New Tax Regime vs Old Tax Regime — Which Saves More in FY 2026-27?
The new tax regime became the default for all taxpayers from FY 2023-24 onwards. Yet millions of salaried Indians still file under the old regime because their deductions — HRA, Section 80C, home loan interest, NPS — exceed the benefit of lower slabs. The problem is that most people pick a regime based on a colleague's advice rather than running the actual numbers. This guide lays out the slab-by-slab math for both regimes at every income level from ₹5L to ₹50L, lists every deduction you lose under the new regime, and gives you a clear decision framework so you can pick the regime that puts more money in your pocket — not the government's.
By Ojasvi Malik
FY 2026-27 Tax Slabs — Side by Side
The new regime offers more slabs at lower rates but eliminates nearly all deductions and exemptions. The old regime retains the familiar structure with full deduction eligibility. Your choice depends entirely on how much total deduction you can claim.
| Income Slab | Old Regime Rate | New Regime Rate |
|---|---|---|
| Up to ₹3,00,000 | Nil | Nil |
| ₹3,00,001 – ₹7,00,000 | 5% (above ₹2.5L) | 5% |
| ₹7,00,001 – ₹10,00,000 | 20% (above ₹5L) | 10% |
| ₹10,00,001 – ₹12,00,000 | 20% | 15% |
| ₹12,00,001 – ₹15,00,000 | 30% (above ₹10L) | 20% |
| Above ₹15,00,000 | 30% | 30% |
Deductions You Lose Under the New Regime
This is where most people make mistakes. The new regime strips out over 70 deductions and exemptions. The major ones: Section 80C (₹1.5L for ELSS, PPF, LIC), Section 80D (₹25K-₹1L for health insurance), HRA exemption (can be ₹2-6L for metro salaried employees), home loan interest under Section 24(b) (₹2L for self-occupied property), standard deduction (allowed ₹75,000 under new regime from FY 2024-25), LTA, professional tax, and NPS employer contribution under 80CCD(2) — this last one is the only major deduction still available under the new regime. If your total claimable deductions exceed approximately ₹3.75L at the ₹15L income level, the old regime wins.
Break-Even Analysis — At What Deduction Level Does Old Win?
The crossover point depends on gross salary. At ₹10L gross, you need approximately ₹2.5L in deductions for old regime to break even. At ₹15L, you need about ₹3.75L. At ₹20L, approximately ₹4.25L. At ₹30L+, the new regime almost always wins unless you have massive HRA (₹4L+) plus full 80C, 80D, and home loan interest. The standard deduction of ₹75,000 under the new regime narrows the gap further.
| Gross Salary | Break-Even Deduction | Typical Salaried Deduction | Better Regime |
|---|---|---|---|
| ₹8,00,000 | ₹1,75,000 | ₹2,00,000 | Old (marginal) |
| ₹12,00,000 | ₹3,00,000 | ₹3,50,000 | Old (if HRA claimed) |
| ₹15,00,000 | ₹3,75,000 | ₹3,00,000 | New (for most) |
| ₹20,00,000 | ₹4,25,000 | ₹3,50,000 | New |
| ₹30,00,000+ | ₹5,00,000+ | ₹4,00,000 | New |
The HRA Factor That Changes Everything
HRA exemption is the single largest deduction that salaried metro employees lose under the new regime. If you pay ₹25,000/month rent in Mumbai or Delhi, your HRA exemption can be ₹3-6L annually — this alone can swing the old regime into a clear winner even at ₹20L+ salary. If you live in your own house or pay no rent, HRA becomes zero and the new regime is almost certainly better for you above ₹12L. This single variable — rent payment — is the deciding factor for most mid-career salaried professionals.
Decision Framework — 3 Questions to Pick Your Regime
Ask yourself three questions. First: do you pay rent in a metro city? If yes, calculate your HRA exemption — it is the minimum of (actual HRA received, rent paid minus 10% of basic, 50% of basic for metro / 40% for non-metro). Second: do you have a home loan on a self-occupied property? Section 24(b) allows ₹2L interest deduction only under the old regime. Third: do you invest ₹1.5L+ in PPF/ELSS/LIC? Add up all three. If the total exceeds the break-even number for your salary from the table above, file under the old regime. If it falls short, file under new. You can switch between regimes every year if you are salaried — there is no permanent lock-in.
lightbulbKey Takeaways
- ✓The new regime is default from FY 2023-24 — you must actively opt for old regime if you want deductions
- ✓At ₹15L+ salary, old regime wins only if total deductions exceed approximately ₹3.75L (HRA + 80C + 80D + home loan)
- ✓HRA exemption is the single largest variable — metro renters paying ₹20K+/month often benefit more under old regime
- ✓NPS employer contribution under 80CCD(2) is the only major deduction available under BOTH regimes
- ✓Salaried employees can switch between regimes every financial year — no permanent lock-in
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Frequently Asked Questions
Can I switch from new to old regime in the middle of the year?expand_more
Is standard deduction available under the new regime?expand_more
What about Section 80D health insurance premium?expand_more
Which regime is better for someone earning ₹7-8 lakh?expand_more
Disclaimer: This article is for educational and informational purposes only. It does NOT constitute investment advice. Return data shown is historical and past performance is not indicative of future results. Vijay Malik Financial Services is an AMFI-registered Mutual Fund Distributor (ARN-317605) and is NOT a SEBI-registered Investment Adviser. Please consult a qualified financial advisor before making investment decisions.