What Changed in Budget 2026
The Union Budget 2026 extended the income tax rebate under Section 87A in the new regime, making income up to ₹12 lakh effectively tax-free. The standard deduction of ₹75,000 applies, so salaried taxpayers with income up to ₹12.75 lakh face zero tax under the new regime.
Old Regime vs New Regime: Who Wins?
The old regime still makes sense if your deductions — 80C, HRA, home loan interest, 80D — exceed roughly ₹4–5 lakh. For most salaried employees who max out only 80C (₹1.5 lakh) and HRA, the new regime is now mathematically better.
What to Do Before July 31
Use a tax calculator to compute your liability under both regimes with your actual income and deductions for FY27. You can switch regimes each year if you have no business income. Don't default to the old regime out of habit — run the numbers, because many employees are leaving money on the table.