Earn ₹18 lakh, ₹20 lakh or ₹25 lakh a year? Choosing between India’s old and new tax regimes could change your take-home pay by thousands of rupees. Yet many salaried employees make the decision based on their investments, home loan or a colleague’s advice—without calculating which regime actually leaves them with more money.
Here’s a simple way to work out your break-even point for FY 2026–27.
1. First, Understand What Changed
The new tax regime offers lower tax rates across broader income slabs, but most traditional deductions and exemptions are unavailable. The old regime has higher rates but allows eligible claims such as Section 80C investments, certain health insurance premiums, HRA exemptions and qualifying home-loan interest.
For FY 2026–27, the new-regime slabs remain:
- Up to ₹4 lakh: Nil
- ₹4–8 lakh: 5%
- ₹8–12 lakh: 10%
- ₹12–16 lakh: 15%
- ₹16–20 lakh: 20%
- ₹20–24 lakh: 25%
- Above ₹24 lakh: 30%
The standard deduction is ₹75,000 under the new regime and ₹50,000 under the old regime for eligible salaried employees. Health and education cess of 4% applies to the calculated income tax. Check the official tax guidance.
2. The Break-Even Calculation Most Employees Miss
The key question isn't how much you invest. It's how much eligible deductions and exemptions actually reduce your tax under the old regime.
Let's consider an employee earning ₹20 lakh annually, assuming the entire amount is salary income and there are no other income sources or special-rate items.
Under the new regime:
- Gross salary: ₹20,00,000
- Standard deduction: ₹75,000
- Taxable income: ₹19,25,000
- Income tax before cess: ₹1,85,000
- Tax including 4% cess: ₹1,92,400
Under the old regime, with no additional deductions:
- Gross salary: ₹20,00,000
- Standard deduction: ₹50,000
- Taxable income: ₹19,50,000
- Income tax before cess: ₹3,97,500
- Tax including 4% cess: ₹4,13,400
In this example, the new regime saves ₹2,21,000 in tax.
So how much would the employee need to claim under the old regime to break even? Under these assumptions, total eligible deductions and exemptions beyond the ₹50,000 standard deduction would need to be approximately ₹6.84 lakh.
That is a substantial amount—and it must consist of genuine, eligible deductions and exemptions, not simply money spent on investments or insurance.
3. Try This Quick Break-Even Calculator
Use this simplified calculator to estimate the old-regime deductions needed to match the new regime for a salaried employee. It assumes income above ₹15 lakh, no special-rate income, no surcharge, and no other income or deductions beyond those entered.
{@body const [salary,setSalary] = DIL.useState(20)}
{@body const [oldBenefits,setOldBenefits] = DIL.useState(4)}
{@body const newTaxable = Math.max(0,salary100000-75000)}
{@body const oldTaxable = Math.max(0,salary100000-50000-oldBenefits*100000)}
{@body const calcNew = (x) => Math.max(0,Math.min(x,800000)-400000)*0.05 + Math.max(0,Math.min(x,1200000)-800000)*0.10 + Math.max(0,Math.min(x,1600000)-1200000)*0.15 + Math.max(0,Math.min(x,2000000)-1600000)*0.20 + Math.max(0,Math.min(x,2400000)-2000000)*0.25 + Math.max(0,x-2400000)*0.30}
{@body const calcOld = (x) => Math.max(0,Math.min(x,500000)-250000)*0.05 + Math.max(0,Math.min(x,1000000)-500000)*0.20 + Math.max(0,x-1000000)*0.30}
{@body const newTax = calcNew(newTaxable)*1.04}
{@body const oldTax = calcOld(oldTaxable)1.04}
{@body const breakEvenBenefits = Math.max(0,salary100000-50000-Math.max(0,(newTax/1.04+187500)/0.30))}
<box border radius="xl" padding={4} gap={4}>
<box gap={1}>
<text weight="medium">Annual gross salary (₹ lakh)</text>
<title size="lg" color="default">₹{salary.toFixed(1)} lakh</title>
<slider min={15} max={40} step={0.5} value={salary} onChange={setSalary} marks={[{"value":15,"label":"₹15L"},{"value":25,"label":"₹25L"},{"value":40,"label":"₹40L"}]} />
