Look, I've been getting at least 15-20 calls a day since the Budget was announced on 1st February. Everyone wants to know the same thing -- "Sir, naye regime mein kitna tax bachega?" So I figured, let me just put the whole thing down in writing. Once and for all. I'm going to explain this the way I explain it to my clients -- in plain, simple language, with actual numbers. No jargon, no beating around the bush.

Before we get into the nitty-gritty, let me tell you something. The Budget 2026-27 has genuinely made life easier for salaried folks earning up to about 13 lakh a year. Zero tax. I'm not exaggerating. But for people above that bracket, the picture is a bit more nuanced, and that's exactly where most people get confused. So stick with me here.

First Things First -- What Exactly Changed This Year?

Alright, so the Finance Minister presented the Union Budget for FY 2026-27 on 1st February 2026. Three big changes happened on the income tax front that you need to care about:

Number one -- the basic exemption limit under the new regime has gone up from 3 lakh to 4 lakh rupees. That means the first 4 lakh of your taxable income is completely tax-free. Sounds small? It adds up. Trust me.

Number two -- the standard deduction for salaried people and pensioners has been increased from 75,000 rupees to 1,00,000 rupees. This is a flat deduction. You don't need to show any receipts, no proof of investment, nothing. If you're salaried, you get this automatically.

Number three -- the Section 87A rebate now covers taxable income up to 12 lakh rupees. What this means in practical terms is this: if your salary is 13 lakh or below, after the 1 lakh standard deduction your taxable income comes to 12 lakh or less, and the government gives you a full rebate. Zero tax payable. Bilkul zero.

The New Tax Slabs -- Let Me Lay Them Out Clearly

Here are the slabs under the new regime for FY 2026-27. I'm writing these the way I'd read them out to you over the phone:

Your first 4 lakh of taxable income -- no tax at all. From 4 lakh to 8 lakh -- 5 percent tax. From 8 lakh to 12 lakh -- 10 percent. From 12 lakh to 16 lakh -- 15 percent. From 16 lakh to 20 lakh -- 20 percent. From 20 lakh to 24 lakh -- 25 percent. And anything above 24 lakh -- 30 percent, which is the maximum rate.

Now compare this to what we had before. The old new-regime slabs (I know, confusing terminology, but bear with me) had the exemption at 3 lakh and the slabs were narrower. The widening of each slab to 4 lakh chunks is a big deal because it means more of your income gets taxed at lower rates before jumping to the next bracket.

A Quick Word on Why the New Regime Is Default

I still get clients who don't know this, so let me say it again. Since FY 2023-24, the new tax regime is the DEFAULT regime. Matlab, if you don't actively choose the old regime while filing your ITR, the government will assess you under the new regime automatically. For salaried people, you need to inform your employer at the start of the year which regime you want for TDS purposes, and you can finalize your choice when you actually file your return.

Now, one thing I keep telling my business clients -- if you have income from business or profession and you've been in the new regime, switching back to the old regime is a one-time option. Ek baar switch kiya, wapas nahi aa sakte. So think carefully before you make that call. Salaried people have more flexibility -- they can switch between regimes every year.

Detailed Tax Calculation -- Salary of 6 Lakh Per Annum

Let's start with someone earning 6 lakh a year. This is a very common income bracket -- could be someone a couple of years into their career, working in a smaller city, maybe in IT support or a junior accounts role.

Under the New Regime:

Gross salary: 6,00,000 rupees. Standard deduction: 1,00,000 rupees. So taxable income becomes 5,00,000 rupees.

Now let's apply the slabs. First 4 lakh: zero tax. Next 1 lakh (from 4 lakh to 5 lakh): taxed at 5 percent = 5,000 rupees. Total tax before rebate: 5,000 rupees.

But wait -- taxable income is 5 lakh, which is well below the 12 lakh rebate limit under Section 87A. So the rebate wipes out the entire 5,000. Tax payable: zero. Not a single rupee.

Under the Old Regime:

Now here's where it gets interesting. Under the old regime, the basic exemption is 2.5 lakh. Without any deductions, taxable income on 6 lakh salary would be: 6,00,000 minus 50,000 (old standard deduction) = 5,50,000. Tax: first 2.5 lakh nil, next 2.5 lakh at 5% = 12,500. But if this person has invested 1.5 lakh under Section 80C (PPF, ELSS, whatever), taxable income drops to 4,00,000. Tax: first 2.5 lakh nil, next 1.5 lakh at 5% = 7,500. Rebate under 87A applies here too (old regime rebate limit is 5 lakh taxable income for the old regime, but the rebate amount is only 12,500 under old regime). So tax could be zero under old regime too, but you'd need to actually invest that 1.5 lakh. Under the new regime, you pay zero WITHOUT investing anything. That's the key difference, bhai.

