India's Union Budget 2027 (presented May 16, 2026) tweaked new-regime slabs, kept section 87A's full rebate up to Rs 12 lakh, and rationalised capital gains. For a salaried filer earning Rs 15 lakh, the new regime now saves about Rs 18,000 a year vs the old regime - assuming a typical Rs 4.5L deduction stack.
India's Union Budget 2027 was presented on May 16, 2026. The new tax regime stays default with wider slabs; the 87A rebate keeps salaries up to Rs 12.75 lakh effectively tax-free; capital gains rates were left untouched. Below: the headline changes, a live old-vs-new regime calculator, and the moves to make in this fiscal year.
Headline changes in Budget 2027
The Finance Minister presented the Union Budget for FY 2026-27 on May 16, 2026. The new regime stays default; slabs widened modestly; several investor-friendly tweaks confirmed:
NPS 80CCD(2): Employer contribution deduction raised to 14% of basic in the new regime (was 10%).
Old vs new regime tax: Rs 7L-25L salary band
Live FY 2026-27 math (new regime per Budget 2027; old regime with typical deductions you control).
New regime tax
Rs 0
Old regime tax
Rs 0
Winner
-
Annual saving
Rs 0
New regime slabs (Budget 2027 confirmed): 0-4L nil, 4-8L 5%, 8-12L 10%, 12-16L 15%, 16-20L 20%, 20-24L 25%, 24L+ 30%. Standard deduction Rs 75,000. 87A rebate makes new regime tax zero up to Rs 12L taxable. Old regime: 0-2.5L nil, 2.5-5L 5%, 5-10L 20%, 10L+ 30%; std deduction Rs 50,000. Includes 4% cess.
Who is affected (and how much it matters)
Salaried earners Rs 7L-12L: Continue to pay zero income tax under the new regime via the 87A rebate. No reason to switch to the old regime - the deduction stack you'd need would exceed your tax bill.
Salaried earners Rs 12L-15L: The contested band. New regime is typically the winner unless you have a home loan (Rs 2L interest deduction is huge in old regime). Use the calculator above with your real numbers.
Salaried earners Rs 15L-25L: New regime wins for renters; old regime narrowly wins for homeowners with a full deduction stack.
Investors: No surprises on capital gains. The lack of indexation on property sold after July 2024 continues to hit long-term property holders - model your sale with the income tax calculator first.
Home buyers: Section 24(b) Rs 2 lakh ceiling unchanged. If you're buying a house with a loan, switching to the old regime can save Rs 50K-1L/year, depending on the loan size.
NPS subscribers: The 14% employer contribution under 80CCD(2) in the new regime makes corporate NPS materially more attractive than the old regime's flat 10%. Ask your employer payroll for the new structure.
How to act this quarter
Re-evaluate your regime choice via the calculator above. Within Rs 10,000 of break-even? Default to the new regime for simpler filing.
Submit form 10-IEA to opt for old regime (required for business income; salaried filers declare to employer in April).
Maximise 80CCD(2) NPS. Ask employer payroll to route 14% of basic into NPS - tax-free upfront and tax-free growth.
Harvest capital gains. Use the Rs 1.25L LTCG exemption every year to step up your equity-fund cost basis.
Home-loan math. Compare scenarios via the home loan EMI calculator - the Rs 2L deduction is only available in the old regime.
Long-term outlook
Budget 2027 cements the direction from Budget 2020: new regime is default and long-term path. Every successive budget widens new-regime slabs and erodes the old regime's edge - expect the old regime to be phased out over 2-3 cycles. Plan around the new regime: prioritise NPS via 80CCD(2), use 87A fully if under Rs 12.75L, and treat HRA / 80C / home-loan interest as legacy levers. The income tax calculator is updated within 48 hours of every Budget.
Sources and methodology
Numbers on this page are sourced from official government / regulator websites and refreshed automatically every Sunday by our build pipeline. Hover any number with a dotted underline to see its source and as-of date.
Methodology: each calculator linked from this post documents its formula. Live market data (FX, treasury yields, mortgage rates) is pulled from public APIs (exchangerate.host, FRED, BoE, ECB, BoC, CoinGecko, stooq).
Key takeaways
Default is the new regime since AY 2024-25; opt into old regime explicitly via Form 10-IEA.
Section 87A rebate covers all tax up to Rs 12.75 lakh gross income in the new regime (Budget 2025).
Rough rule: if your total old-regime deductions exceed Rs 4-5 lakh, the old regime usually wins.
HRA exemption, 80C deduction, and Section 24(b) home loan interest are old-regime-only benefits.
Standard deduction: Rs 75,000 in new regime vs Rs 50,000 in old regime.
Salaried employees can switch regime annually; self-employed / business income can switch only once in lifetime.
By audience: what to focus on
Different reader types need different angles on this topic. Pick the one closest to your situation.
Salaried employees
Maximise tax-advantaged retirement contributions (EPF/401(k)/SIPP/RRSP). Check whether your country prefers the old vs new regime, employer-match thresholds, and salary-sacrifice options. Use the calculators below with your CTC / gross income.