</box>
<box gap={1}>
<text weight="medium">Old-regime deductions and exemptions, excluding standard deduction (₹ lakh)</text>
<title size="lg" color="default">₹{oldBenefits.toFixed(1)} lakh</title>
<slider min={0} max={12} step={0.25} value={oldBenefits} onChange={setOldBenefits} marks={[{"value":0,"label":"₹0L"},{"value":6,"label":"₹6L"},{"value":12,"label":"₹12L"}]} />
</box>
<divider color="subtle" />
<grid columns={2} gap={3}>
<grid-item>
<box background="surface-secondary" radius="lg" padding={3} gap={1}>
<text color="secondary" size="sm">New-regime tax</text>
<title size="xl" color="default">₹{Math.round(newTax).toLocaleString("en-IN")}</title>
</box>
</grid-item>
<grid-item>
<box background="surface-secondary" radius="lg" padding={3} gap={1}>
<text color="secondary" size="sm">Old-regime tax</text>
<title size="xl" color="default">₹{Math.round(oldTax).toLocaleString("en-IN")}</title>
</box>
</grid-item>
</grid>
{#if Math.abs(newTax-oldTax)<100}
Result: The two regimes are approximately at break-even.
{ if newTax<oldTax}
<text color="success" weight="medium">The new regime saves about ₹{Math.round(oldTax-newTax).toLocaleString("en-IN")} a year.</text>
{}
<text color="success" weight="medium">The old regime saves about ₹{Math.round(newTax-oldTax).toLocaleString("en-IN")} a year.</text>
{/if}
<text color="secondary" size="xs">Illustrative estimate only. Uses the FY 2026–27 slab rates described above, basic slab calculations and 4% cess. It does not model every exemption, rebate, surcharge, special-rate income or individual eligibility rule. For precise results, use the official Income Tax Department calculator.</text>
</box>
4. Five Mistakes That Can Give You the Wrong Answer
Mistake 1: Counting investments instead of deductions. Your PPF, EPF, eligible insurance premiums and other Section 80C claims share a combined limit. Investing more does not automatically create more tax relief.
Mistake 2: Ignoring HRA. If you pay rent and qualify for an HRA exemption, the old regime may become more competitive. The exemption depends on your salary structure, rent and location.
Mistake 3: Assuming a home loan guarantees savings. Interest and principal deductions have specific conditions and limits. Calculate the eligible amounts rather than using the total EMI.
Mistake 4: Forgetting employer NPS contributions. Eligible employer contributions may qualify for deductions under Section 80CCD(2), including under the new regime, subject to applicable limits.
Mistake 5: Comparing CTC with taxable income. Employer PF, bonuses, perquisites and other salary components can affect the calculation. Use your actual taxable salary figures, not just the headline CTC.
5. The Final Rule: Compare Tax, Not Lifestyle
For many salaried employees earning above ₹15 lakh, the new regime is a strong starting point because of its lower slab rates and higher standard deduction. The old regime can still win when substantial eligible exemptions and deductions bring taxable income down enough.
Run both calculations using the same financial year and actual income details. Then choose the regime that leaves you with the lower tax bill—not the one that encourages you to spend more just to claim a deduction.
Official resource: Income Tax Department – Tax rates and computation
This article is for general information. Individual tax outcomes depend on eligibility, income composition and the applicable law. Verify your figures using the official tax calculator or a qualified tax professional before filing.
Meta description: Earning above ₹15 lakh? Compare India's old and new tax regimes for FY 2026–27 with a simple break-even calculator and discover how much eligible deductions you need.
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