Every year around this time the same question circulates in Indian office WhatsApp groups: old regime or new regime? And every year the answer is buried under influencer thumbnails promising "zero tax up to ₹12.75 lakh" without telling you what happens at ₹12.8 lakh, or why your colleague on the same salary pays less than you do.
This article does the arithmetic instead. Real slabs, real worked examples at four income levels, and one number — the break-even deduction figure — that settles the question for most salaried readers in about thirty seconds.
The short answer
For the large majority of salaried Indians in FY 2026-27, the new regime wins. The old regime only beats it if your total deductions — 80C, 80D, HRA, home loan interest, NPS — are large enough to push your taxable income well below the new-regime figure. We calculate that exact threshold below.
The FY 2026-27 Slabs, Side by Side
Budget 2026 left the income tax structure unchanged from the previous year. The new regime remains the default: if you do not actively opt for the old regime, this is what applies to you.
New regime (default)
| Taxable income | 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% |
Standard deduction for salaried taxpayers: ₹75,000. Section 87A rebate: up to ₹60,000, available where total income does not exceed ₹12,00,000. Health and education cess of 4% applies on the tax computed.
Old regime (must be opted for)
| Taxable income | Rate (below 60 years) |
|---|---|
| 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% |
Standard deduction: ₹50,000. The old regime keeps the full deduction toolkit — Section 80C (₹1.5 lakh), 80D medical insurance, HRA exemption, home loan interest under Section 24(b), NPS under 80CCD(1B), and the rest. The new regime gives up almost all of these in exchange for lower rates.
Where "Zero Tax up to ₹12.75 Lakh" Comes From
The figure is real, and here is the arithmetic behind it. Take a salaried employee with gross salary of ₹12,75,000:
- Less standard deduction of ₹75,000 → taxable income ₹12,00,000
- Tax on first ₹4 lakh: nil
- ₹4–8 lakh at 5%: ₹20,000
- ₹8–12 lakh at 10%: ₹40,000
- Total tax before rebate: ₹60,000
- Section 87A rebate (income does not exceed ₹12 lakh): −₹60,000
- Tax payable: ₹0
The rebate is calibrated to exactly cancel the tax at that ceiling. One rupee of taxable income above ₹12,00,000 and the rebate disappears entirely.
The Cliff That Nobody Explains: Marginal Relief
If the rebate simply vanished above ₹12 lakh, someone earning ₹12,10,000 of taxable income would owe roughly ₹61,500 in tax while someone at ₹12,00,000 owed nothing — a ₹61,500 penalty for ₹10,000 of extra income. The law prevents this through marginal relief, and almost no one talks about it.
How marginal relief works
Where taxable income just exceeds ₹12,00,000, your tax is capped at the amount by which your income exceeds ₹12,00,000. Earn ₹12,25,000 and the tax computed by the slabs would be ₹63,750 — but marginal relief limits it to ₹25,000 (plus cess), because that is your excess over ₹12 lakh.
Marginal relief tapers off as income rises, and stops mattering once the slab tax falls below the excess. The practical consequence: if you are hovering just above the ₹12 lakh line, do not panic-invest to get under it. Check the marginal relief calculation first.
Four Worked Examples
₹10 lakh gross salary
New regime: taxable ₹9,25,000 after standard deduction. Tax = ₹20,000 (4–8 lakh slab) + ₹12,500 (₹1.25 lakh at 10%) = ₹32,500, fully wiped out by the 87A rebate. Tax payable: ₹0.
Old regime: to get to zero you would need taxable income under ₹5 lakh, which from a ₹10 lakh gross means ₹4.5 lakh of deductions on top of the ₹50,000 standard deduction. Possible for a metro renter maxing 80C, but you had to spend or lock up the money to get there.
Verdict: new regime, comfortably. Zero tax with zero paperwork and zero forced investment.
₹15 lakh gross salary
New regime: taxable ₹14,25,000. Tax = ₹20,000 + ₹40,000 + ₹33,750 (₹2.25 lakh at 15%) = ₹93,750. Add 4% cess → ₹97,500.
Old regime with typical deductions (80C ₹1.5 lakh, 80D ₹25,000, HRA ₹2 lakh, standard deduction ₹50,000): taxable ₹10,75,000. Tax = ₹12,500 + ₹1,00,000 + ₹22,500 = ₹1,35,000, plus cess → ₹1,40,400.
Verdict: new regime saves about ₹42,900. The old regime only catches up with substantially larger deductions — see the break-even section below.
₹25 lakh gross salary
New regime: taxable ₹24,25,000. Tax = ₹20,000 + ₹40,000 + ₹60,000 + ₹80,000 + ₹1,00,000 + ₹7,500 = ₹3,07,500, plus cess → ₹3,19,800.
