For Assessment Year 2026-27, the New Tax Regime is the default option for individual taxpayers. Unless a taxpayer actively opts for the Old Regime, returns are processed under the New Regime's slab rates automatically. This is a shift from how things worked for years, when the Old Regime — with its deductions and exemptions — was the default and the New Regime had to be chosen.
"The New Regime is automatic now, so I don't need to think about my deductions anymore." This is the most common misreading of the change — it describes the filing default, not a recommendation. Whether the New Regime actually results in lower tax still depends entirely on your own numbers.
What actually changed
The New Regime offers lower slab rates but removes most of the deductions and exemptions available under the Old Regime, including Section 80C investments, HRA exemption, and home loan interest on a self-occupied property. The trade-off is simplicity versus tax savings through structured investment and expenditure.
Salaried individuals can choose between the two regimes each financial year, directly at the time of filing their return, with no separate form required. Taxpayers with income from business or profession face a more restricted choice: opting out of the New Regime requires filing Form 10-IEA on or before the due date under Section 139(1). This opt-out is a one-time option — if such a taxpayer later opts back into the New Regime, they become permanently ineligible to opt out again for as long as they continue to have business or professional income. Once used and reversed, the choice cannot be exercised a second time.
When the Old Regime is still worth checking
Defaulting to the New Regime is not automatically the better outcome for everyone. It is worth running the numbers under the Old Regime if any of the following apply:
- A home loan is being serviced on a let-out or self-occupied property, with interest that would otherwise be deductible
- HRA exemption would be significant, particularly for those renting in a metro city
- Section 80C, 80D, or other deduction commitments (life insurance, ELSS, health insurance premiums) were already in place before the regime shift
How to compare the two
The only reliable way to know which regime results in lower tax liability is to compute both and compare, since the answer depends on the specific mix of income, deductions, and applicable rebate or marginal relief at that income level. Our Income Tax Calculator runs both regimes side by side for Assessment Year 2026-27, including Section 87A rebate and marginal relief, so the comparison reflects your actual numbers rather than a general rule of thumb.
For a position specific to your situation, get in touch.