tax · 18 min read
New Tax Regime vs Old Regime 2026: Which Saves You More Money?
Detailed comparison of new vs old tax regime for FY 2025-26. Salary-wise tax tables from 5L to 1Cr, exact breakpoint calculation, and clear recommendation based on your deductions.
By CalcCrack Editorial Team · Published
Last updated: 7 April 2026
The single biggest tax decision you make every year is picking between the new and old tax regime. Get it right, and you save tens of thousands. Get it wrong, and you overpay the government for no reason.
Here is exactly how to decide, with real numbers for every salary bracket from 5 lakh to 1 crore.
The Core Difference in 30 Seconds
The old regime lets you claim deductions: 80C (1.5 lakh), 80D (health insurance), HRA, home loan interest, NPS, and more. Your taxable income drops, and you pay tax on the reduced amount.
The new regime strips away almost all deductions but gives you lower tax rates. The slabs are gentler, the 87A rebate is larger (up to 12 lakh taxable income), and the standard deduction is now 75,000.
Simple rule: if your total deductions are small, the new regime wins. If you have a home loan, pay rent in a metro, max out 80C, and invest in NPS, the old regime might still save you more.
New Regime Tax Slabs for FY 2025-26
| Taxable Income | Tax Rate |
|---|---|
| Up to 4,00,000 | Nil |
| 4,00,001 - 8,00,000 | 5% |
| 8,00,001 - 12,00,000 | 10% |
| 12,00,001 - 16,00,000 | 15% |
| 16,00,001 - 20,00,000 | 20% |
| 20,00,001 - 24,00,000 | 25% |
| Above 24,00,000 | 30% |
Plus 4% health and education cess on total tax. The 87A rebate wipes out tax completely if taxable income is 12 lakh or below.
Old Regime Tax Slabs for FY 2025-26
| Taxable Income | Tax Rate |
|---|---|
| Up to 2,50,000 | Nil |
| 2,50,001 - 5,00,000 | 5% |
| 5,00,001 - 10,00,000 | 20% |
| Above 10,00,000 | 30% |
The old regime also has a 87A rebate, but only up to 5 lakh taxable income. Standard deduction is 50,000 (not 75,000 like the new regime).
Salary-Wise Comparison: New vs Old Regime
This table assumes the person claims the following under old regime: 1.5 lakh under 80C (EPF + ELSS), 25,000 under 80D (health insurance), 50,000 NPS under 80CCD(1B), and standard deduction. No HRA, no home loan. Total old regime deductions: 2.75 lakh.
| Gross Salary | Tax (New Regime) | Tax (Old Regime, 2.75L deductions) | Savings |
|---|---|---|---|
| 5,00,000 | 0 | 0 | Tie |
| 7,50,000 | 0 | 17,160 | New saves 17,160 |
| 10,00,000 | 0 | 54,600 | New saves 54,600 |
| 12,00,000 | 0 | 1,01,400 | New saves 1,01,400 |
| 12,75,000 | 0 | 1,16,688 | New saves 1,16,688 |
| 15,00,000 | 78,000 | 1,71,600 | New saves 93,600 |
| 18,00,000 | 1,27,400 | 2,34,000 | New saves 1,06,600 |
| 20,00,000 | 1,82,000 | 2,80,800 | New saves 98,800 |
| 25,00,000 | 3,12,000 | 4,11,840 | New saves 99,840 |
| 30,00,000 | 4,68,000 | 5,57,700 | New saves 89,700 |
| 50,00,000 | 10,92,000 | 12,09,600 | New saves 1,17,600 |
| 75,00,000 | 18,72,000 | 19,89,600 | New saves 1,17,600 |
| 1,00,00,000 | 26,52,000 | 27,69,600 | New saves 1,17,600 |
With just 2.75 lakh in deductions, the new regime wins at every salary level. The gap is massive below 15 lakh (because of the 87A rebate) and stays meaningful even at 1 crore.
When Does the Old Regime Actually Win?
The old regime fights back when you stack heavy deductions. Here is the same table, but now the person also claims HRA of 2.4 lakh/year (paying 20,000/month rent in Bangalore) and home loan interest of 2 lakh under Section 24. Total old regime deductions: 7.15 lakh.
| Gross Salary | Tax (New Regime) | Tax (Old Regime, 7.15L deductions) | Winner |
|---|---|---|---|
| 10,00,000 | 0 | 0 | Tie |
| 15,00,000 | 78,000 | 46,800 | Old saves 31,200 |
| 18,00,000 | 1,27,400 | 98,280 | Old saves 29,120 |
| 20,00,000 | 1,82,000 | 1,40,400 | Old saves 41,600 |
| 25,00,000 | 3,12,000 | 2,49,600 | Old saves 62,400 |
| 30,00,000 | 4,68,000 | 3,93,120 | Old saves 74,880 |
| 50,00,000 | 10,92,000 | 9,79,200 | Old saves 1,12,800 |
With 7.15 lakh in deductions, the old regime wins at every salary above 12 lakh. The more you earn, the bigger the gap, because those deductions reduce income that would be taxed at 30%.
