The question isn't "which regime is better" in general - it's whether your deductions are big enough to beat the new regime's lower rates.
The break-even idea
For each salary there's a level of deductions at which both regimes give the same tax. Below it, the new regime wins. Approximate break-evens for tax year 2026-27 (total old-regime deductions including the ₹50,000 standard deduction):
| Salary | New regime tax | Old regime needs about |
|---|---|---|
| ₹12.75 lakh | ₹0 | At best a tie (about ₹7.75 lakh of deductions) |
| ₹15 lakh | ₹97,500 | ₹5.9 lakh of deductions |
| ₹20 lakh | ₹1,92,400 | about ₹7.6 lakh |
| ₹25 lakh | ₹3,19,800 | about ₹8.5 lakh |
(Use the calculator for your exact figure.)
What counts as deductions in the old regime
Standard deduction ₹50,000 · 80C ₹1.5 lakh · NPS 80CCD(1B) ₹50,000 · employer NPS up to 10% of basic · 80D up to ₹25,000 (₹50,000 if senior) + parents ₹25,000/₹50,000 · HRA exemption · home loan interest up to ₹2 lakh · education loan interest · professional tax.
Worked example 1 - renting in a metro
Salary ₹20 lakh, basic ₹8 lakh, HRA ₹4 lakh, rent ₹4.8 lakh a year in Mumbai, 80C ₹1.5 lakh, NPS ₹50,000, 80D ₹25,000.
- HRA exemption = least of ₹4 lakh, ₹4.8 lakh − ₹80,000 = ₹4 lakh, 50% of basic = ₹4 lakh → ₹4 lakh.
- Total deductions = ₹50,000 + ₹4 lakh + ₹1.5 lakh + ₹50,000 + ₹25,000 + ₹2,500 professional tax = ₹6.78 lakh.
- Old regime tax ₹2,17,620 vs new regime ₹1,92,400 → even with big metro rent, the new regime still wins by ₹25,220.
- Add a home loan on a flat in your home town (interest ₹2 lakh, self-occupied by family) and deductions reach ₹8.78 lakh: old regime ₹1,55,220 - now the old regime wins by ₹37,180. Close calls like this are worth calculating exactly.
Worked example 2 - no rent, no loan
Salary ₹18 lakh, EPF ₹86,400, health insurance ₹15,000. Deductions about ₹1.5 lakh → new regime wins by a wide margin.
Switching rules
- Salaried, no business income: choose either regime every year - with your employer for TDS, and again when filing.
- With business income: you can move from new to old only once.
Rule of thumb
If you don't pay large rent in a city and don't have a home loan, the new regime almost always wins. Don't buy products just to reach the break-even - you'd spend ₹1 to save 20-30 paise.