Income Tax Old Regime Vs New Regime for AY 2026-27: The income tax return (ITR) filing for the assessment year 2026-27 is going on, with only 10 days left for the July 31 deadline. Though the return filing has
been made simple on the e-filing portal, the main task is your tax computation and the decision between the old and new tax regimes.
The new tax regime was announced in the Union Budget 2020-21 on February 1, 2020, and became effective from April 1, 2020. This regime was introduced as a relaxed income tax system with lower tax rates in exchange for giving up most exemptions and deductions (such as HRA, LTA, Section 80C, etc.). The old tax regime has higher tax rates but comes with various deductions and exemptions.
ITR Filing Last Date: Who Must File Their Income Tax Return by July 31?
The new tax regime was made the default tax regime from April 1, 2023. However, taxpayers also have the option to choose the old tax regime at the start of the financial year (by informing their employer) or during ITR filing. Here are the income tax rates, slabs, deductions, exemption limits and rebates under both old and new tax regimes.
Old Tax Regime: Slabs, Exemption Limit, Deductions, Rebate For AY 2026-27 (FY 2025-26)
Basic exemption limit: Rs 2.5 lakh (Rs 3 lakh for senior citizens aged 60-79 years and Rs 5 lakh for super senior citizens aged 80 years and above).
| Annual Taxable Income | Tax Rate |
|---|---|
| Up to Rs 2,50,000 | Nil |
| Rs 2,50,001 – Rs 5,00,000 | 5% |
| Rs 5,00,001 – Rs 10,00,000 | 20% |
| Above Rs 10,00,000 | 30% |
Note: The above slabs apply to individuals below 60 years of age. Senior citizens enjoy a higher basic exemption limit under the old tax regime.
Standard deduction (salaried/pensioners): Rs 50,000.
Eligible deductions and exemptions: Most deductions and exemptions can be claimed, including Section 80C (up to Rs 1.5 lakh), Section 80D, Section 24(b) on self-occupied home loan interest (up to Rs 2 lakh), HRA, LTA, NPS under Section 80CCD(1B), among others.
Section 87A rebate: Up to Rs 12,500 for resident individuals with taxable income up to Rs 5 lakh. It means income up to Rs 5 lakh is effectively tax-free under the old regime.
Default regime: No. Taxpayers have to opt for the old regime if they do not wish to be taxed under the default new regime.
New Tax Regime: Slabs, Exemption Limit, Deductions, Rebate
Basic exemption limit: Rs 4 lakh (including senior citizens and super senior citizens).
| Annual Taxable Income | Tax Rate |
|---|---|
| Up to Rs 4,00,000 | Nil |
| Rs 4,00,001 – Rs 8,00,000 | 5% |
| Rs 8,00,001 – Rs 12,00,000 | 10% |
| Rs 12,00,001 – Rs 16,00,000 | 15% |
| Rs 16,00,001 – Rs 20,00,000 | 20% |
| Rs 20,00,001 – Rs 24,00,000 | 25% |
| Above Rs 24,00,000 | 30% |
Note: The new tax regime has a uniform basic exemption limit of Rs 4 lakh for all individual taxpayers, irrespective of age.
Standard deduction (salaried/pensioners): Rs 75,000.
Deductions and exemptions: Most exemptions and deductions, including HRA, LTA and Section 80C, are not available. However, a limited set of benefits such as the standard deduction, employer’s NPS contribution under Section 80CCD(2), and a few specified deductions remain available.
Section 87A rebate: Up to Rs 60,000 for resident individuals with taxable income up to Rs 12 lakh. Salaried taxpayers can effectively pay nil tax up to Rs 12.75 lakh because of the Rs 75,000 standard deduction.
Default regime: Yes. The new tax regime is the default tax regime unless an eligible taxpayer opts for the old regime.
Income tax old regime vs new regime: Which one is better for you?
A Delhi-based CA said, “Taxpayers claiming substantial deductions and exemptions may benefit more under the old regime. However, taxpayers with limited deductions and exemptions generally benefit more under the new regime. As a practical measure, taxpayers should compute their tax liability under both regimes before filing their income tax return (ITR) on the official income tax portal at https://eportal.incometax.gov.in/iec/foservices/#/TaxCalc/calculator.”
Who needs to file ITR by July 31?
Taxpayers eligible to file ITR-1 and ITR-2 are required to submit their income tax returns by July 31. This category generally includes salaried individuals and those with capital gains or losses.
Taxpayers with business or professional income that is not subject to tax audit have until August 31 to file their returns. Depending on the nature of income and eligibility, they are required to file either ITR-3 or ITR-4.
Meanwhile, taxpayers whose accounts are required to be audited have until October 31 to file their income tax returns. The tax audit deadline is September 31.
