Old vs New Tax Regime: 2026–27 Salary Break-Even Guide

Start with the same gross salary, compute the deductions permitted in each regime, and compare the final tax. A deduction break-even table is useful only when its salary, employer-NPS and income assumptions match yours.

Period covered: 1 April 2026 to 31 March 2027 (Tax Year 2026–27), under the Income-tax Act, 2025 as amended by Finance Act, 2026. Income earned before 1 April 2026 needs the applicable earlier-year law and filing procedure, even where a slab looks similar. Act commencement.

Salary break-even deductions for 2026–27

Assume a resident individual below 60, salary only, no employer NPS, no special-rate income or other adjustments, and no surcharge. New taxable income is gross salary minus ₹75,000. Old taxable income is gross salary minus ₹50,000 and the admissible old-regime reductions. The reductions in this table are in addition to the old standard deduction. They are illustrative totals, not automatic allowances.

Above a row's crossover, the old-regime tax is lower under these assumptions; below it, the new-regime tax is lower. At equality, both are equal before final rounding. Apply the same 4% cess, then the statutory income/tax rounding. A few rupees around an approximate crossover can produce a tie after rounding.

Reproduce the ₹15 lakh calculation

New taxable income is ₹14,25,000. Tax is ₹60,000 through ₹12 lakh plus 15% of ₹2,25,000: ₹93,750. For the old regime to equal ₹93,750, its taxable income must be ₹9,06,250: ₹12,500 plus 20% of ₹4,06,250. Therefore the required additional reduction is ₹15,00,000 − ₹50,000 − ₹9,06,250 = ₹5,43,750. Both taxes become ₹97,500 after 4% cess.

At ₹20 lakh gross, solving ₹1,12,500 + 30% × (old taxable income − ₹10 lakh) = ₹1,85,000 produces the approximate ₹7,08,333 reduction. Rebuild the calculation if employer NPS or another new-regime deduction changes the new taxable income; subtracting its benefit only on one side distorts the crossover.

Which reductions belong in the comparison?

A home-loan principal payment and interest are different items. Do not count EPF or another qualifying payment again after it has already used the ₹1.5 lakh savings ceiling. HRA and house-property deductions each need their own factual conditions. Other income, age, residence, special rates or a business-income election history can make this salary table inapplicable.

Separate employer NPS from your own contribution

Employer contribution is included in salary income, then an eligible section 124 deduction is claimed. For an employer other than Central/State Government, the ordinary limit is 10% of statutory salary under the old regime and 14% under the new regime. Central/State Government employers have a 14% rule. The actual contribution can be lower than the limit: a 10% contribution does not become a 14% deduction just because the new regime allows up to 14%.

For section 124, salary includes DA if the employment terms provide for it and excludes other allowances and perquisites. Total CTC is not that salary base. An individual's eligible additional own pension contribution under section 124(3), up to ₹50,000, is different from the employer deduction and is not among section 202's permitted Chapter VIII exceptions. Do not claim the same contribution twice.

Also test the separate section 17 perquisite for aggregate employer contributions above ₹7.5 lakh to the listed retirement funds and attributable annual accretion. Contributions affect access to cash and retirement benefits; a tax deduction alone does not establish that a package is preferable.

HRA uses a formula, not a city percentage alone

Rule 279 uses the least of actual HRA, rent above 10% of statutory salary, and the applicable 50%/40% salary amount for the relevant period. For 2026–27, the 50% locations listed are Mumbai, Kolkata, Delhi, Chennai, Hyderabad, Pune, Ahmedabad and Bengaluru; other places use 40%. Salary includes DA where the terms provide and excludes other allowances/perquisites. A city change, salary change or part-year tenancy needs a period-based working. See the complete HRA and NPS examples.

Compare your computed taxable incomes

Enter the taxable ordinary income separately computed for each regime. This tool is for a resident individual below 60 within its stated scope. It does not determine the deduction total, classification or tax residence.

Payroll evidence and the return are different steps

Tell payroll your intended regime and provide the evidence needed for its tax estimate. Under Rule 205, Form 124 supplies particulars/evidence for specified employee claims. It is not the return-based section 202 election. The rule does not create a universal statutory “submit on the first day of the year” election deadline. Follow your employer's practical timetable without confusing it with the Act's filing rules.

For HRA, keep the rent agreement, payments, receipts and the landlord particulars required by Rule 205/Form 124, including PAN where aggregate annual rent exceeds ₹1 lakh and the relationship, if any. Non-submission to payroll does not by itself decide whether the underlying claim meets the law in the final return; retain the evidence and reconcile any difference.

Rule 136 records exercise or withdrawal of the section 202(4) option in the return under section 263(1). Without business/professional income, section 202(4)(b) provides the annual return route. With such income, the due-date requirement, continuing option and one later withdrawal restriction in section 202(4)(a) matter. Employer withholding does not conclusively establish the final return election. Check the applicable statutory calendar and any official extension rather than assuming one filing date covers every taxpayer.

Frequently asked questions