The Breakpoint Formula
There is no single magic number because it depends on your salary slab. But here is a practical rule of thumb that works for most salaried people:
If your total deductions (80C + 80D + HRA + home loan + NPS + any other) exceed 3.75 lakh, run the numbers for both regimes using our income tax calculator.
Below 3.75 lakh in deductions, the new regime almost always wins. Above 5 lakh in deductions, the old regime almost always wins. Between 3.75 and 5 lakh is the grey zone where your exact salary determines the answer.
The Standard Deduction Change: 75,000 in the New Regime
Budget 2024 bumped the standard deduction from 50,000 to 75,000 for the new regime. This is automatic - you do not need to claim it or show bills. Everyone gets it.
This means a gross salary of 12,75,000 results in taxable income of 12,00,000 after standard deduction, which falls within the 87A rebate limit. Zero tax. Anyone earning up to 12.75 lakh should pick the new regime without thinking twice.
NPS: The One Deduction That Works in Both Regimes
Here is something most people miss. Your employer's NPS contribution under Section 80CCD(2) is deductible in BOTH regimes. This is up to 14% of your basic salary for central government employees, and 10% for everyone else.
If your basic salary is 6 lakh, your employer can contribute 60,000 to NPS (10% of basic), and you can deduct that from taxable income even in the new regime. This is free tax saving - ask your HR to restructure your CTC to include employer NPS contribution.
The 80CCD(1B) extra deduction of 50,000 for self-contribution? That only works in the old regime. But the employer contribution works in both. Big difference.
HRA: The Old Regime's Secret Weapon
HRA exemption is the single biggest reason people stick with the old regime. If you pay 25,000/month rent in Delhi or Mumbai, your HRA exemption could be 2.5-3 lakh per year. That is 2.5-3 lakh of income moved from the 30% bracket to the 0% bracket, saving you 75,000-90,000 in tax.
Use our HRA calculator to find your exact exemption. If the number is above 2 lakh, the old regime starts becoming attractive.
If you do not get HRA in your salary structure, you can claim up to 60,000 under Section 80GG (old regime only). But this has conditions: you, your spouse, and minor children should not own residential property in the city of employment.
Home Loan Interest: Section 24 in the Old Regime
If you have a home loan, Section 24(b) lets you deduct up to 2 lakh in interest paid per year from taxable income under the old regime. This deduction does not exist in the new regime.
For a 50 lakh home loan at 8.5%, you pay about 4.2 lakh in interest in year 1. You can deduct 2 lakh of that. Combined with HRA and 80C, this pushes many homeowners firmly into old-regime territory.
Use our EMI calculator to see your interest breakup year by year.
Real Example: Priya, 30, Software Engineer in Bangalore
Priya earns 18 LPA (gross). Her CTC breakup: Basic 7.2L, HRA 3.6L, special allowance 5.2L, EPF (employer) 0.86L, gratuity 0.35L, insurance 0.17L.
New regime calculation:
Gross salary: 18,00,000. Standard deduction: 75,000. Taxable income: 17,25,000. Tax: 0 + 20,000 + 40,000 + 60,000 + 25,000 = 1,45,000. Cess: 5,800. Total tax: 1,50,800.
Old regime calculation (Priya claims everything):
80C: 1,50,000 (EPF 86,400 + ELSS 63,600). 80D: 25,000 (health insurance). 80CCD(1B): 50,000 (NPS self). HRA exemption: 1,92,000 (rent 20,000/month in Bangalore). Standard deduction: 50,000. Total deductions: 4,67,000.
Taxable income: 18,00,000 - 4,67,000 = 13,33,000. Tax: 12,500 + 1,00,000 + 99,900 = 2,12,400. Cess: 8,496. Total tax: 2,20,896.
Result: New regime saves Priya 70,096 per year. Even with 4.67 lakh in deductions, the new regime wins because a big chunk of her income falls in lower slabs.
But what if Priya also has a home loan? Add 2 lakh Section 24 deduction. Old regime taxable income drops to 11,33,000. Tax becomes 1,69,800. Cess: 6,792. Total: 1,76,592. Now the old regime saves her about 25,792.
Home loan + HRA + maxed 80C/80D/NPS was the tipping point.
Real Example: Vikram, 45, Manager in Pune
Vikram earns 30 LPA. He has a home loan (2L interest deduction), pays rent for a second property (no HRA benefit since he owns a home), maxes 80C, 80D for family (50,000 since parents are senior citizens), and NPS 80CCD(1B).
