New vs Old Tax Regime India 2026: Which Saves More Tax on Your Salary?

After Budget 2025, the new tax regime has these slabs: 0% up to ₹4L, 5% from ₹4L–8L, 10% from ₹8L–12L, 15% from ₹12L–16L, 20% from ₹16L–20L, 25% from ₹20L–24L, 30% above ₹24L. Additionally: ₹75,000 standard deduction applies. Section 87A rebate gives zero tax for income up to ₹12L (after standard deduction). This means an employee with ₹12.75L gross salary pays zero income tax under the new regime. No other deductions (80C, HRA, home loan) are available.

The old regime becomes better when your total deductions exceed approximately ₹3.75 lakh. Key deductions only available in old regime: 80C (₹1.5L), 80CCD(1B) NPS (₹50K), HRA exemption, home loan interest 24(b) (₹2L), health insurance 80D (₹25K–75K), LTA. If you have a home loan (₹2L interest) + full 80C (₹1.5L) + NPS 80CCD(1B) (₹50K) + HRA (₹1L+), the old regime can save significantly more. Use Tax Calculator for your exact comparison.

Salaried employees without business income can switch between new and old regime every financial year. You declare your choice to your employer at the start of the year for TDS purposes. If you don't declare, employers default to new regime from FY 2024-25 onwards. You can also make a final choice when filing ITR — if you choose old regime at ITR stage after employer deducted TDS under new regime, you can claim refund. Individuals with business income can switch only once.

Yes — this is the only significant deduction available under the new tax regime. Section 80CCD(2) allows deduction for employer NPS contribution up to 14% of salary (Basic + DA). If your employer contributes ₹50,000 to your NPS, that amount is deducted from your taxable income even under the new regime. This is why salary restructuring to increase employer NPS contribution is beneficial under new regime. Ask HR to add NPS component to CTC.

Section 87A provides a tax rebate (not deduction) of up to ₹60,000 under the new regime for FY 2026-27. This effectively means zero tax for taxable income up to ₹12L (after ₹75K standard deduction). So salary up to ₹12.75L gross → ₹12L taxable after standard deduction → 87A rebate = zero tax. For ₹12.01L taxable income, the 87A rebate disappears and tax applies on full ₹12L at slab rates. This marginal cliff effect means income just above ₹12L can have a very high effective tax rate temporarily.

ELSS SIP continues to be an excellent investment even under new regime — you just lose the 80C deduction benefit. The investment still grows at 12–15% CAGR with 12.5% LTCG tax on gains above ₹1.25L/year. Many financial planners recommend: choose new regime for lower tax rates, but continue ELSS SIP for wealth creation (not for 80C). Under new regime, you save on taxes; ELSS still beats FD by 5–6% per year in post-tax returns over long term.

At ₹15L gross salary with standard deduction ₹75K = ₹14.25L taxable under new regime. New regime tax: ₹0 (up to 4L) + ₹20K (4–8L at 5%) + ₹40K (8–12L at 10%) + ₹33,750 (12–14.25L at 15%) = ₹93,750. Old regime tax at ₹15L − ₹75K std − ₹1.5L 80C − ₹50K NPS − ₹1L HRA = ₹11.25L taxable = approximately ₹1,31,250. New regime saves ₹37,500. However, if you also have home loan interest ₹2L + 80D ₹25K, old regime taxable = ₹9L → tax ₹77,500 → old regime saves ₹16,250. Use Tax Calculator.

Yes — ₹75,000 standard deduction (increased from ₹50,000 in Budget 2023, applicable from FY 2024-25) is available to all salaried employees and pensioners in BOTH new and old tax regimes. This means regardless of which regime you choose, your gross salary is first reduced by ₹75,000. For a ₹10L salary, taxable income starts at ₹9.25L in both regimes before applying other deductions (old regime) or direct slab rates (new regime).