everywhere in that range.

A section 80C claim of ₹1,50,000, ₹75,000 under 80D for self and senior-citizen parents, ₹2,00,000 of home loan interest and ₹50,000 under 80CCD(1B) for NPS add up to ₹4,75,000. Few salaried people reach ₹8,00,000 without a large HRA exemption on top of all of these.

Above ₹50 lakh

Surcharge changes the comparison. At a salary of ₹51,00,000, new-regime taxable income is ₹50,25,000, which attracts the 10% surcharge, reduced by marginal relief to ₹11,05,000 before cess. Under the old regime, deductions can bring taxable income below ₹50,00,000 and avoid the surcharge altogether, so the break-even falls to about ₹7,91,667 of total deductions. Above ₹5 crore, the old regime's 37% surcharge against the new regime's 25% makes the new regime cheaper for almost everyone. Work out these cases with the exact figures; small changes move the answer.

Worked case: ₹24,75,000 salary with ₹6,50,000 of deductions

Deductions claimed under the old regime: ₹50,000 standard deduction, ₹1,50,000 under 80C, ₹50,000 under 80D, ₹2,00,000 of home loan interest and ₹2,00,000 of HRA exemption.

The new regime is ₹62,400 cheaper despite ₹6,50,000 of deductions.

Tax at Each Salary With Only the Standard Deduction

Choosing a Regime and Form 10-IEA

No business or professional income

If your income is salary, pension, interest, rent or capital gains, you choose the regime in the return itself, and you can choose differently each year. The choice must be made in a return filed by the due date under section 139(1), which for most individuals is 31 July 2026 unless CBDT extends it. A belated return is computed under the new regime. You don't file Form 10-IEA.

What you tell your employer at the start of the year decides only how much TDS is deducted from salary. You can still pick the other regime when you file.

Business or professional income

If you have income from business or profession (including freelancing, consulting, and futures and options trading), opting out of the new regime needs Form 10-IEA, filed on the portal on or before the section 139(1) due date for that year. Miss it and the year is taxed under the new regime.

Having opted out, you can return to the new regime only once. After that, you can't choose the old regime again for as long as you have business or professional income.

A note on the new Income-tax Act

The Income-tax Act, 2025 replaces the 1961 Act from 1 April 2026, and section numbers change for income earned after that date. Returns for AY 2026-27 still use the 1961 Act's sections quoted here. Check the forms and notifications on the e-filing portal before filing.

Summary

1. The new regime is the default for AY 2026-27; the old regime has to be chosen.
2. Salary up to ₹12,75,000 pays no tax under the new regime if there's no other income and you're a resident.
3. Between ₹24,75,000 and ₹50,00,000 of salary, the old regime wins only with more than ₹8,50,000 of total deductions.
4. Without business income, you choose in a return filed on time; with business income, you need Form 10-IEA by the due date.