New regime: Taxable: 29,25,000. Tax: 0 + 20,000 + 40,000 + 60,000 + 80,000 + 1,00,000 + 1,57,500 = 4,57,500. Cess: 18,300. Total: 4,75,800.
Old regime: Deductions: 80C 1.5L + 80D 50K + 80CCD(1B) 50K + Section 24 2L + standard 50K = 5L. Taxable: 25,00,000. Tax: 12,500 + 1,00,000 + 4,50,000 = 5,62,500. Cess: 22,500. Total: 5,85,000.
Result: New regime saves Vikram 1,09,200. Even with 5 lakh in deductions, the new regime wins because he does not get HRA benefit. Without HRA, it is very hard for the old regime to compete at salaries above 20 lakh.
Who Should Pick the Old Regime in 2026?
You need a very specific combination: paying high rent in a metro city (HRA exemption above 2 lakh) PLUS a running home loan PLUS maxed 80C, 80D, and NPS contributions. This combination pushes total deductions above 6-7 lakh, which is where the old regime consistently saves more.
Specifically:
1. Salaried individuals paying 20,000+ monthly rent in Delhi/Mumbai/Bangalore/Chennai who also receive HRA in their salary structure.
2. People with a home loan where they are still in the first 10 years (high interest component).
3. People who max out 80C (1.5L), 80D (25K-50K), and NPS 80CCD(1B) (50K) every year without fail.
If you tick all three boxes, run the exact numbers. Use our income tax calculator - it supports both regimes side by side.
Who Should Pick the New Regime in 2026?
Almost everyone else. Specifically:
Anyone earning below 12.75 lakh - zero tax, no contest. People who live in their own home (no HRA benefit). People without a home loan. People who do not consistently max out all deduction sections. People who prefer simplicity over optimization.
The government has been nudging everyone toward the new regime since 2020. The 87A rebate expansion to 12 lakh, the standard deduction increase to 75,000, and the lower slab rates are all designed to make the new regime the default choice.
Common Mistakes to Avoid
Mistake 1: Comparing only the tax slabs. The slabs are just one part. You need to compare total tax after all deductions. A lower slab rate means nothing if you are leaving 5 lakh in deductions on the table.
Mistake 2: Assuming 80C alone is enough. Investing 1.5 lakh in PPF or ELSS saves you 46,800 in tax (at 30% + cess) under the old regime. But the new regime gives you lower rates across all slabs. That 46,800 saving might be offset by the rate difference.
Mistake 3: Not accounting for employer NPS. If your employer contributes to NPS, that deduction works in both regimes. Do not count it as an old-regime-only benefit.
Mistake 4: Forgetting surcharge. At salaries above 50 lakh, surcharge kicks in (10% on 50L-1Cr, 15% on 1Cr-2Cr). This applies to both regimes and can change the math significantly. At these income levels, always use a calculator rather than mental math.
My Recommendation
For most salaried Indians in 2026, the new regime is the better choice. The 87A rebate making income up to 12 lakh tax-free is a massive benefit that the old regime cannot match. The higher standard deduction of 75,000 and lower slab rates add to the advantage.
Switch to old regime only if your total deductions consistently exceed 5 lakh AND you have HRA as part of those deductions. Run the exact numbers every year using a tax calculator because your deduction mix changes (home loan interest decreases over time, rent may change, insurance premiums change).
And remember: salaried employees can switch every year. There is no penalty for changing your mind.
Frequently Asked Questions
Q.Which tax regime is better for salary of 10 lakh?
For a gross salary of 10 lakh, the new regime is almost always better. You get a standard deduction of 75,000 and the 87A rebate makes income up to 12 lakh effectively tax-free. Unless you have deductions exceeding 3.75 lakh under the old regime (unlikely at this salary), the new regime wins.
Q.Can I switch between old and new tax regime every year?
Yes, salaried employees can switch between old and new regime every financial year. You are not locked in. Business owners (ITR-3/4 filers) can only switch once in a lifetime.
Q.Is NPS deduction available in the new tax regime?
The employer NPS contribution under Section 80CCD(2) is available in both regimes, up to 14% of basic salary. The self-contribution deduction under 80CCD(1B) of 50,000 is only available under the old regime.
Q.What is the 87A rebate in the new regime for 2025-26?
Under the new regime for FY 2025-26, Section 87A provides a rebate that makes taxable income up to 12 lakh effectively tax-free. After the 75,000 standard deduction, this means a gross salary up to 12.75 lakh pays zero tax under the new regime.
Q.At what deduction amount does the old regime become better?
The breakpoint depends on your salary. Generally, if your total deductions (80C + 80D + HRA + home loan interest + NPS) exceed 3.75 lakh, the old regime starts saving more. At higher salaries above 20 lakh, the breakpoint can rise to 4-5 lakh in deductions.