New vs Old Tax Regime 2026: The Breakeven Analysis for Salaried Employees
By Nitish Bharadwaj · Published Jun 17, 2026 · 5 min
For salaried employees in 2026, the new tax regime is beneficial at income levels below ₹7 lakh (zero tax with rebate) and increasingly competitive above ₹15 lakh where the lower slab rates offset HRA and home loan deductions. The old regime remains better for employees claiming HRA in metro cities plus ₹1.5 lakh in 80C deductions and home loan interest. This breakeven analysis covers five income levels from ₹8 lakh to ₹25 lakh.
The debate between new and old tax regimes is now four years old, but the answer is still not simple — it depends entirely on your specific deductions profile. The Union Budget 2025 made the new regime even more attractive by expanding the Section 87A rebate so that income up to ₹12 lakh is effectively tax-free and raising the standard deduction to ₹75,000 (our dedicated standard deduction guide covers who qualifies for that figure, and the separate, smaller number that applies to family pensioners). Budget 2026 left every one of these numbers untouched — see our FY 2026-27 slabs confirmation guide if you just want the current tables without the regime debate. Yet for salaried individuals who own a home, pay significant insurance premiums, and maximise their 80C investments, the old regime still wins. This article gives you the exact maths for a ₹15 lakh gross salary and the tools to check your own situation.
Tax Slabs: New vs. Old Regime for AY 2026-27
| Income Slab | New Regime Rate | Old Regime Rate |
|---|---|---|
| Up to ₹4,00,000 | Nil | Nil |
| ₹4,00,001 – ₹8,00,000 | 5% | Nil (up to ₹5L) / 5% (₹5L–₹10L) |
| ₹8,00,001 – ₹12,00,000 | 10% | 5% / 20% |
| ₹12,00,001 – ₹16,00,000 | 15% | 20% / 30% |
| ₹16,00,001 – ₹20,00,000 | 20% | 30% |
| ₹20,00,001 – ₹24,00,000 | 25% | 30% |
| Above ₹24,00,000 | 30% | 30% |
What Deductions Are Available Under Each Regime?
| Deduction / Exemption | New Regime | Old Regime |
|---|---|---|
| Standard Deduction (salaried) | ₹75,000 | ₹50,000 |
| Section 80C (EPF, PPF, ELSS, LIC, etc.) | Not available | Up to ₹1,50,000 |
| Section 80D (Health Insurance Premium) | Not available | Up to ₹25,000 (₹50,000 for senior citizens) |
| Section 24(b) Home Loan Interest | Not available | Up to ₹2,00,000 (self-occupied) |
| HRA Exemption | Not available | Actual HRA or formula-based, whichever is less |
| LTA Exemption | Not available | Actual travel cost (2 trips in 4-year block) |
| Section 80CCD(1B) NPS Additional | Not available | Up to ₹50,000 |
| Section 80TTA/80TTB (Interest income) | Not available | Up to ₹10,000 / ₹50,000 for senior citizens |
| Employer NPS contribution (Section 80CCD(2)) | Available | Available |
| Gratuity and leave encashment exemptions | Available | Available |
The ₹15 Lakh Salary Example: Which Regime Wins?
Gross salary: ₹15,00,000. Scenario: employee has HRA of ₹2,40,000 (actually claimed exemption ₹1,50,000), pays home loan interest of ₹1,80,000, pays life insurance premium of ₹30,000, invests ₹1,50,000 in EPF/PPF/ELSS (fully avails 80C), pays health insurance ₹25,000 (80D), and contributes ₹50,000 to NPS (80CCD(1B)).
| New Regime | Old Regime | |
|---|---|---|
| Gross Salary | ₹15,00,000 | ₹15,00,000 |
| Standard Deduction | −₹75,000 | −₹50,000 |
| HRA Exemption | Not available | −₹1,50,000 |
| Home Loan Interest (Sec 24b) | Not available | −₹1,80,000 |
| Section 80C | Not available | −₹1,50,000 |
| Section 80D | Not available | −₹25,000 |
| Section 80CCD(1B) NPS | Not available | −₹50,000 |
| Taxable Income | ₹14,25,000 | ₹7,95,000 |
| Tax Before Cess | ₹93,750 | ₹71,500 |
| Health & Education Cess (4%) | ₹3,750 | ₹2,860 |
| Total Tax Payable | ₹97,500 | ₹74,360 |
| Annual Tax Saving — Old Regime | ₹23,140 LESS TAX |
Who Should Choose New Regime?
