Old or New Tax Regime? Decide With Three Numbers

Every April, salaried Indians are asked which tax regime they want. Most people answer with a feeling. You can answer with three numbers instead.

Number one: your gross salary

Since Budget 2025, the new regime charges nothing on taxable income up to ₹12 lakh, thanks to a rebate under section 87A. Add the ₹75,000 standard deduction and a salaried person earning up to ₹12.75 lakh pays no income tax at all in the new regime. Budget 2026 kept all of this unchanged for FY 2026-27.

If your salary is at or below that line, you're done. The new regime wins, and no deduction can beat zero.

Number two: what you can genuinely deduct

The old regime only helps if you have real deductions and exemptions: EPF and PPF under 80C (up to ₹1.5 lakh), health insurance under 80D, extra NPS under 80CCD(1B), HRA if you pay rent, and home loan interest up to ₹2 lakh.

Add up only what you would do anyway. A life insurance policy bought in March to fill 80C is not a deduction; it's an expense with a tax discount.

Number three: the break-even point

For every income there's a level of deductions at which both regimes cost the same. At a ₹18 lakh salary it's roughly ₹6.4 lakh of deductions and exemptions beyond the standard deduction. At ₹25 lakh, roughly ₹8 lakh.

Most people without a large rent bill and a home loan never get there. If you do, the old regime is still worth a look.

₹Try the income tax calculatorOld vs new regime for FY 2025-26 and FY 2026-27.

The decision

1. Salary under ₹12.75 lakh: new regime.
2. Deductions below your break-even: new regime.
3. Deductions above it: old regime, and check again next year.

Salaried taxpayers can choose again every year when filing, whatever they told their employer in April. So the decision isn't permanent, but it's worth getting right each time.

Source: Income Tax Department — Tax Slabs for AY 2026-27