My advice for someone at 6 LPA: go with the new regime. Don't even think about it. You're paying zero tax either way, but in the new regime you don't have to lock up 1.5 lakh in investments just to save tax. That money stays in your pocket, liquid, use it as you like.

Detailed Tax Calculation -- Salary of 12 Lakh Per Annum

This is the sweet spot of the new regime, and I'll explain why. Twelve lakh is a pretty decent salary. Could be a mid-level IT professional in Pune, or a bank manager, or someone 5-6 years into a corporate job.

Under the New Regime:

Gross salary: 12,00,000 rupees. Standard deduction: 1,00,000 rupees. Taxable income: 11,00,000 rupees.

Tax calculation slab by slab: First 4 lakh -- nil. Next 4 lakh (4L to 8L) at 5% = 20,000. Next 3 lakh (8L to 11L) at 10% = 30,000. Total tax: 50,000 rupees.

Now, taxable income of 11 lakh is under the 12 lakh rebate limit. Section 87A wipes out the entire 50,000. Net tax: ZERO. No cess either because tax itself is zero.

So someone earning 12 lakh per year pays absolutely nothing in income tax. Let that sink in for a moment.

Under the Old Regime:

This is where you need to do the maths carefully. Gross salary: 12,00,000. Standard deduction in old regime: 50,000. Taxable income before deductions: 11,50,000.

Now, to make old regime work, you need deductions. Let's say this person claims: Section 80C -- 1,50,000 (PPF, ELSS, LIC, PF contribution etc.). Section 80D -- 25,000 (health insurance). HRA exemption -- let's assume they're paying rent in Bengaluru, HRA exemption works out to about 1,20,000. Maybe NPS under 80CCD(1B) -- 50,000.

Total deductions: 1,50,000 + 25,000 + 1,20,000 + 50,000 = 3,45,000. Taxable income: 11,50,000 minus 3,45,000 = 8,05,000.

Tax under old slabs: First 2.5 lakh nil. Next 2.5 lakh (2.5L to 5L) at 5% = 12,500. Next 3.05 lakh (5L to 8.05L) at 20% = 61,000. Total: 73,500 plus 4% cess = 76,440 rupees.

See the difference? Even with 3.45 lakh in deductions claimed under the old regime, you're still paying 76,440 rupees. Under the new regime, it's zero. Not even close.

My advice at 12 LPA: unless you have a very heavy home loan (Section 24b interest deduction of 2 lakh) on top of all other deductions, the new regime wins hands down. And honestly, even with a home loan, the numbers usually favour the new regime at this salary level now.

Detailed Tax Calculation -- Salary of 20 Lakh Per Annum

Okay, now we're talking about a senior professional. Could be a Team Lead in an MNC, a Deputy Manager in a bank, someone in consulting. At this level, the calculation gets more interesting because you're clearly above the rebate limit.

Under the New Regime:

Gross salary: 20,00,000 rupees. Standard deduction: 1,00,000. Taxable income: 19,00,000 rupees.

Let me go slab by slab, and I'll show you how each chunk gets taxed:

Slab 1: Up to 4,00,000 -- NIL -- Tax: 0
Slab 2: 4,00,001 to 8,00,000 -- 5% on 4,00,000 -- Tax: 20,000
Slab 3: 8,00,001 to 12,00,000 -- 10% on 4,00,000 -- Tax: 40,000
Slab 4: 12,00,001 to 16,00,000 -- 15% on 4,00,000 -- Tax: 60,000
Slab 5: 16,00,001 to 19,00,000 -- 20% on 3,00,000 -- Tax: 60,000

Total tax: 1,80,000 rupees. Add 4% health and education cess: 7,200. Total tax payable: 1,87,200 rupees.

That's an effective tax rate of about 9.36% on a gross salary of 20 lakh. Not bad at all, if you think about it.

Under the Old Regime:

Now let's check if the old regime could do better. Gross salary 20,00,000. Old standard deduction: 50,000. Gross taxable: 19,50,000.

Assume maximum possible deductions: 80C = 1,50,000. 80D = 25,000 (self) + 25,000 (parents) = 50,000. 80CCD(1B) NPS = 50,000. HRA exemption = 1,80,000 (assuming rent of 25,000/month in Mumbai). Section 24b home loan interest = 2,00,000.

