New Tax Regime vs Old Tax Regime 2026 — Which Saves More at Every Salary Level
The new tax regime (introduced in Budget 2020, made the default in 2023) offers lower tax rates but no deductions. The old regime has higher rates but allows deductions under 80C, 80D, HRA, and home loan interest.
The right choice depends on your salary level and how many deductions you can claim.
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The First Principle: Which Regime is Better?
Answer: It depends on your deductions. If you claim more than ₹3-4 lakh in deductions annually, the old regime usually wins. If you claim less, the new regime is better.
| Salary (₹) | Old Regime (with max deductions) | New Regime | Winner |
|---|---|---|---|
| 7.5 Lakh | ₹23,400 | ₹0 | New Regime (saves ₹23,400) |
| 10 Lakh | ₹67,600 | ₹60,000 | New Regime (saves ₹7,600) |
| 12 Lakh | ₹1,00,360 | ₹1,08,000 | Old Regime (saves ₹7,640) |
| 15 Lakh | ₹1,64,880 | ₹1,80,000 | Old Regime (saves ₹15,120) |
| 20 Lakh | ₹2,93,280 | ₹3,48,000 | Old Regime (saves ₹54,720) |
| 25 Lakh | ₹4,56,480 | ₹5,34,000 | Old Regime (saves ₹77,520) |
| 50 Lakh | ₹11,76,540 | ₹13,34,000 | Old Regime (saves ₹1,57,460) |
When the Old Regime Wins
The old regime is better if you can claim all of these deductions:
- Section 80C (₹1.5L): EPF, PPF, ELSS, life insurance, tuition fees
- Section 80D (₹25K-50K): Health insurance premiums
- HRA (varies): If you live in a metro and pay rent
- Home loan interest (₹2L for self-occupied property)
- NPS 80CCD(1B) (₹50K additional)
Rule of thumb: If your total deductions exceed ₹3.5L, choose old regime. If less, choose new regime.
The Smart Friend’s Verdict
Most salaried employees earning below ₹12L should choose the new regime. Above ₹12L, do the math with your actual deductions. For most people with home loans and insurance, the old regime wins above ₹12-15L.
Next: CTC breakdown — understand how your salary structure affects your tax liability.