🧮 Run your own numbers
Use the free New vs Old Regime calculator — it applies the 87A rebate, marginal relief and cess automatically, and tells you the exact deduction figure at which the old regime starts winning for your income.
Open the free calculator →At this level the old regime needs an unusually heavy deduction stack — a large home loan interest claim plus maxed 80C, 80D, NPS and metro HRA — to compete. Run your own numbers rather than assuming; this is the income band where it is genuinely worth checking both.
₹8 lakh gross salary
New regime: taxable ₹7,25,000. Tax = ₹16,250, cancelled by the rebate. Tax payable: ₹0. No investment required, no rent receipts, no proof submission. For early-career professionals this is the single strongest argument for the new regime — it removes the pressure to buy financial products purely for tax reasons.
The Break-Even Number
The 30-second test
At a gross salary of ₹15 lakh, the old regime only beats the new regime if your total deductions and exemptions exceed roughly ₹5.4 lakh. That is 80C (₹1.5 lakh) + 80D (₹25,000) + NPS 80CCD(1B) (₹50,000) + HRA exemption of about ₹3.2 lakh — which in practice means paying metro-level rent and having the receipts to prove it.
Here is how that figure is derived. Under the new regime you pay ₹93,750 before cess. For the old regime to produce the same tax, your old-regime taxable income must fall to about ₹9,06,250. From a gross of ₹15 lakh less the ₹50,000 standard deduction (₹14.5 lakh), that requires ₹5.44 lakh of deductions.
If you are a homeowner living in your own property, you have no HRA claim, and clearing ₹5.4 lakh becomes very hard. If you rent in Mumbai, Delhi, Bengaluru or Gurugram and pay ₹35,000–45,000 a month, it is achievable. That single distinction — do you claim HRA or not — settles the regime question for most salaried people faster than any calculator.
When the Old Regime Still Wins
- High metro rent with a genuine landlord PAN. HRA is the largest deduction most salaried people can claim, and the new regime does not allow it at all.
- A large home loan in its early years. Interest is front-loaded, so Section 24(b) claims of ₹2 lakh are easiest to hit in the first several years of the loan.
- A parent's health insurance premium under 80D. Senior-citizen parent cover can add a meaningful deduction on top of your own.
- Salary structures heavy on exempt allowances — LTA, and other components your employer already structures for tax efficiency.
If none of the four apply to you, the new regime is almost certainly your answer, and you can stop reading calculators.
Practical Points People Get Wrong
You can switch, but not freely if you have business income
A salaried taxpayer with no business income can choose the regime afresh each year while filing. Someone with business or professional income who opts out of the new regime gets a limited number of switches — which matters a great deal to freelancers and consultants. If that is you, read our companion guide on freelancer tax in India before you make the choice.
The default is the new regime
Do nothing and the new regime applies. Under the old system, the old regime was the default. Several people have discovered this only after their employer's TDS came out different from what they expected. Declare your choice with your employer at the start of the year.
Your employer's TDS is not your final tax
Your regime choice at filing time can differ from the one you declared to your employer. If you declared new regime but the old regime turns out better, you can still switch when you file and claim the refund — you simply financed the government for a year in the meantime.
Frequently Asked Questions
Is income up to ₹12.75 lakh really tax-free?
For a salaried person under the new regime, yes — ₹75,000 standard deduction brings taxable income to ₹12 lakh, and the ₹60,000 rebate under Section 87A cancels the tax exactly. For non-salaried income there is no standard deduction, so the equivalent ceiling is ₹12 lakh.
Can I claim 80C under the new regime?
No. Section 80C, 80D, HRA and most other common deductions are unavailable under the new regime. The employer's contribution to NPS under Section 80CCD(2) is one of the few that survives.
What if my income is ₹12.5 lakh?
Marginal relief applies. Your tax is capped at the amount by which your taxable income exceeds ₹12 lakh, rather than the full slab computation. Check that calculation before assuming you owe the headline figure.
Which regime should I tell my employer at the start of the year?
Estimate your likely deductions for the year. If they will comfortably exceed the break-even figure for your salary band, declare old regime. If not, declare new. Either way you can correct the choice at filing time if you are salaried.
The Bottom Line
The new regime is designed to be the right answer for most people, and for most salaried Indians it is. The old regime survives for a specific profile: metro renters with high HRA, early-stage home loan borrowers, and people whose salary structures were built around exemptions.
Work out one number — your realistic total deductions for the year — and compare it against the break-even figure for your salary. That comparison is the entire decision. Everything else is noise.
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