ITR filing for AY 2026-27: choosing between the old and new regime, one last time
The new regime is now the default — but for a shrinking set of taxpayers, the old regime still wins. Here is how to run the comparison properly before the July 31 due date.
For assessment year 2026-27, the question is no longer “which regime is better?” in the abstract — it is “do my deductions clear the breakeven?” The new regime under Section 115BAC is the default: lower slab rates, higher rebate, and almost no deductions. The old regime survives as an opt-in for those whose Chapter VI-A claims, housing interest, and HRA still outweigh the rate advantage. For most salaried taxpayers, they no longer do. For some, they very much still do.
What the new regime gives up — and keeps
Under the new regime you forgo most familiar claims: Section 80C investments, 80D health premiums, HRA exemption, LTA, and interest on a self-occupied home loan. What survives is the standard deduction on salary and family pension, employer NPS contributions under 80CCD(2), and Agniveer corpus contributions. Employer NPS is the quiet star here — it is one of the few levers that works in both regimes, and most employers still do not structure for it.
The breakeven logic
Strip the comparison to one question: how much deduction do you need for the old regime's higher rates to be worth it? The answer scales with income. As a working rule from this filing season:
| Gross salary | Old regime wins only if total deductions exceed roughly |
|---|---|
| ₹8 lakh | Almost never — rebate makes new-regime tax nil or negligible |
| ₹12–15 lakh | ₹3.5–4 lakh of genuine claims |
| ₹20 lakh | ₹4–4.5 lakh of genuine claims |
| ₹30 lakh + | ₹4.5 lakh+ — typically only with large HRA plus housing interest |
The profile that still clears the bar is consistent: a metro tenant with substantial HRA, a home loan on a let-out or self-occupied property, a full 80C basket, and family health premiums. If that is you, run the numbers before defaulting.
Mistakes we are correcting this month
- Assuming the employer's choice is final. If your employer deducted TDS on new-regime slabs but the old regime suits you, claim the difference in the return — attach nothing, but keep rent receipts and proof of investments for the record.
- Comparing on last year's numbers. Slabs, rebate thresholds and the standard deduction have moved over the last three years. A comparison done for AY 2024-25 is stale.
- Ignoring capital gains. Special-rate income — equity LTCG, STCG under 111A — is taxed identically in both regimes, but it affects surcharge and rebate eligibility differently. Include it in the model.
- Missing the AIS reconciliation. Whatever regime you pick, tie your return to the Annual Information Statement first. Mismatched interest income and unreported mutual-fund switches remain the top causes of 143(1) adjustments.
The July 31 discipline
Non-audit taxpayers must file by July 31, 2026. A belated return costs a late fee under Section 234F, interest under 234A on unpaid tax — and, notably, a belated return locks you into the new regime: the old-regime option must be exercised in a return filed on time. If the old regime saves you money, the deadline is not administrative. It is the price of the choice itself.
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