Bottom line first: for FY 2025-26 (AY 2026-27), if your gross salary is up to about Rs. 12.75 lakh, the new regime wins for almost everyone — the enhanced Section 87A rebate makes income up to Rs. 12 lakh completely tax-free, and the Rs. 75,000 standard deduction stretches that to Rs. 12.75 lakh for the salaried. Above that, the answer stops being “it depends” and becomes a number: the old regime beats the new one only if your deductions (over and above the standard deduction) cross a specific break-even for your salary band.
This article gives you that break-even, band by band, so you can decide in thirty seconds instead of guessing. Run your own figures alongside it using our Income Tax Calculator or the downloadable income tax comparison Excel.
The two regimes for FY 2025-26 at a glance
The new regime is now the default. It offers wider slabs and a bigger standard deduction but almost no other deductions. The old regime has narrower slabs but lets you claim 80C, 80D, HRA, home loan interest, 80CCD(1B) and the rest.
| Feature | New regime (FY 2025-26) | Old regime (FY 2025-26) |
|---|---|---|
| Slabs | Nil up to 4L; 5% (4-8L); 10% (8-12L); 15% (12-16L); 20% (16-20L); 25% (20-24L); 30% above 24L | Nil up to 2.5L; 5% (2.5-5L); 20% (5-10L); 30% above 10L |
| Section 87A rebate | Full rebate up to Rs. 12,00,000 taxable income (up to Rs. 60,000) | Rebate up to Rs. 5,00,000 taxable income (Rs. 12,500) |
| Standard deduction (salaried) | Rs. 75,000 | Rs. 50,000 |
| 80C / 80D / HRA / home loan interest / 80CCD(1B) | Not available | Available |
| 80CCD(2) employer NPS | Available | Available |
All figures below include the 4% health and education cess and assume a salaried taxpayer. “Deductions” means everything other than the standard deduction — the difference in standard deduction between the two regimes is already built into the numbers.
The break-even table by salary band
Here is the whole decision in one table. Find your gross salary, read across to the break-even, and compare it with the deductions you can realistically claim.
| Gross salary | Tax under new regime | Break-even deductions (excl. standard deduction) | Verdict |
|---|---|---|---|
| Up to Rs. 12.75 lakh | Nil | ~Rs. 7.25 lakh (practically unreachable) | New regime wins for almost everyone |
| Rs. 15 lakh | Rs. 97,500 | ~Rs. 5.40 lakh | Old wins only if deductions exceed ~5.40 lakh |
| Rs. 16 lakh | Rs. 1,13,100 | ~Rs. 5.70 lakh | Old wins only if deductions exceed ~5.70 lakh |
| Rs. 18 lakh | Rs. 1,50,800 | ~Rs. 6.40 lakh | Old wins only if deductions exceed ~6.40 lakh |
| Rs. 20 lakh | Rs. 1,92,400 | ~Rs. 7.10 lakh | Old wins only if deductions exceed ~7.10 lakh |
| Rs. 24 lakh | Rs. 2,92,500 | ~Rs. 7.90 lakh | Old wins only if deductions exceed ~7.90 lakh |
| Rs. 30 lakh and above | Rs. 4,75,800+ | ~Rs. 8.00 lakh (near the ceiling) | Old wins only with very high, HRA-heavy deductions |
The pattern is clear: the deduction bar you must clear rises with income — roughly Rs. 5.4 lakh at Rs. 15 lakh salary, climbing to about Rs. 8 lakh once you are past Rs. 24 lakh. That is because at higher incomes each deduction saves tax at 30%, so it takes more of them to offset the new regime’s structurally lower rates and rebate.
What Rs. 5-8 lakh of deductions actually looks like
Before assuming you can hit the break-even, add up what you genuinely claim:
- Section 80C — Rs. 1,50,000 (EPF, PPF, ELSS, life insurance, principal on home loan, children’s tuition).
- Section 80CCD(1B) — Rs. 50,000 (additional NPS).
- Section 80D — Rs. 25,000 to Rs. 75,000 (health insurance for self and parents).
- Home loan interest (Section 24b) — up to Rs. 2,00,000 for a self-occupied house.
- HRA — the wild card. This is uncapped and depends on your rent and city; it is what pushes high earners past the break-even.