- Individuals earning up to ₹12 lakh — zero tax under the Section 87A rebate makes the old regime irrelevant.
- High earners with no HRA, no home loan, and minimal deductions — the new regime's lower slab rates outweigh the limited deductions they can claim.
- Early-career professionals who are renters without a home loan and have not yet built a deduction portfolio — new regime reduces complexity.
- Freelancers and self-employed individuals whose deductions (other than business expenses) are limited — especially if they opt for presumptive taxation under Section 44ADA.
Who Should Stick With Old Regime?
- Salaried individuals with home loans where annual interest exceeds ₹1.5 lakh, especially in metro cities where loan sizes are large — see our full breakdown of Section 24 and 80C home loan deductions for the complete old-vs-new regime math.
- Those with significant HRA exemption (living in metro cities on rent with high allowances). From FY 2026-27, HRA exemption expands to 8 cities — Bengaluru, Hyderabad, Pune, and Ahmedabad join the 50% metro list, strengthening the old regime case for residents of these cities.
- Senior citizens with large FD portfolios using Section 80TTB (₹50,000 deduction) and health insurance premiums (₹50,000 deduction) — these alone total ₹1 lakh before touching 80C.
- Government employees who have NPS mandatory contributions and can claim NPS employer contribution under Section 80CCD(2) — this deduction survives even in the new regime and was raised to 14% of basic salary for private employees under the new regime from FY 2024-25 — PLUS voluntary NPS under 80CCD(1B) in the old regime makes additional contributions especially valuable.
- Regular donors to charitable trusts and relief funds — Section 80G is old-regime only, and for anyone giving a meaningful amount each year, it stacks on top of 80C, 80D, and HRA rather than competing with them.
- Agniveers under the Agnipath scheme, though this one cuts the other way — Section 80CCH is one of the few deductions that survives in the new regime too, but only partially, so it's worth checking exactly which portion of your Corpus Fund contribution you can claim under each regime.
Frequently Asked Questions
Is income up to ₹12 lakh really tax-free in the new regime?
Yes — for salaried individuals in FY 2025-26. The Section 87A rebate makes income up to ₹12 lakh effectively tax-free in the new regime. Add the ₹75,000 standard deduction, and a salaried employee with gross income up to ₹12.75 lakh pays zero income tax in the new regime. However, note that the 87A rebate doesn't apply to capital gains — if you have STCG or LTCG from stocks or mutual funds, those are taxed at 20% and 12.5% respectively even if your total income is below ₹12 lakh. And if your taxable income lands just above ₹12 lakh rather than below it, you don't lose the entire rebate at once — see our guide to marginal relief under the new regime for exactly how much tax you'd actually owe.
Which deductions are still available in the new tax regime?
Very few. The new regime allows: standard deduction of ₹75,000 for salaried employees, employer's NPS contribution under Section 80CCD(2), gratuity and leave encashment exemptions, and interest on home loan for let-out property. All major deductions — 80C, 80D, HRA, and home loan interest on self-occupied property — are unavailable.
How do I decide which regime to choose for FY 2025-26?
Calculate your taxable income under both regimes. In the old regime, subtract: ₹50,000 standard deduction + HRA exemption + home loan interest (up to ₹2L) + 80C investments (up to ₹1.5L) + 80D premiums + NPS 80CCD(1B) (up to ₹50K). In the new regime, subtract only ₹75,000 standard deduction. Apply the respective slab rates and compare. ClearTax and Kuvera have free calculators.
What is the new regime default for FY 2025-26?
The new tax regime is now the default for all taxpayers including salaried employees. If you do not explicitly choose the old regime (by filing Form 10-IEA or informing your employer), the new regime applies automatically. To claim 80C, HRA, and other deductions, you must actively opt for the old regime.