Last reviewed: 16 October 2026. From 1 April 2026 the Income-tax Act, 2025 governs your income, the "financial year" has become the tax year, and the deductions you know by heart carry new numbers: 80C is now section 123, 80D is section 126, 87A is section 156 and the new regime sits in section 202. The limits themselves have not moved. What has changed is the order of the decisions: you first decide which regime suits you, and only then whether any tax-saving investment is worth making. This guide walks through that sequence for salaried people, professionals, senior citizens, NRIs and families, with a month-by-month plan to 31 March 2027.
Start with your own numbers. The free regime calculator compares both regimes for Tax Year 2026-27 and shows how much more deduction the old regime would need to win.
Open the regime calculator ↗Step 1: Choose the regime before you invest
Under the new regime the slabs are nil up to ₹4 lakh, then 5% to ₹8 lakh, 10% to ₹12 lakh, 15% to ₹16 lakh, 20% to ₹20 lakh, 25% to ₹24 lakh and 30% above that. A resident whose total income does not exceed ₹12 lakh gets a rebate of up to ₹60,000 under section 156, which brings the tax to nil; just above ₹12 lakh, marginal relief caps the tax at the income that exceeds ₹12 lakh. The old regime keeps its familiar slabs (nil to ₹2.5 lakh, 5%, 20% and 30%) and its deductions, with a ₹12,500 rebate only up to ₹5 lakh.
The practical consequence is simple. For most salaried residents earning up to about ₹12.75 lakh, nothing in the old regime can beat a nil tax bill, so a tax-saving investment made only for the deduction saves nothing. Above that level, the old regime can still win, but usually only where several large items come together: HRA in a high-rent city, interest on a self-occupied home loan, the full ₹1.5 lakh basket, additional NPS and health insurance for the family and parents.
| Profile (illustrative) | Usually cheaper | Why |
|---|---|---|
| Salary up to ₹12.75 lakh, few deductions | New regime | Rebate under s.156 brings tax to nil |
| Salary ₹15–25 lakh, no rent, no home loan | New regime | Basket and NPS alone rarely bridge the slab gap |
| Salary ₹15–25 lakh, metro rent, home loan, full basket | Often old regime | HRA plus ₹2 lakh interest plus deductions can pass break-even |
| Senior citizen with pension and interest income | Compare both | Higher old-regime exemption limit and s.126 limits of ₹50,000 |
Run your own figures rather than relying on the table: the break-even depends on your salary structure, rent and interest. The regime calculator shows the exact amount.
Step 2: Know which deductions exist, and where they now sit
| What it covers | Old section (1961 Act) | New section (2025 Act) | Limit | Regime |
|---|---|---|---|---|
| EPF, PPF, ELSS, life cover, NSC, SSY, home-loan principal, tuition fees | 80C | 123 with Schedule XV | ₹1,50,000 | Old only |
| Your own additional NPS contribution | 80CCD(1B) | 124(3) | ₹50,000 | Old only |
| Employer's NPS contribution | 80CCD(2) | 124(1)–(2) | 14% of Basic + DA (new regime); 10% (old, 14% for Government) | Both |
| Health insurance: self, spouse, children | 80D | 126 | ₹25,000 (₹50,000 if senior) | Old only |
| Health insurance: parents | 80D | 126 | ₹25,000 (₹50,000 if senior) | Old only |
| Standard deduction on salary | 16(ia) | 19 | ₹75,000 new / ₹50,000 old | Both |
| Professional tax paid | 16(iii) | 19 | Amount paid | Old only |
| Rebate | 87A | 156 | ₹60,000 up to ₹12 lakh (new); ₹12,500 up to ₹5 lakh (old) | Residents |
HRA (50% of salary in Mumbai, Delhi, Kolkata, Chennai, Bengaluru, Hyderabad, Pune and Ahmedabad; 40% elsewhere) and interest of up to ₹2 lakh on a self-occupied house are available only in the old regime. Other deductions, such as interest on an education loan (old section 80E) or eligible donations (old section 80G), continue in the new Act; check the conditions for your case before relying on them.
Step 3: Tax saving by situation
Salaried employees
- Ask about employer NPS. Routing part of the salary into the employer's NPS contribution reduces tax under both regimes, up to 14% of Basic + DA in the new regime. It is the one lever that works whichever regime you choose.
- Count what you already have. Your EPF, life cover and children's tuition fees may already fill much of the ₹1.5 lakh basket.
- Declare carefully at the start of the year. If you tell your employer "old regime", have the proofs ready by January; if you are unsure, the final choice can still be made in the return.
- HRA needs paperwork. Keep rent receipts and the rent agreement, and obtain the landlord's PAN where rent exceeds ₹1 lakh a year.
Professionals and small businesses
- Presumptive taxation. Eligible businesses and professionals can declare income at prescribed rates under the merged presumptive scheme (section 58), which reduces bookkeeping and audit cost. Read the conditions and the lock-in in the presumptive taxation guide before opting in.
- The regime choice is sticky. With business or professional income, opting out of the new regime is made by the return due date and can be reversed only once. Model at least two years before deciding.