Total deductions: 1,50,000 + 50,000 + 50,000 + 1,80,000 + 2,00,000 = 6,30,000. Taxable income: 19,50,000 minus 6,30,000 = 13,20,000.

Tax under old regime slabs: First 2.5L nil. 2.5L to 5L at 5% = 12,500. 5L to 10L at 20% = 1,00,000. 10L to 13.2L at 30% = 96,000. Total: 2,08,500. Cess at 4%: 8,340. Total: 2,16,840 rupees.

So even with 6.3 lakh in deductions, the old regime costs you 2,16,840 while the new regime costs 1,87,200. The new regime saves you about 29,640 rupees. And remember -- in the old regime, you actually need to invest that money, pay that rent, have that home loan. In the new regime, you just... pay the tax and keep the rest.

Now, here's where I'll give you a real CA's honest take. If your deductions under old regime cross about 7 lakh rupees -- which typically means you're paying HRA in an expensive city, have a big home loan, AND you're maxing out 80C, 80D, NPS, maybe 80E education loan interest -- then the old regime MIGHT save you a few thousand more. But for 90% of people at 20 LPA? New regime is the way to go.

The Standard Deduction Bump -- Why It Matters More Than You Think

A lot of people I speak to dismiss the standard deduction increase. "Bas 25,000 ka farak hai, kya hoga?" Let me explain why it's bigger than it looks.

The standard deduction went from 75,000 to 1,00,000 rupees. That extra 25,000 means different things depending on which tax slab you fall in. If your marginal rate is 30%, you save 30% of 25,000 = 7,500 in tax, plus cess. If you're in the 20% bracket, it's 5,000 plus cess. It might not sound like much, but combine this with the slab widening and the higher exemption limit, and the cumulative effect is significant.

But the really big deal is for people earning between 12 lakh and 13 lakh. Earlier, with the 75,000 standard deduction, a person earning 12.75 lakh would have taxable income of 12 lakh -- just at the rebate limit. But someone earning 13 lakh would have taxable income of 12.25 lakh -- above the rebate limit -- and would have to pay tax. Now with the 1 lakh deduction, even a 13 lakh salary results in 12 lakh taxable income, which is within the rebate limit. That's a whole new group of people who now pay zero tax.

Section 87A Rebate -- The Zero-Tax Magic

Let me clear up a common confusion. The Section 87A rebate is NOT a deduction. It's a rebate. Deductions reduce your taxable income. A rebate reduces your actual tax liability. The distinction matters.

Under the new regime, if your total taxable income (after standard deduction) is 12 lakh or below, the government gives you a rebate equal to your entire tax amount. So even though tax IS calculated on your income, the rebate cancels it out. Net payable: zero.

But here's the catch that trips people up every year. The rebate has a limit of 12 lakh taxable income, not 12 lakh tax. And it doesn't apply on special rate incomes. So if you have short-term capital gains from shares (taxed at 20%), those are not eligible for the rebate calculation. I've seen people get confused by this during ITR filing.

One more thing. The rebate doesn't eliminate cess. But since the rebate brings tax to zero, cess (which is 4% of tax) is also zero. So the total comes to zero across the board.

What About People Earning Between 13 and 14 Lakh? The Marginal Relief Situation

This is something that confuses a LOT of my clients, so pay attention. Let's say your salary is 13,10,000 rupees. After 1 lakh standard deduction, taxable income is 12,10,000. This is above 12 lakh, so technically the 87A rebate doesn't apply.

Tax on 12,10,000: first 4L nil, next 4L at 5% = 20,000, next 4L at 10% = 40,000, next 10,000 at 15% = 1,500. Total tax: 61,500 plus cess = 63,960.

But wait -- your income is only 10,000 above the rebate limit. Paying 63,960 on that extra 10,000 would be absurd, right? That's where marginal relief kicks in. The tax department ensures that the tax payable doesn't exceed the income above the rebate threshold. So your tax would be limited to 10,000 (the excess over 12 lakh) plus cess. Effective tax: around 10,400 rupees.

This marginal relief provision is there in the law but many people don't know about it. If you're in this narrow income band between 13-14 lakh, make sure your tax is being calculated with marginal relief. Your employer's payroll team should handle this, but always double-check your Form 16.

