Old or new tax regime? One number decides it, and most people never work it out.

By the author of From Rupees to Riches: Master the Indian Wealth Game. Published 29 October 2026.

Every year the same question lands in every office WhatsApp group. Old regime or new?

The answers usually come with a story attached. "Old regime is better if you have a home loan." "New regime is better for young people." Both are sometimes true. Neither tells you what to do.

There is a better way. For any salary, there is exactly one level of deductions at which the two regimes cost the same. Claim more than that and the old regime wins. Claim less and the new regime wins. Call it your break-even deduction. Once you know it, the question answers itself.

What changed for FY 2026-27

Less than you might think. Budget 2026 kept the slabs from Budget 2025 in both regimes. The new regime still makes taxable income up to ₹12 lakh tax-free through the rebate, so a salary of ₹12.75 lakh pays nothing after the ₹75,000 standard deduction.

The bigger change is structural. From 1 April 2026 the Income Tax Act 2025 replaced the Act of 1961. Section numbers have changed and the "assessment year" is now the "tax year." The deductions themselves carry over, which is why most people still call them 80C and 80D.

The break-even table

These figures are for a salaried person below 60, with no employer NPS contribution. "Deductions needed" means everything beyond the standard deduction: HRA exemption, 80C, 80D, home loan interest, 80CCD(1B), and the rest.

Figures include 4% cess. Run your own exact numbers in the old vs new regime calculator.

What the table is telling you

Below ₹12.75 lakh, the new regime is simply better. It costs nothing. No combination of deductions makes the old regime cheaper than zero.

From ₹15 lakh up, you need big deductions. The typical salaried person claims ₹1.5 lakh under 80C and maybe ₹25,000 under 80D. That is ₹1.75 lakh, nowhere near the ₹5.4 lakh or more needed. On those deductions alone, the new regime wins at every income level in the table.

The old regime wins when you stack the large items. A big HRA exemption from living in a metro on rent, plus full 80C and 80D, can get you there. So can ₹2 lakh of home loan interest on top of 80C, 80D and NPS. If you have a large HRA exemption and a home loan on a different property, the old regime is worth a serious look.

At higher incomes the break-even flattens. Once taxable income in both regimes is past ₹24 lakh, both tax every additional rupee at 30%, so the gap between them stops growing. From a salary of about ₹25 lakh up to ₹50 lakh, the break-even sits at exactly ₹8 lakh.

How to find your own number

Open your payslip and Form 16 from last year. Add up your actual HRA exemption, 80C investments, health insurance premiums, home loan interest and NPS contributions. Then put your salary into the calculator and look at the result.

If your deductions are close to the break-even, remember the hidden cost of the old regime: you have to keep investing in tax-saving products and keep the paperwork for it. Some of those products, like a tax-saving FD or traditional insurance, may not be what you would have chosen otherwise. A small tax saving is not always worth it.

Salaried people without business income can choose either regime each year when they file. So the decision is not permanent. But it is worth getting right, because at a ₹20 lakh salary with typical deductions of ₹1.75 lakh, picking the old regime by habit costs about ₹1.66 lakh more than the new one.

For education only. Not investment, tax or legal advice. See our disclaimer.