- Advance tax. Instalments are due by 15 June (15%), 15 September (45%), 15 December (75%) and 15 March (100%); presumptive taxpayers may pay the whole amount by 15 March. The advance tax calculator works out each instalment.
Senior citizens
- Under the old regime the nil band is ₹3 lakh at 60–79 and ₹5 lakh at 80 and above, and the health-insurance limit under section 126 rises to ₹50,000. A senior with no health cover can claim medical expenditure up to ₹50,000 instead.
- Compare both regimes every year: pension plus interest income often lands close to the break-even.
NRIs
- The section 156 rebate is not available to non-residents, and the old-regime senior-citizen slabs do not apply to them.
- Much of the saving for NRIs comes from lower TDS rather than deductions: treaty relief, a lower-deduction certificate and the correct account type. See the NRI refund and repatriation guide.
Families and HUFs
- A Hindu undivided family is a separate taxpayer with its own slabs and basket; it can be useful where genuine family property or business income exists.
- Income from money gifted to a spouse or a minor child is generally clubbed with the giver's income, so "spreading" income inside the family needs care. Gifts from defined relatives are not taxed in the hands of the recipient, as explained in the gift taxation guide.
Step 4: A month-by-month plan to 31 March 2027
| When | What to do |
|---|---|
| October–November 2026 | Run the regime comparison on actual salary figures for the year. Check employer NPS options with HR. |
| By 15 December 2026 | Third advance-tax instalment (75% cumulative) if your tax not covered by TDS exceeds the threshold. |
| December–January | Top up the section 123 basket and NPS only if the old regime is cheaper for you. Renew health covers by a non-cash mode. |
| January–February 2027 | Submit investment and rent proofs to the employer; check the TDS projection on your payslip. |
| By 15 March 2027 | Final advance-tax instalment (100%). |
| By 31 March 2027 | Last date for payments that count for Tax Year 2026-27: premiums, PPF, ELSS, tuition fees, donations. |
Common mistakes we see
- Buying an insurance or lock-in product only for the deduction when the new regime is already cheaper.
- Forgetting that EPF already uses part of the ₹1.5 lakh basket.
- Paying health-insurance premium in cash, which is not deductible (only a preventive check-up may be paid in cash).
- Declaring the old regime to the employer and then missing the proof deadline, which leads to higher TDS in the last quarter.
- Using new section numbers for the FY 2025-26 return, which still follows the 1961 Act.
Before 31 March 2027: checklist
- Regime compared on this year's actual figures
- Employer NPS contribution reviewed with HR
- Section 123 basket: EPF counted, balance identified
- Health insurance for self, family and parents renewed through a bank mode
- Rent receipts, agreement and landlord PAN collected (if claiming HRA)
- Home-loan interest and principal certificates obtained
- Advance tax paid by 15 December and 15 March
- Proofs submitted to the employer and TDS on the payslip checked
More tools for this year's planning: regime calculator, HRA calculator, advance tax calculator, TDS rate finder and more, all in one place.
See all tax tools ↗Frequently asked questions
Is 80C still available from 1 April 2026?
Yes, under a new number. The ₹1.5 lakh basket is now section 123 read with Schedule XV of the Income-tax Act, 2025. It is available only to taxpayers who opt out of the new regime.
Is salary up to ₹12.75 lakh tax-free in Tax Year 2026-27?
For a resident individual with only normal-rate income, yes. Salary of ₹12.75 lakh less the ₹75,000 standard deduction leaves total income of ₹12 lakh, and the section 156 rebate of up to ₹60,000 removes the tax under the new regime.
Which deductions are allowed under the new regime?
The ₹75,000 standard deduction on salary and the employer's NPS contribution up to 14% of Basic + DA under section 124. The section 123 basket, additional NPS under section 124(3), health insurance under section 126, HRA and self-occupied home-loan interest are not available.
Can I change my regime every year?
If you have no business or professional income, yes: the choice is made each year with the return. With business or professional income, the opt-out from the new regime must be made by the return due date and can be withdrawn only once.
Does my EPF count towards the ₹1.5 lakh limit?
Yes. Your own provident fund contribution is part of the section 123 basket, so check how much room it already uses before investing more for the deduction.
What is the last date for tax-saving investments for Tax Year 2026-27?
The payment must be made by 31 March 2027. Employers usually ask for proofs between January and February; a deduction missed at the employer stage can still be claimed in the return if the old regime is chosen.
Do the new section numbers apply to my return for FY 2025-26?
No. Income earned up to 31 March 2026 is governed by the Income-tax Act, 1961, so the return for that year uses the old numbers such as 80C, 80D and 115BAC.
We review salary structure, deductions, advance tax and the return position, and document the working.
Discuss your tax planning Regime calculatorGeneral guidance as on 16 October 2026 under the Income-tax Act, 2025 (sections 19, 123, 124, 126, 156 and 202) for Tax Year 2026-27, based on the text published on incometaxindia.gov.in. It does not cover special-rate income, losses or business-specific deductions, and the figures in the illustrative table are not advice for any person. Confirm your position on the facts before acting.