New vs. Old Tax Regime: Which Offers Greater Savings?

OTHER
Whalesbook Logo
AuthorAnanya Iyer|Published at:
New vs. Old Tax Regime: Which Offers Greater Savings?
Overview

For fiscal year 2026-27, the new tax regime is the default, offering lower tax slabs and a rebate up to Rs 12 lakh. However, it removes deductions like 80C and HRA. Taxpayers who heavily use these deductions, especially for home loans or 80C investments, might find the old regime still saves them more money. A personal financial review is essential to choose the best option.

Instant Stock Alerts on WhatsApp

Used by 10,000+ active investors

1

Add Stocks

Select the stocks you want to track in real time.

2

Get Alerts on WhatsApp

Receive instant updates directly to WhatsApp.

  • ✓Quarterly Results
  • ✓Concall Announcements
  • ✓New Orders & Big Deals
  • ✓Capex Announcements
  • ✓Bulk Deals
  • ✦And much more
Add StocksGet it on Google PlayDownload on the App Store

Navigating the Default Tax System

Starting fiscal year 2026-27, the new tax regime is automatically applied to taxpayers. This system features lower tax rates and allows individuals earning up to Rs 12 lakh (or Rs 12.75 lakh with standard deduction for salaried) to pay no tax. However, it significantly limits popular deductions such as those under Section 80C (for investments like PPF, life insurance), House Rent Allowance (HRA), Leave Travel Allowance (LTA), and medical insurance (Section 80D).

Why the Old Tax Regime Still Matters

The traditional tax regime remains advantageous for individuals who take full advantage of various deductions. If you have substantial home loan interest payments (Section 24(b)), maximize Section 80C investments, or claim significant HRA, especially in major cities, the old regime could offer greater overall tax savings. Deductions totaling Rs 3-4 lakh or more annually can make the old regime the more beneficial choice, despite its higher tax brackets.

Taxpayer Pitfalls and Employer Roles

Taxpayers often mistakenly assume certain salary components are automatically exempt without verification, which can lead to incorrect deductions and potential tax issues. Employers might also inadvertently default to the new tax regime for tax withholding (TDS) without consulting employees, causing immediate calculation problems. While most individuals can switch between tax regimes each year, those with business income have stricter rules for changing regimes, highlighting the need for careful planning and clear communication with employers.

What Deductions Remain?

Even within the new tax regime, some deductions are still permitted. Salaried individuals and pensioners can claim a standard deduction of Rs 75,000. Employer contributions to the National Pension System (NPS) under Section 80CCD(2) are also still deductible. Businesses can still claim deductions for hiring new staff under Section 80JJAA. Financial advisors are seeing increased demand for personalized tax planning as taxpayers try to navigate these changes.

Get stock alerts instantly on WhatsApp

Quarterly results, bulk deals, concall updates and major announcements delivered in real time.

Add Stocks
Disclaimer:This content is for educational and informational purposes only and does not constitute investment, financial, or trading advice, nor a recommendation to buy or sell any securities. Readers should consult a SEBI-registered advisor before making investment decisions, as markets involve risk and past performance does not guarantee future results. The publisher and authors accept no liability for any losses. Some content may be AI-generated and may contain errors; accuracy and completeness are not guaranteed. Views expressed do not reflect the publication’s editorial stance.