ITR Filing AY 2026-2027: Old vs. New Tax Regime - Which is Better?

ITR filing AY 2026-2027: Do you plan to file income tax returns under the old tax regime? The first thing to know is that your ITR must be filed within the July 31, 2026 deadline, otherwise you will automatically be switched to the new income tax regime, which is the default regime. For many people the old income tax regime continues to be attractive despite the new regime offering higher basic exemption and standard deduction, rebate limits and lower tax rates. This is because the number of deductions and exemptions under the old regime can make it a compelling choice for those who can claim higher amounts of these.

Income Tax Slabs FY 2025-26 under the old tax regime

Income Tax Slab

Income Tax Rate

0-2.5 lakh

Nil

2.5-5 lakh

5%

5-10 lakh

20%

Above 10 lakh

30%

The above are applicable for resident individuals up to the age of 60. As you sit to file your income tax return, it’s important to understand how to calculate your tax outgo under the old tax regime. Also Read | ITR filing: Switched jobs? How to file tax return and mistakes to avoid

How to calculate taxes under old income tax regime

While the tax slab rates are less beneficial compared to the new regime, the availability of deductions under various provisions can substantially reduce the taxable income and overall tax liability under the old tax regime, notes Archit Gupta, Founder and CEO, ClearTax. Therefore, taxpayers should carefully evaluate their eligible deductions before deciding which tax regime to opt for. He explains how a salaried taxpayer can calculate tax liability:

To calculate taxes under the old tax regime, start with your salary income and reduce the standard deduction to arrive at the net taxable salary income.

Thereafter, add income from other sources, such as savings account interest, fixed deposit interest, dividends, or rental income, to compute the Gross Total Income (GTI).

From the GTI, eligible deductions under Chapter VI-A, such as Sections 80C, 80CCD(1B), 80D, and 80TTA, can be claimed to determine the net taxable income.

The applicable slab rates are then applied to calculate the tax liability.

The following illustrative table shows the manner of tax calculation under the old regime for an individual earning a salary of Rs 20 lakh per annum.

Particulars

Amount (Rs)

Salary Income

20,00,000

Less: Standard Deduction

-50,000

Net Salary Income

19,50,000

Add: Savings Bank Interest

15,000

Add: Fixed Deposit Interest

35,000

Gross Total Income

20,00,000

Less: Chapter VI-A Deductions

Section 80C

(1,50,000)

Section 80CCD(1B) – NPS

-50,000

Section 80D – Health Insurance

-25,000

Section 80TTA (Savings Account Interest)

-10,000

Total Chapter VI-A Deductions

(2,35,000)

Net Taxable Income

17,65,000

Tax up to ₹2.5 lakh

Nil

Tax on ₹2.5 lakh to ₹5 lakh @ 5%

12,500

Tax on ₹5 lakh to ₹10 lakh @ 20%

1,00,000

Tax on ₹10 lakh to ₹17.65 lakh @ 30%

2,29,500

Total Tax

3,42,000

Add: Health & Education Cess @ 4%

13,680

Total Tax Liability

3,55,680

Points to Remember

Form 16 should not be relied upon blindly, says Archit Gupta. Carefully verify every income and deduction entry to ensure that all eligible benefits are claimed correctly.

He also says it’s important to refer to Form 26AS and AIS to identify additional income sources, such as interest income, that may not be reflected in Form 16, and cross-verify with the relevant evidence.

Deductions under Sections 80TTA and 80TTB can be claimed only if the prescribed conditions are satisfied.

Avoid claiming deductions without adequate supporting documents such as receipts, certificates, and bank records, he cautions.

“A thorough review of income and deductions can help optimize tax savings while ensuring accurate tax compliance under the old regime,” he concludes. Also Read | ITR filing: How to pay zero tax under new and old tax regime - know all about Section 87A rebate