The choice is annual and it is yours. The new regime gives you wider slabs and a large rebate but strips out almost every deduction; the old regime keeps the deductions but taxes you sooner. Which one wins comes down to a single number: how much you can actually deduct.
This guide gives you that number for your income band.
The two slab tables (FY 2026-27)
New regime — the 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 ₹75,000. §87A rebate makes tax nil up to ₹12,00,000 of taxable income — which, with the standard deduction on top, means a salary up to ₹12,75,000 pays no income tax at all. Surcharge is capped at 25% under §115BAC. Cess is 4% on top of everything.
Old regime — deductions kept
| Taxable income | 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% |
Standard deduction ₹50,000, rebate only up to ₹5,00,000, and a top surcharge band of 37%. In exchange you keep 80C (₹1.5 lakh), 80D, 80CCD(1B) (₹50,000), HRA exemption, LTA, and home-loan interest under §24(b) (₹2 lakh).
The number that decides it
Below ₹12,75,000 of salary the question is moot: the new regime charges nothing, and the best the old regime can do is match it. Above that, here is how much you need to deduct before the old regime catches up.
| Gross salary | Tax — new regime | Deductions needed to break even |
|---|---|---|
| ₹15,00,000 | ₹97,500 | ₹5,43,748 |
| ₹18,00,000 | ₹1,50,800 | ₹6,41,666 |
| ₹20,00,000 | ₹1,92,400 | ₹7,08,332 |
| ₹25,00,000 | ₹3,19,800 | ₹7,99,999 |
| ₹30,00,000 | ₹4,75,800 | ₹7,99,999 |
| ₹40,00,000 | ₹7,87,800 | ₹7,99,999 |
| ₹50,00,000 | ₹10,99,800 | ₹7,99,999 |
Read it as a threshold. At ₹15,00,000 you need about ₹5,43,748 in deductions before the old regime is even level — anything less and the new regime is simply cheaper. Deductions here means everything beyond the old regime's own standard deduction: 80C, 80D, 80CCD(1B), HRA exemption, home-loan interest, the lot.
A reality check on those thresholds. Maxed 80C (₹1,50,000) plus NPS (₹50,000) plus family health cover (₹50,000) comes to ₹2,50,000 — less than half of what the ₹15 lakh row needs. Adding HRA gets you closer but rarely all the way, because the exemption is capped by the HRA you actually receive. In practice it takes a running home loan to clear these numbers, which is why the new regime is the default.
The ₹12 lakh cliff that isn't
A common worry: if tax is nil up to ₹12,00,000, does earning one rupee more trigger the full slab bill? No — §87A carries marginal relief, which caps tax just past the ceiling at the amount by which you crossed it.
| Taxable income | Tax payable | Effective rate |
|---|---|---|
| ₹12,00,000 | ₹0 | 0.0% |
| ₹12,10,000 | ₹10,400 | 0.9% |
| ₹12,50,000 | ₹52,000 | 4.2% |
| ₹12,75,000 | ₹74,100 | 5.8% |
| ₹13,00,000 | ₹78,000 | 6.0% |
Tax rises gradually from zero rather than jumping. A raise never leaves you worse off — and any calculator that shows it doing so has skipped marginal relief. (The figures above include the 4% cess, which is charged on the relieved amount, so the first row past the ceiling is marginally above the excess itself.)
So which should you pick?
- Salary under ₹12,75,000 — new regime. Nil tax, nothing to prove, no rent receipts to collect.
- Renting, even in a metro — probably still the new regime, which surprises people. HRA exemption is capped at the HRA you actually receive, and on a conventional 40%-basic structure that is only about 20% of CTC. Worked through on a ₹18 lakh package with ₹40,000 monthly rent, the old regime still loses — see the CTC breakdown for that calculation.
- Paying a home loan — this is the case that genuinely flips it. ₹2 lakh of §24(b) interest, plus principal inside 80C, plus HRA if you rent elsewhere, is what gets you past the thresholds in the table above.
- Everyone else — the new regime, and it is not close.
Rather than estimate, put your own package in: the CTC salary calculator computes both regimes side by side from your actual basic split, rent, state and 80C/80D figures, and tells you which one leaves more in your account each month. If the CTC-versus-take-home gap is what brought you here, the companion guide walks through where the rest of your package goes.