Old vs New Tax Regime for Salaried Individuals and Directors: Tax Year 2026-27
Old vs new tax regime 2026-27: new slabs from 5% to 30%, nil tax up to ₹12 lakh, ₹75,000 standard deduction, and when deductions favour old.
Short answer
For most salaried individuals and director-employees, the new regime under section 202 of the Income-tax Act 2025 costs less: income up to ₹12 lakh is effectively tax-free, and salaried taxpayers get a ₹75,000 standard deduction. The old regime wins only with large deductions. At ₹20 lakh salary, total deductions must exceed roughly ₹7.6 lakh.
- Default regime
- New regime, section 202
- New regime rebate
- Up to ₹60,000 if income does not exceed ₹12 lakh
- Standard deduction
- ₹75,000 (new) vs ₹50,000 (old)
- New regime top rate
- 30% above ₹24 lakh
- Old regime top rate
- 30% above ₹10 lakh
- Budget 2026
- No change to slabs
What changed for tax year 2026-27?
The Income-tax Act 2025 took effect on 1 April 2026 and replaced 'previous year' with 'tax year'. The new regime, formerly section 115BAC, is now section 202 and remains the default. Budget 2026 made no change to slab rates, so the structure introduced in 2025 continues: nil up to ₹4 lakh, then rising in ₹4 lakh steps to 30% above ₹24 lakh.
Resident individuals with total income up to ₹12 lakh get a rebate of up to ₹60,000 under section 156, which wipes out tax at that level. With the ₹75,000 standard deduction, a salaried person earning up to ₹12.75 lakh pays no tax.
Side-by-side slab and benefit comparison
The table compares the two regimes for a resident individual below 60. Cess of 4% applies on top of tax in both regimes, and surcharge applies at higher income levels.
| Feature | New regime (section 202) | Old regime |
|---|---|---|
| Up to ₹2.5 lakh | Nil | Nil |
| ₹2.5 lakh to ₹4 lakh | Nil | 5% |
| ₹4 lakh to ₹8 lakh | 5% | 5% up to ₹5 lakh, then 20% |
| ₹8 lakh to ₹12 lakh | 10% | 20% up to ₹10 lakh, then 30% |
| ₹12 lakh to ₹16 lakh | 15% | 30% |
| ₹16 lakh to ₹20 lakh | 20% | 30% |
| ₹20 lakh to ₹24 lakh | 25% | 30% |
| Above ₹24 lakh | 30% | 30% |
| Rebate | Up to ₹60,000, income up to ₹12 lakh | Up to ₹12,500, income up to ₹5 lakh |
| Standard deduction for salary | ₹75,000 | ₹50,000 |
| HRA, home loan interest, 80C-type deductions | Not available | Available |
How do you find your break-even?
Compute tax both ways. For a salary of ₹20 lakh, the new regime gives taxable income of ₹19.25 lakh and tax of ₹1.85 lakh before cess. Under the old regime the same tax arises only if taxable income falls to about ₹12.4 lakh, which needs roughly ₹7.6 lakh of deductions including the ₹50,000 standard deduction.
Few people reach that level without a large home loan, high rent with HRA, and full use of investment-linked deductions. Employer contributions to NPS remain deductible within limits even under the new regime, which strengthens it further for directors who can structure salary.
Can you switch between regimes?
Salaried individuals and directors without business income can choose either regime every year when filing the return. Individuals with business or professional income who opt out of the new regime under section 202(4) can generally return to it only once. Director-employees should tell their employer their choice at the start of the year so TDS is computed correctly, and can still change it in the return.
Which should you choose?
Run the numbers each year with your actual salary and deductions, but these rules usually hold for salaried individuals and director-employees choosing between the two regimes for tax year 2026-27.
- Taxable income up to ₹12.75 lakh from salary: new regime, nil tax.
- No home loan and modest investments: new regime.
- Large home loan interest, high rent with HRA and full investment deductions: compare; the old regime may win.
- Director with flexibility on salary structure: new regime plus employer NPS contribution is often efficient.
- Business or professional income: choose carefully, because switching back is restricted.
Related services
Sources
- Section 202 default tax regime under Income-tax Act 2025 (Ebizfiling)
- Budget 2026: no change to income-tax slabs (Scroll)
- Section 115BAC becomes section 202 under the new law (Business Today)
Written by the Refogo Editorial Team from the official sources above and checked on 2026-10-31. Laws, rates and due dates change, and authorities often extend deadlines, so confirm your own case with a qualified professional. This is general information, not legal or tax advice. Read our editorial policy or report an error to support@refogo.com.
Common questions
Is the new tax regime compulsory in 2026?
No. It is the default, but individuals can opt for the old regime. Those without business income can choose afresh every year in their return.
Is income up to ₹12 lakh tax-free under the new regime?
Yes, for resident individuals. The rebate under section 156 covers tax up to ₹60,000 when total income does not exceed ₹12 lakh, with marginal relief just above it. Special rate income such as certain capital gains is treated differently.
Did Budget 2026 change income-tax slabs?
No. Budget 2026 kept the slabs and rates unchanged for tax year 2026-27.
Which regime is better for a company director?
Usually the new regime, unless the director has large deductions such as home loan interest and HRA. Directors receiving salary get the ₹75,000 standard deduction under the new regime.