Without HRA or home loan interest, most salaried people top out around Rs. 2.25-3 lakh (80C + 80CCD(1B) + 80D). That comfortably clears the bar below Rs. 12.75 lakh — where the new regime already wins anyway — but falls well short of the Rs. 5.4-8 lakh needed at higher salaries. This is why, in practice, the old regime now favours a specific profile: high earners paying substantial rent, or those still servicing a big home loan.
Worked example: Rs. 16 lakh salary
Rahul earns a gross salary of Rs. 16,00,000. His new-regime tax is fixed at Rs. 1,13,100. Whether the old regime beats that depends entirely on his deductions:
| Scenario | Deductions (excl. std. deduction) | Old regime tax | New regime tax | Better regime |
|---|---|---|---|---|
| No rent, standard investments | Rs. 4,25,000 (80C + 80CCD1B + 80D + home loan interest) | Rs. 1,56,000 | Rs. 1,13,100 | New (saves Rs. 42,900) |
| Break-even point | Rs. 5,68,800 | Rs. 1,13,090 | Rs. 1,13,100 | Line-ball |
| Pays high metro rent (large HRA) | Rs. 7,00,000 | Rs. 85,800 | Rs. 1,13,100 | Old (saves Rs. 27,300) |
Rahul with typical investments should stay in the new regime. Only once his HRA and other claims push total deductions past roughly Rs. 5.70 lakh does the old regime start to pay — and it takes a genuinely large rent to get there.
The one deduction that survives in the new regime
If you are in the new regime, do not overlook Section 80CCD(2) — employer contribution to your NPS, deductible up to 14% of basic salary. It is the rare deduction available in both regimes. Routing part of your CTC through employer NPS lowers your taxable income without changing your regime decision, and can even bring a salary just above Rs. 12 lakh back under the rebate line. For most salaried taxpayers this is the single most effective lever left in the new regime.
Key takeaways
- Up to about Rs. 12.75 lakh gross salary, the new regime is effectively unbeatable — income to Rs. 12 lakh is tax-free after the 87A rebate, plus a Rs. 75,000 standard deduction.
- Above that, the old regime wins only if your deductions clear a break-even that rises with salary: ~Rs. 5.4 lakh at Rs. 15 lakh, ~Rs. 5.7 lakh at Rs. 16 lakh, ~Rs. 7.1 lakh at Rs. 20 lakh, ~Rs. 8 lakh at Rs. 24 lakh+.
- HRA and home loan interest are what get high earners over the break-even; investment deductions alone rarely do.
- Section 80CCD(2) employer NPS is deductible in both regimes — use it regardless of your choice.
- Salaried employees can switch regimes every year; business income taxpayers cannot switch back freely, so choose with more care.
Frequently Asked Questions
Is Rs. 12 lakh income really completely tax-free in FY 2025-26?
Yes, in the new regime. A taxable income up to Rs. 12,00,000 attracts nil tax after the Section 87A rebate. For salaried taxpayers the Rs. 75,000 standard deduction lifts this to a gross salary of Rs. 12,75,000. The rebate does not apply to special-rate incomes like capital gains.
What is “marginal relief” just above Rs. 12 lakh?
If your taxable income slightly exceeds Rs. 12 lakh, marginal relief ensures your extra tax cannot be more than the income above Rs. 12 lakh. So at, say, Rs. 12.10 lakh you pay only about Rs. 10,000, not the full slab tax — the rebate tapers rather than dropping off a cliff.
Can I switch between the old and new regime every year?
If you have only salary or other non-business income, yes — you choose afresh each year while filing your ITR. If you have business or professional income, moving out of the new regime and back is restricted, so plan before you switch.
Which deductions still work in the new regime?
Very few: the Rs. 75,000 standard deduction, employer NPS under Section 80CCD(2), and a handful of specific items. The staples — 80C, 80D, HRA, 80CCD(1B) and home loan interest on a self-occupied house — are available only in the old regime.
I pay high rent in a metro. Should I stay in the old regime?
Possibly — HRA is the main deduction that pushes high earners past the break-even. Add your HRA exemption to your other deductions; if the total clears the break-even for your salary band in the table above, the old regime saves tax. Confirm the exact figure with our ask a CA on income tax and TDS page or the comparison Excel before you lock it in.
Related free tools: Income Tax Calculator · Income Tax Comparison Excel
Disclaimer: This article is for general information based on the income tax law in force for FY 2025-26 (AY 2026-27) and does not constitute professional advice. Tax outcomes depend on your specific facts; please verify your position before acting. For a personalised opinion, consult a Chartered Accountant.