Every salaried person in India faces the same choice each year. Take the lower tax rates of the new regime and give up almost every deduction, or stay with the old regime and claim HRA, 80C, 80D and home loan interest at higher rates. The honest answer for most people in 2026 is the new regime, and the reason is arithmetic rather than opinion.
What each regime gives you
Under the new regime for Tax Year 2026-27, there is no tax on the first ₹4 lakh, and the rates then rise in steps of ₹4 lakh through 5%, 10%, 15%, 20% and 25%, reaching 30% only above ₹24 lakh. You also get a standard deduction of ₹75,000, and a rebate that removes tax entirely on taxable income up to ₹12 lakh. What you give up is nearly everything else: HRA exemption, 80C, 80D, professional tax and home loan interest on a self-occupied house.
The old regime starts taxing at ₹2.5 lakh, reaches 20% at ₹5 lakh and 30% above ₹10 lakh. The standard deduction is ₹50,000 and the rebate only covers taxable income up to ₹5 lakh. In exchange, you can claim the full set of deductions.
The break-even test
The question is simple. How much do you need to deduct under the old regime to beat the new one? The table below shows the answer at different levels of salary income, meaning your gross salary before any deductions. Figures include cess.
| Salary income | Tax under the new regime | Deductions needed under the old regime |
|---|---|---|
| ₹12,00,000 | Nil | About ₹6,50,000 |
| ₹15,00,000 | ₹97,500 | About ₹5,45,000 |
| ₹18,00,000 | ₹1,50,800 | About ₹6,42,000 |
| ₹20,00,000 | ₹1,92,400 | About ₹7,09,000 |
| ₹25,00,000 and above | ₹3,19,800 and up | About ₹8,00,000 |
Those are large numbers. To reach ₹8 lakh of deductions you would need the full ₹1.5 lakh under 80C, ₹50,000 of your own NPS, ₹75,000 of health insurance premiums, ₹2 lakh of home loan interest and close to ₹3.5 lakh of HRA exemption at the same time. That combination is possible, and some people do reach it, but it usually means paying high rent in a big city while also servicing a home loan.
A worked example
Take someone with a salary income of ₹18 lakh who pays ₹35,000 a month in rent in Pune, claims the full ₹1.5 lakh under 80C and ₹25,000 for health insurance. With a basic pay of ₹9 lakh, the HRA exemption works out to ₹3 lakh, so total deductions come to about ₹4.75 lakh with professional tax and the standard deduction included. The old regime tax comes to ₹2,02,800, against ₹1,50,800 under the new regime. The new regime is ahead by ₹52,000.
Now change one thing. Give the same person a home loan with ₹2 lakh of interest on a self-occupied house. Deductions rise to ₹6.75 lakh, and the old regime moves ahead. That single item is often what decides the choice.
Three things people get wrong
The first is comparing tax rates rather than tax paid. The old regime's 30% rate starting at ₹10 lakh does more damage than most people expect, because the new regime does not reach 30% until ₹24 lakh.
The second is forgetting that the employer's NPS contribution is deductible under both regimes, up to 14% of basic pay under the new regime and 10% under the old. If your employer offers it, the new regime treats it more generously.
The third is assuming the choice is permanent. A salaried person without business income can switch regimes each year when filing the return, whatever they told their employer at the start of the year. The declaration to your employer only decides how much tax is deducted from your salary during the year.
Work out your own answer
Averages do not pay your tax bill, so use your own figures. Our CTC to in-hand salary calculator computes both regimes side by side from your salary structure, rent and deductions, and shows the full working for each.
Figures are for a resident individual below 60 with salary as the only income, and include 4% health and education cess. This is general information and not tax advice. Last updated 22 September 2026.