Old vs New Tax Regime: Slab Comparisons, Allowed Deductions & Calculations
This Old vs New Tax Regime Guide is designed to help you choose the best filing method. Starting in FY 2023-24, the government made the New Tax Regime the default, and in subsequent budgets (including FY 2026-27), further sweetened its slabs, standard deductions, and rebates to encourage transition. You can compare your specific package side-by-side using our Old vs New Tax Regime Calculator.
This guide provides a comprehensive comparison, featuring new regime slabs Budget 2025 data, a complete deduction comparison checklist, and a breakeven analysis for FY 2026-27. Additionally, understanding how HR calculates salary and processes TDS under both regimes is crucial for planning your annual declarations.
1. Side-by-Side Slabs Comparison (FY 2026-27)
The two regimes have completely different slab structures. The New Regime features narrower, progressive slabs with lower tax rates, while the Old Regime has wider slabs with steeper rate jumps.
Income Slab
New Regime Rate
Income Slab
Old Regime Rate
Up to ₹4,00,000
Nil
Up to ₹2,50,000
Nil
₹4,00,001 � ₹8,00,000
5%
₹2,50,001 � ₹5,00,000
5%
₹8,00,001 � ₹12,00,000
10%
₹5,00,001 � ₹10,00,000
20%
₹12,00,001 � ₹16,00,000
15%
Above ₹10,00,000
30%
₹16,00,001 � ₹20,00,000
20%
Above ₹20,00,000
30%
Note: Surcharges are applicable under both regimes for high-income earners (exceeding ₹50 Lakhs), and a mandatory 4% Health and Education Cess is added to the final calculated tax.
2. Deductions Directory: What is Allowed Where
The primary trade-off of the New Tax Regime is that it removes almost all deductions and exemptions in exchange for lower tax rates. When you file your ITR, your employer-issued Form 16 acts as the master record detailing which deductions have been applied. For a step-by-step guide to verifying your certificate, read our dedicated Form 16 Guide.
Exemption / Deduction
Old Tax Regime
New Tax Regime (FY 2026-27)
Standard Deduction (for Salaried)
₹50,000
₹75,000
Section 87A Rebate (Tax Free Cap)
Up to ₹5 Lakhs taxable income
Up to ₹12 Lakhs taxable income
Section 80C (EPF, PPF, ELSS, Insurance)
₹1,50,000
No
Section 80D (Health Insurance Premium)
Up to ₹25,000 (Self) + ₹50,000 (Parents)
No
Section 24(b) (Home Loan Interest - Self Occupied)
Up to ₹2,00,000
No
HRA Exemption (House Rent Allowance)
Yes (Based on rent paid - calculate with our HRA Calculator)
No
Section 80CCD(2) (Employer NPS Contribution)
Yes (Up to 10% of basic)
Yes (Up to 10% of basic)
3. Section 87A Tax Rebate: The Game Change
The Section 87A rebate makes taxable income zero up to a certain threshold.
New Tax Regime: If your taxable income (Gross Salary minus standard deduction) is ₹12,00,000 or less, your tax is fully rebated under Section 87A. With the ₹75,000 standard deduction, a salaried employee earning a gross salary of ₹12,75,000 pays ₹0 income tax.
Old Tax Regime: The Section 87A rebate is capped at a taxable income of ₹5,00,000. If your taxable income is even ₹5,00,100, you pay tax on the entire amount without rebate.
4. The Breakeven Deduction Analysi
To determine which regime is better for your salary bracket, calculate your Breakeven Deduction. This represents the minimum deductions you must declare under the Old Tax Regime to make it cheaper than the New Regime.
If your total deductions (80C + 80D + HRA + Home Loan + NPS) exceed the breakeven threshold, choose the Old Regime. Otherwise, choose the New Regime.
Annual Gross Income
Breakeven Deduction Required (Old Regime)
Up to ₹12 Lakhs
Not feasible (New regime is ₹0 tax up to ₹12.75L gross CTC).
₹15 Lakhs
₹4,25,000 (Must declare > ₹4.25L deductions to make Old Regime win).
₹20 Lakhs
₹4,50,000 (Must declare > ₹4.50L deductions to make Old Regime win).
₹30 Lakhs
₹4,75,000 (Must declare > ₹4.75L deductions to make Old Regime win).
Tip
Under modern payroll structures, achieving more than ₹4.5 Lakhs in deductions requires high expenditures, such as substantial HRA (high rent) and significant home loan interest payments. For the majority of salaried employees who do not have home loans or high HRA exemptions, the New Tax Regime is the clear winner due to its lower baseline tax slabs and hassle-free, zero-proof filing.
5. Frequently Asked Questions
FAQ
)
Can I switch between Old and New regimes?
Salaried individuals who do not have business income can choose their preferred tax regime every financial year at the time of filing their Income Tax Return (ITR).
Is standard deduction available under both regimes?
Yes, salaried employees are eligible for a standard deduction of ₹75,000 under the New Regime and ₹50,000 under the Old Regime for FY 2026-27.
What is the breakeven deduction point for a 15 LPA salary?
For an annual gross income of ₹15 LPA, the breakeven deduction threshold is approximately ₹3.75 Lakhs. If your total tax deductions (80C, HRA, home loan, etc.) exceed this, the Old Regime is better.
Compare Old vs New Tax Regime Slabs
Compare your tax liabilities side-by-side and find your exact breakeven point. Try our free comparison tool.
Compare regimes
Disclaimer: CTC Calculator provides calculations based on standard Indian payroll and tax slabs (Budget FY 2026-27) for educational purposes. Actual structures and deductions may vary based on company policy. Please consult a Chartered Accountant or tax professional for financial decisions.
Calculation Methodology: Calculations run client-side in your browser using pure JavaScript. No personal salary data is transmitted to our servers or stored. EPF calculations default to 12% of basic salary, gratuity is projected at 4.81% of basic, and Professional Tax is based on selected state boundaries.