Old vs new tax regime: Key differences that you must know before ITR filing

At first glance, the new tax regime seems like a great deal. With lower tax rates and less hassle many end up paying zero income tax on salary incomes up to ₹12.75. Many non-salaried people also end up paying zero income tax on income up to Rs 12 lakh. It’s no surprise that more and more taxpayers are jumping on board without a second thought.

But the choice may not be as simple as it appears, especially considering some of the changes in deductions from income in the old tax regime.

While the new regime trims tax rates, it also removes many of the deductions and exemptions that taxpayers have long relied on to reduce their tax burden. At the same time, the new income tax rules still allow for several allowances and perquisites across both tax regimes. In some cases, these can reduce your tax burden more effectively than just relying on lower tax rates. This makes it crucial to compare both tax regimes thoroughly instead of just picking one by default.

For the FY 2026–27 (AY 2027–28) Tax Year 2026-2027, for which income tax returns need to be filed on or before July 31, 2027, the differences between the old and new tax regimes remain significant, particularly in terms of deductions, exemptions, and overall tax outgo. For AY 2026-27, the ITR filing due date is on or before July 31, 2026 and none of the changes under Income Tax Rules, 2026, are applicable.

To understand how both tax regimes compare after the latest updates, here’s a detailed breakdown of allowances and benefits available:

Tax benefits available under both regimes

Below are the major tax benefits available under both income tax regimes. These can help reduce your taxable income if structured correctly for the Tax Year 2026-27.

Meal coupons

Meal cards or food vouchers like Sodexo, Pluxee, and Zaggle are employer-paid cards meant for food expenses. If structured correctly, they are not treated as taxable perquisites up to the allowed limit. This helps employees save tax while managing everyday meal costs at the office or nearby outlets.

From April 1, 2026 salaried employees may get tax-free meal card benefits of up to Rs 200 per meal during working hours. This is a sharp rise from the earlier Rs 50 limit.

“Free food and non-alcoholic beverages provided by employers during working hours at office or business premises or through paid vouchers usable only at eating joints, to the extent the value does not exceed Rs. 200 per meal is not taxable as a perquisite,” says Neeraj Agarwala, Senior Partner, Nangia & Co LLP.

Publication – The Economic Times
By Neeraj Agarwala