A clinic in Chennai has a receptionist, a doctor and a manager, and every April all three ask the accounts person the same thing: which regime should I pick? The honest answer depends on each person's rent, investments and loans. It can be worked out in five minutes, and it usually comes out the same way.
Old vs new tax regime for salaried employees: the short answer
For 2026-27, the new regime charges no tax at all on salary up to ₹12,75,000: the ₹60,000 rebate covers everything up to ₹12,00,000 of taxable income, and the standard deduction is ₹75,000. Above that, its slabs are lower than the old regime's. The old regime has a smaller standard deduction of ₹50,000 but lets you take off HRA, 80C, health insurance, home-loan interest and NPS. So the question is always the same: do your deductions add up to more than the break-even figure for your salary?
New regime slabs for FY 2026-27
| Taxable income | New regime rate |
|---|
| Up to ₹4,00,000 | 0% |
|---|
| ₹4,00,001 to ₹8,00,000 | 5% |
|---|
| ₹8,00,001 to ₹12,00,000 | 10% |
|---|
| ₹12,00,001 to ₹16,00,000 | 15% |
|---|
| ₹16,00,001 to ₹20,00,000 | 20% |
|---|
| ₹20,00,001 to ₹24,00,000 | 25% |
|---|
| Above ₹24,00,000 | 30% |
|---|
And the old regime, for anyone under 60:
| Taxable income | Old regime rate |
|---|
| Up to ₹2,50,000 | 0% |
|---|
| ₹2,50,001 to ₹5,00,000 | 5% |
|---|
| ₹5,00,001 to ₹10,00,000 | 20% |
|---|
| Above ₹10,00,000 | 30% |
|---|
Both add 4% cess, and surcharge above ₹50,00,000.
Which tax regime is better in 2026-27? Three salaries
All three worked out by the engine behind our tax regime calculator, with ₹2,500 of professional tax:
| Employee | New regime tax | Old regime tax | Break-even |
|---|
| Receptionist (₹4,80,000) | ₹0 | ₹0 | None: new is nil |
|---|
| Doctor (₹15,00,000) | ₹97,500 | ₹1,31,820 | ₹5,41,300 |
|---|
| Clinic manager (₹24,00,000) | ₹2,92,500 | ₹2,95,620 | ₹7,85,000 |
|---|
- Receptionist: ₹21,600 of PF under 80C. For the receptionist, the two regimes cost the same.
- Doctor: rent of ₹25,000 a month, full 80C, family health cover. For the doctor, the new regime is ₹34,320 a year cheaper.
- Clinic manager: rent, full 80C, health cover for family and senior parents, a home loan and NPS. For the clinic manager, the new regime is ₹3,120 a year cheaper.
₹4,00,000the doctor’s deductions
₹5,41,300what the old regime needs
Tax regime break-even deductions, explained
The break-even is the least the old regime needs taken off, HRA and every deduction together, before it costs no more than the new one. It rises with salary. The doctor's deductions come to ₹4,00,000, against a break-even of ₹5,41,300. The manager has ₹7,75,000, against ₹7,85,000.
What counts towards it:
- HRA exemption, if you pay rent and get HRA: the least of the HRA itself, rent less 10% of Basic, and half or two fifths of Basic depending on the city.
- 80C, up to ₹1,50,000: employee PF, PPF, ELSS, life insurance, children's tuition fees.
- 80D: health insurance for your family and, separately, for your parents.
- Home-loan interest on the house you live in, up to ₹2,00,000.
- Your own NPS, up to ₹50,000 beyond 80C.
Somebody who lives in their own house with no loan rarely gets anywhere near the break-even. Somebody paying high rent in a big city, with a home loan elsewhere, sometimes does. Look at the manager: nearly every deduction there is to claim, and the old regime still loses by ₹3,120.
Standard deduction in the new regime, and the ₹12 lakh edge
Every salaried person gets the standard deduction without claiming anything: ₹75,000 under the new regime and ₹50,000 under the old. It's the reason the zero-tax line sits at ₹12,75,000 of salary and not at ₹12,00,000.
Just past that line, the rebate doesn't vanish all at once. Marginal relief caps the tax at the income above ₹12,00,000, so a salary of ₹12,85,000 pays ₹10,400 in tax, where the slabs alone would charge far more. Somebody offered a raise that takes them just over the line should still take it.
Mistakes that cost employees money
- Choosing the old regime in April and never sending proofs. Payroll then has to drop the unproven deductions near the year end, and the last few months' TDS jumps to catch up.
- Counting employee PF twice. It's already inside the ₹1,50,000 of 80C. It doesn't add on top.
- Forgetting the rent receipts. HRA is only exempt against rent actually paid, and above a certain rent the landlord's PAN is needed too.
- Assuming last year's answer still holds. A raise, a new loan or moving back into your own house can flip it.
Can salaried employees switch regime every year?
Yes. Somebody with no business or professional income can choose afresh every year in their return, as long as it's filed by the due date: under the Income-tax Act 2025 the choice is made in the return itself (section 202 and rule 136). A late return stays on the new regime. The new regime applies unless they pick the old one. Somebody with business income can switch back to the new regime only once. What they tell their employer in April only decides how much TDS comes out each month. If they choose differently when filing, the difference comes back as a refund or goes as extra tax.
For the employer, the job is to ask every employee in April, deduct on that basis, and set a cut-off after which the choice is fixed for the year's TDS. TDS on salary: what an employer must do covers the rest, and CTC to in-hand salary shows what either regime leaves in hand.