Old Regime vs New Regime -- A Practical Decision Framework

I'm going to give you the same advice I give my paying clients, free of charge. Here's how to decide:

Step 1: Add up ALL your deductions and exemptions under the old regime. I mean everything -- 80C, 80D, 80CCD(1B), 80E, HRA exemption, Section 24b, LTA, professional tax, the works. Be honest with yourself. Don't count things you "plan to invest" -- count what you actually will invest.

Step 2: If your total deductions come to less than 3.75 lakh rupees, the new regime is better. Full stop. Don't even bother calculating further.

Step 3: If deductions are between 3.75 lakh and 5 lakh, it's a grey zone. You'll need to actually calculate tax under both regimes and compare. The break-even depends on your exact income level.

Step 4: If deductions exceed 5 lakh (which means you probably have a home loan, pay high rent, max out 80C and 80D, and contribute to NPS), the old regime MIGHT save you some tax. Calculate both and see.

But here's my honest opinion as someone who's been doing taxes for 18 years: for a majority of salaried people -- I'd say 70-75% -- the new regime is going to be better from FY 2026-27 onwards. The math just works out that way with these new slabs.

Deductions That Still Work in the New Regime

I want to be clear about this because there's a lot of misinformation floating around. The new regime is NOT a zero-deduction regime. There are specific deductions that are still allowed:

Standard deduction of 1,00,000 rupees -- automatic for all salaried employees and pensioners.

Employer's NPS contribution under Section 80CCD(2) -- this is a big one. If your employer puts money into your NPS account, that deduction is allowed up to 14% of your basic salary for central government employees, and 10% for everyone else. This is basically free tax savings. If your company offers NPS as part of the CTC, take it. Seriously. I always push my clients on this.

Deduction for family pension income -- up to 15,000 rupees or one-third of pension, whichever is lower.

Exemptions on gratuity, leave encashment on retirement, and VRS proceeds -- these continue to be exempt within the prescribed limits under both regimes.

Transport allowance for persons with disabilities. Conveyance allowance for travel expenses related to employment duties (not the regular commute, but actual duty-related travel).

Tax-Saving Tips a CA Would Give You (Because I Am One)

Alright, here are some things I tell my clients that most articles don't cover:

Tip 1 -- Don't invest just to save tax. I know this sounds counterintuitive coming from a CA, but hear me out. If you're in the new regime and your income is under 13 lakh, you're paying zero tax anyway. Don't lock your money in a 5-year FD or a bad ULIP just because some insurance agent told you it saves tax. It doesn't matter anymore. Invest for returns, not for tax saving.

Tip 2 -- Ask your employer to restructure your CTC. Even in the new regime, employer NPS contribution is deductible. So if your company currently gives you 50,000 as a "special allowance" which is fully taxable, ask them to route it through NPS instead. You save tax, and you build a retirement corpus. Win-win.

Tip 3 -- Time your investments even in the new regime. Look, the new regime doesn't give you 80C deduction, but it doesn't stop you from investing in ELSS or PPF. These are still good investment products. Just don't buy them ONLY for tax saving.

Tip 4 -- Check your Form 26AS and AIS before filing. I cannot stress this enough. Every year I have clients who get notices because some bank reported interest income they forgot to declare, or some mutual fund redemption showed up as income. Log into the income tax portal, pull up your Annual Information Statement, and verify every transaction. It takes 20 minutes. Do it.

Tip 5 -- Don't file at the last minute. The due date for salaried individuals is 31st July 2027 for FY 2026-27. I know that seems far away, but every year I have people calling me on 30th July in a panic. If your Form 16 comes in June, file in June. Get your refund earlier. And if you owe tax, you can still wait till July to pay, but at least have your documents ready.

Tip 6 -- If you're confused between regimes, use the official calculator. The income tax department has a free tax calculator on their e-filing portal. Put in your numbers under both regimes and see the result. It's accurate and it's free. Don't pay some random website 500 rupees for this.

Some Real Conversations I've Had With Clients

Let me share a few real scenarios (names changed, obviously) that might help you see where you fit in.

Scenario 1 -- Rahul, 27, Noida, 7.5 LPA. Single, renting a PG, no loans. His deductions under old regime? Just 80C through EPF contribution (about 50,000 a year) and a term insurance premium of 12,000. Total: 62,000. My advice: new regime, obviously. After 1 lakh standard deduction, his taxable income is 6.5 lakh. Rebate applies. Zero tax. He doesn't need to invest a single extra rupee.

