Nine in ten have moved to the new tax regime. Should you?
With the filing deadline days away, the new tax regime has quietly stopped being an option and become the norm. But "most people choose it" is not the same as "it is right for you" — and for a meaningful minority of taxpayers, the old regime still produces a smaller bill. Here is what the numbers actually show, and how to tell which side of the line you are on.
What the numbers actually say
It is worth being precise here, because the figure being shared around is a mix of two different things:
- The official number: CBDT Chairman Ravi Agrawal said that across ITR-1, 2, 3 and 4, about 88% of individual taxpayers had opted for the new regime, based on last year's filings. Among presumptive-tax cases the figure was roughly 97%.
- This season's number is not official yet. The Income Tax Department has not released AY 2026-27 data. What exists is what practitioners report from their own client bases — broadly 80% to 95%, with large filing platforms expecting above 80%.
So "nine in ten" is a fair description of the direction of travel, not a published statistic for this year. The trend is real and accelerating; the precise figure for AY 2026-27 is still to come.
The slabs, side by side (AY 2026-27)
| Old regime | Rate | New regime | Rate |
|---|---|---|---|
| Up to ₹2.5 lakh | Nil | Up to ₹4 lakh | Nil |
| ₹2.5–5 lakh | 5% | ₹4–8 lakh | 5% |
| ₹5–10 lakh | 20% | ₹8–12 lakh | 10% |
| Above ₹10 lakh | 30% | ₹12–16 lakh | 15% |
| — | — | ₹16–20 lakh | 20% |
| — | — | ₹20–24 lakh | 25% |
| — | — | Above ₹24 lakh | 30% |
Why the new regime wins for most people
- The rebate. Under Section 87A the rebate in the new regime is up to ₹60,000 where total income is up to ₹12 lakh — which wipes out the liability entirely. In the old regime the rebate is ₹12,500, and only up to ₹5 lakh of income.
- The standard deduction. ₹75,000 in the new regime against ₹50,000 in the old. Stack that on the rebate and a salaried person earning up to ₹12.75 lakh can end up paying nil tax.
- No paperwork. No rent receipts, no investment proofs, no locking money into products chosen mainly for the deduction. For a lot of people this is the real reason they switched.
When the old regime still wins
The old regime survives on deductions. If you genuinely claim a large stack of them, it can still be the cheaper option:
- Substantial HRA, particularly in a metro on a high rent
- Home-loan interest on a self-occupied property — up to ₹2 lakh
- A full 80C of ₹1.5 lakh (EPF, PPF, ELSS, life insurance, tuition fees) plus 80D health premiums
- 80E education-loan interest, 80G donations, and NPS contributions
A rough rule of thumb: the more of your income you are already routing into deductible commitments, the more likely the old regime still fits. Someone with ₹2 lakh of home-loan interest and a full ₹1.5 lakh 80C is exactly the profile that should compute both before filing.
The breakeven point — with actual numbers
"Compare both" is easy advice to give and hard to act on, so here is the arithmetic. The question that matters is simple: how much deduction does the old regime need before it merely draws level with the new one?
Assumptions: salaried individual below 60; standard deduction of ₹75,000 (new) and ₹50,000 (old); Section 87A rebate applied where eligible; health and education cess of 4% included; income below ₹50 lakh, so no surcharge.
| Gross salary | Tax — new regime | Deductions the old regime needs just to draw level |
|---|---|---|
| ₹12,75,000 | ₹0 | ₹7,25,000 |
| ₹15,00,000 | ₹97,500 | ₹5,43,750 |
| ₹20,00,000 | ₹1,92,400 | ₹7,08,333 |
| ₹25,00,000 | ₹3,19,800 | ₹8,00,000 |
Those deduction figures are over and above the ₹50,000 standard deduction. Note the first row: at ₹12.75 lakh the new regime charges nothing at all, so the old regime would have to shelter income down to ₹5 lakh to match it. In practice, up to about ₹12.75 lakh of salary the new regime is effectively unbeatable.
Now compare that to what you can realistically claim
A well-organised salaried taxpayer with a home loan can typically assemble this:
| Deduction | Amount |
|---|---|
| Section 80C (EPF, PPF, ELSS, insurance, tuition) | ₹1,50,000 |
| Section 80CCD(1B) — NPS | ₹50,000 |
| Section 80D — health insurance (self, below 60) | ₹25,000 |
| Home-loan interest — self-occupied | ₹2,00,000 |
| Total (excluding standard deduction) | ₹4,25,000 |
Run that stack against the breakeven table and the picture becomes concrete:
- At ₹15 lakh salary: old regime tax works out to ₹1,24,800 against ₹97,500 under the new regime. The new regime is ahead by ₹27,300 — you would need roughly ₹1.19 lakh of HRA on top of that full stack just to break even.
- At ₹20 lakh salary: old regime tax is ₹2,80,800 against ₹1,92,400. The new regime wins by ₹88,400, and the HRA needed to close the gap rises to about ₹2.83 lakh.
The practical conclusion: a full 80C, a full NPS top-up, health insurance and a ₹2 lakh home-loan interest deduction — on their own — are not enough to beat the new regime. What tips the balance is meaningful HRA on top of all of it, which in practice means high rent in a metro. That is the profile the old regime still serves.
The rules on switching
- The new regime is the default. If you do nothing, that is what you are taxed under — you have to actively opt out to use the old one.
- Salaried, no business income: you can choose between the regimes each year when you file.
- Business or professional income: opting out is done through Form 10-IEA, and the ability to move back and forth is restricted — so treat it as a considered decision rather than an annual toss-up.
- The old regime is not being scrapped. The CBDT chief has said there is no plan for a sunset clause, so there is no need to switch out of panic.
Two things people are getting wrong right now
- The rebate does not cover everything. The Section 87A rebate applies to income taxed at normal slab rates. Income taxed at special rates — capital gains being the common case — does not get the benefit. A salary of ₹11 lakh plus ₹3 lakh of capital gains is not the same as ₹12 lakh of salary.
- Your ITR this year still follows the old Act. The Income-tax Act, 2025 came into force on 1 April 2026, but the return you are filing now is for income of FY 2025-26, assessed as AY 2026-27, and is governed entirely by the Income-tax Act, 1961. The 2025 Act — and its new "Tax Year" concept — applies to income earned from 1 April 2026 onwards.
Read the official source
- Income Tax e-filing portal — file, and check your AIS/26AS before you do
- The department's own tax calculator — the fastest way to compare both regimes on your actual numbers
- Income-tax Act — the text of the provisions themselves
If you have not filed yet, our note on the ITR due dates and late-filing consequences covers what it costs to miss the date.
Takeaway: The new regime has become the sensible default, and for most salaried people it now wins on both tax and effort. But default is not always. If you carry a home loan, pay serious rent, or claim a full stack of deductions, run both computations before you file — it is a ten-minute exercise that occasionally saves a five-figure sum.
Not sure which side you fall on? Talk to us — send us your numbers and we'll compute both regimes and file the one that costs you less.
AI-assisted note, reviewed by Chartford Consultancy. Rules and figures can change with government notifications — talk to us to confirm exactly what applies to your business.