Freelancers / self-employed
You bear higher self-employment tax + lose the employer match, but get access to higher contribution limits (Solo 401k, SEP-IRA, NPS Tier-I). Track business expenses meticulously. Quarterly estimated tax payments avoid underpayment penalty.
NRIs / expats
Tax residency rules (183-day, tie-breaker), double-taxation treaties, foreign tax credits all come into play. NRI restrictions on PPF (no new accounts) but expanded options on NPS. Cross-border income often needs specialist advice.
Retirees / pre-retirees
Sequence-of-returns risk in early retirement is the largest threat. Glide-path asset allocation, Roth-conversion analysis in low-income years, Required Minimum Distribution planning, and Medicare/healthcare gap funding (US) are the big items.
Quick reference: 12 specific scenarios
Scan the question list, expand only the rows that match your situation.
Should I choose the old or new tax regime?
Rough rule: if your total old-regime deductions (Section 80C + HRA + 24b + 80D + 80CCD(1B) + standard) exceed about Rs 4-5 lakh, the old regime usually wins. Otherwise the new regime wins, especially below Rs 12.75 lakh gross income where the new regime's 87A rebate gives zero tax. Use our regime comparator below to check both for your exact inputs.
What deductions are available only in the old regime?
Section 80C (Rs 1.5 lakh: PPF, ELSS, EPF, life insurance, home loan principal, tuition fees), HRA exemption, Section 24(b) home loan interest (Rs 2 lakh self-occupied), Section 80D health insurance (Rs 25k self / Rs 50k senior parents), Section 80CCD(1B) NPS (extra Rs 50k), Section 80E education loan interest, Section 80TTA/TTB savings interest. None of these are available in the new regime.
What's available in the new regime?
Lower slab rates (Nil / 5% / 10% / 15% / 20% / 30%) and a higher standard deduction of Rs 75,000 (vs Rs 50,000 in old regime). Section 87A rebate gives full tax waiver up to Rs 12.75 lakh gross income (Budget 2025). Employer NPS contribution (80CCD(2)) up to 14% of basic is allowed in both regimes.
Which regime is the default?
From AY 2024-25 onwards, the NEW regime is the default. To opt into the old regime, salaried employees must explicitly choose it each year via Form 10-IEA (filed before due date) or via the employer's investment declaration. Self-employed / business taxpayers can switch only once.
Can I switch between old and new regime each year?
Salaried employees CAN switch each year, but must signal the choice to the employer before the start of the financial year (or accept the new-regime default). Self-employed / business income taxpayers can switch only once in their lifetime - choose carefully.
How does Section 87A rebate work in the new regime?
Under the new regime, if your total taxable income is below Rs 12.75 lakh (Rs 12 lakh + Rs 75k standard deduction = effective threshold Rs 12.75L gross), the Section 87A rebate covers ALL the tax due, making your effective income tax ZERO. This is the single biggest reason most salaried Indians earning under Rs 13 lakh now prefer the new regime.
What is the marginal relief in the new regime?
If your income marginally exceeds the rebate threshold (Rs 12.75 lakh), the tax can jump significantly. Marginal relief caps the tax increase to the amount by which income exceeds the threshold. So an income of Rs 12.80 lakh doesn't pay full slab tax - the marginal-relief mechanism limits the tax to Rs 5,000 (the income above threshold).
Does HRA exemption apply in the new regime?
No. HRA exemption is an old-regime-only benefit. Under the new regime, the entire HRA you receive is added to taxable income with no exemption. This is a major reason metro-city renters with significant HRA may still find the old regime more tax-efficient.
Can I claim home loan interest in the new regime?
Self-occupied home loan interest (Section 24b, Rs 2 lakh) is NOT available in the new regime. Let-out / rented property home loan interest IS available in BOTH regimes against rental income (but with rental income loss capped at Rs 2 lakh against other heads in both).
How does the regime choice affect my TDS at source?
Your employer deducts TDS based on the regime you declare in your investment declaration (Form 12BB). If you don't declare, the employer applies the new regime by default. You can recover excess TDS by claiming the old regime when filing your ITR if it works out better.
Is the new regime always better for low-income earners?
Below Rs 12.75 lakh gross income, the new regime usually wins because of the 87A rebate covering all tax. Even if you have Rs 1.5 lakh of 80C deductions, the old regime would still pay Rs 50k+ in tax above Rs 7 lakh income, whereas the new regime pays zero up to Rs 12.75 lakh. The old regime wins only at higher incomes with very large deduction stacks.
Does the new regime allow PPF / NPS investments?
Yes, you can INVEST in PPF / NPS in either regime, but you can only CLAIM the deduction in the OLD regime. NPS Tier-I employer contribution (Section 80CCD(2)) up to 14% of basic salary is the one NPS-related deduction allowed in both regimes.
Related topics readers also search for
Common adjacent queries on this topic. Each calculator and explainer linked below covers one or more of these specifically.
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