Old vs New Tax Regime: Where Is the Breakeven in FY 2026-27?
Reviewed on June 28, 2026 • Author: Upaman Research Team • Reviewer: Tax Policy Review Desk
Since the new regime added a ₹75,000 standard deduction and a Section 87A rebate that makes income up to ₹12 lakh tax-free, it has become the default and the cheaper option for most salaried taxpayers in FY 2026-27. The old regime only wins if you can claim enough deductions to overcome the new regime’s lower rates. The practical question is therefore: how big do my deductions need to be?
The breakeven, by salary level
For each salary below, we computed the new-regime tax, then found the level of old-regime deductions that produces an equal tax bill. If your real, documentable deductions exceed the “deductions needed” figure, the old regime is cheaper; otherwise stay on the new regime.
| Gross salary | New-regime tax (incl. cess) | Deductions needed to match (old regime) |
|---|---|---|
| ₹14,00,000 | ₹81,900 | ≈ ₹5,68,750 |
| ₹16,00,000 | ₹1,13,100 | ≈ ₹6,18,750 |
| ₹20,00,000 | ₹1,92,400 | ≈ ₹7,58,333 |
| ₹25,00,000 | ₹3,19,800 | ≈ ₹8,50,000 |
The pattern is clear: the more you earn, the larger the deduction pile you need before the old regime is worth it. That is because the new regime’s rate advantage grows with income.
Can you realistically reach those numbers?
Add up what a typical salaried person can actually claim under the old regime:
| Deduction | Typical maximum |
|---|---|
| Standard deduction | ₹50,000 |
| Section 80C (EPF, ELSS, PPF, insurance, etc.) | ₹1,50,000 |
| Section 80D (health insurance) | ₹25,000 |
| Section 80CCD(1B) — NPS | ₹50,000 |
| Home-loan interest (Section 24b) | ₹2,00,000 |
| Subtotal (without HRA) | ₹4,75,000 |
Without HRA, most people top out around ₹4.75 lakh — below the breakeven at every salary in the table. The taxpayers for whom the old regime still wins almost always have two things together: a home loan (₹2 lakh interest) and meaningful HRA exemption from renting in a metro. If you have only one of those, the new regime usually wins.
Worked example: ₹16 lakh salary
Under the new regime, a ₹16 lakh salary has taxable income of ₹15.25 lakh and a tax of ₹1,13,100 including cess. To match that under the old regime you would need taxable income of about ₹9.81 lakh — meaning roughly ₹6.19 lakh of deductions. Even claiming the full ₹4.75 lakh above, you would still need about ₹1.44 lakh of HRA exemption on top just to break even. Anything less and the new regime is cheaper.
Compare the two side by side: ₹16 lakh under the new regime against the same salary under the old regime with the standard deductions claimed — then add your own HRA figure to see which side of the breakeven you land on.
Two cautions before you choose the old regime
- Only count deductions you will actually make and can prove. Choosing the old regime on the assumption that you will invest ₹1.5 lakh in 80C — and then not doing it — leaves you worse off.
- The new regime is automatic. It applies unless you actively opt for the old regime, and salaried taxpayers can switch each year.
Run your own comparison
Enter your real deductions in the Tax Regime Comparison tool or the Income Tax Calculator to see both regimes side by side. For the underlying slabs see the FY 2026-27 slabs guide, and for why ₹12 lakh is tax-free read tax on a ₹12 lakh salary.
Figures are rounded planning estimates and exclude surcharge and special-income cases. This is general information, not tax advice. Verify on the Income Tax Department portal.