Scenario 2 -- Priya, 34, Mumbai, 18 LPA. Married, two kids, paying 30,000 rent, has a home loan on a flat in Thane (not the rented one -- this is an investment property). Her deductions: 80C = 1.5L, 80D = 50,000, HRA = 1.44L, Section 24b home loan interest = 2L, NPS = 50,000. Total deductions: 5.94 lakh. I actually calculated both regimes for her. Old regime tax: about 1,85,000. New regime tax: about 1,45,600. New regime saved her about 40,000. Even with nearly 6 lakh in deductions, the new regime won. She was shocked.

Scenario 3 -- Anand, 45, Chennai, 30 LPA. Heavy deductions: 80C maxed, 80D for self and parents, HRA exemption of 2.4 lakh, home loan interest 2 lakh, NPS employer and self, charitable donations under 80G. Total deductions came to nearly 8.5 lakh. In his case, old regime was better by about 35,000. But I told him -- "Anand, the moment you move to a company that doesn't give HRA, or you pay off that home loan, the new regime becomes better. Keep reviewing every year."

ITR Filing -- Which Form to Use and How to File

Quick rundown on filing your return for FY 2026-27:

If you're salaried with income up to 50 lakh, one house property maximum, and no business income, you file ITR-1 (Sahaj). This is the simplest form and what most salaried people use.

If your income exceeds 50 lakh, or you have capital gains, or more than one house property, you'll need ITR-2. If you have business income along with salary, then ITR-3.

For filing, go to the e-filing portal at eportal.incometax.gov.in. Your employer usually uploads your Form 16 data, and the portal pre-fills most of the return. Verify the numbers, add anything that's missing (like savings account interest, or capital gains from mutual funds), choose your regime, and submit. After submission, e-verify using Aadhaar OTP. Takes literally 5 minutes if your data is clean.

The new AIS (Annual Information Statement) is your best friend. It shows everything the tax department already knows about you -- bank interest, dividend income, mutual fund transactions, property purchases, the lot. If you match your return to your AIS, your chances of getting a notice drop to nearly zero.

Common Mistakes I See Every Year

These are mistakes I see even smart people make, so don't feel bad if you've done any of these:

Forgetting to declare savings account interest. Even if it's 2,000 rupees, declare it. The bank has already reported it to the tax department via TDS or AIS.

Claiming HRA exemption without rent receipts. If you're audited, you need to produce those receipts. For rent above 1 lakh per year, you also need your landlord's PAN.

Not switching to the correct regime before filing. Remember, new regime is default. If you want old regime, you need to actively select it in the ITR form AND file Form 10IE if applicable.

Confusing financial year and assessment year. FY 2026-27 means the year starting April 2026. The assessment year for this is AY 2027-28. You file your return for FY 2026-27 in the assessment year 2027-28. Simple concept but people mix it up all the time.

Not claiming employer NPS contribution as a separate deduction. This is available under the new regime and a lot of people miss it because they think "new regime means no deductions." Wrong. This specific deduction works.

What If You Have Income From Other Sources?

I should mention this because salary isn't the only income most people have. If you also earn interest from FDs, rental income from a property, or capital gains from selling shares or mutual funds, those get added to your total income and taxed accordingly.

Under the new regime, rental income from a house property is calculated slightly differently. You can claim a standard deduction of 30% on the net annual value of the property (this is allowed even in the new regime). But you CANNOT claim home loan interest deduction under Section 24b in the new regime. In the old regime, you can deduct up to 2 lakh of home loan interest on a self-occupied property.

For capital gains, the tax rates are the same under both regimes. Short-term capital gains on listed equity shares are taxed at 20%, and long-term capital gains above 1.25 lakh are taxed at 12.5%. These special rate incomes don't benefit from the 87A rebate, so keep that in mind.

My Final Take -- Stop Overthinking This

Look, I've been practising as a CA for nearly two decades now, and if there's one piece of advice I want to leave you with, it's this: don't let tax planning consume you. The new regime has simplified things dramatically. For most salaried people, especially those earning under 15-16 lakh, the new regime is clearly better. For those earning more, it's still probably better unless you have very heavy legitimate deductions.

Calculate both. Choose the better one. File your return on time. And then forget about it and focus on actually earning more money and investing wisely. Tax saving should be a byproduct of good financial planning, not the goal itself.

If you still have doubts, talk to your CA. And if you don't have a CA, well -- you've basically just got a free consultation from one. You're welcome.

Source: This article is based on the Income Tax provisions announced in the Union Budget 2026-27 and information available on the official Income Tax Department portal at incometax.gov.in.