Will the new tax regime be default?

From April 1, 2026, the new tax regime will be the default choice for salaried folks. But don't worry—you still have options. In this blog, I'll answer common questions like whether ₹12 lakh salary is really tax-free, what the downsides of the new regime are, and if you can still opt out of the new tax regime. Let's keep it simple and practical.

1. Is a 12 lakh salary tax-free?

Yes, but only if your total income is ₹12 lakh or less. Under the new tax regime, you get a rebate under Section 87A that wipes off the entire tax. Go even one rupee above ₹12 lakh, and you'll pay tax as per the slabs. Also, this rebate doesn't apply to special incomes like capital gains. So yes—but with small conditions.

2. What are the drawbacks of the new regime?

The biggest one is you lose almost all popular deductions under new tax regime. No 80C deduction for your LIC, PPF, or ELSS. No HRA exemption. No deduction for health insurance or home loan interest. If you're someone who invests or spends on these things, the old regime vs new regime comparison might still favor the old one.

3. Can I opt out of the new tax regime?
Yes, you absolutely can. Just because it's "default" doesn't mean it's compulsory. Salaried employees can choose old tax regime every year while filing ITR. However, from FY 2026-27, you'll have to actively tell the system you want the old regime—otherwise, it'll assume you want the new one.

4. Who pays 42% tax in India?
Only those earning more than ₹5 crore income in a year. On that super-high income, a 25% surcharge applies, pushing the effective tax rate 42.74% including cess. Regular salaried people or even those earning a few lakhs more than ₹12 lakh don't come anywhere near that rate.

5. Is the new regime compulsory?
No, it's not compulsory. The word "default tax regime" confuses many people. It simply means the tax department will first calculate your tax under the new tax regime unless you say otherwise. You still have the freedom to pick the old tax regime if it saves you more tax. Default ≠ forced.

6. Can I gift 1 crore to my friend?
Legally, yes. But here's the catch: any gift above ₹50,000 in a financial year is taxable gift in India in the receiver's hands. So your friend will have to pay tax on that ₹1 crore as per their income slab. The only exception is gifts to relatives—spouse, siblings, parents, etc. Keep that in mind.

7. Is it better to opt for a new tax regime?
Honestly, it depends on your lifestyle. If you don't invest much in 80C deductions, don't pay HRA-heavy rent, and don't have a home loan, the new tax regime benefits are simpler and often better. But if you claim many deductions, the old tax regime benefits could still save you more. Best to run a quick tax comparison calculator before deciding.

8. What changes from 1st April 2026?
Three big things: First, the new tax regime default from April 2026 for salaried employees. Second, the rebate limit increased to ₹12 lakh (from ₹7 lakh). Third, the basic exemption limit ₹4 lakh goes up. Slab rates new regime remain the same. Also, employers will start deducting TDS under new regime unless you tell them otherwise.

9. What changes from 1st April 2026?

From April 1, 2026, the new tax regime becomes the default more firmly. Employers will start deducting TDS under it unless you specifically inform them otherwise. Rebate limit moves up to ₹12 lakh (from ₹7 lakh). Basic exemption rises to ₹4 lakh.

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