Is the new tax regime better for you? Break-even

For most salaried people the new regime is cheaper, because its rebate makes tax nil up to ₹12 lakh of taxable income and its slabs are lower. The old regime wins only if your deductions, beyond the standard deduction, are above a break-even amount. TaxCare's engine puts that amount between about ₹4.5 lakh and ₹8 lakh for salaries of ₹10 lakh to ₹25 lakh.

The figures below were computed with TaxCare's own tax engine (compareRegimes) on the signed-off rules for the tax year 2025-26. For the tax year 2026-27 the same figures are carried forward but are provisional and not yet signed off against the Income-tax Act, 2025 or the Finance Act 2026.

What break-even means

Both regimes give a standard deduction (₹50,000 in the old regime and ₹75,000 in the new). Beyond that, the old regime lets you deduct 80C, 80D, home loan interest and more, while the new regime allows almost none. Break-even is the total of those extra old-regime deductions at which the two taxes are equal. Above it, the old regime is cheaper. Below it, the new regime is.

Break-even by salary

Assumptions: salary only, below 60, no other income, tax year 2025-26. Tax includes 4% cess. "Extra deductions" are those beyond the standard deduction.

Notice the pattern. Up to ₹12 lakh the new regime's tax is nil because of the rebate, so the old regime has to bring tax all the way down to nil as well. That needs deductions that take taxable income to ₹5,00,000. Above ₹12 lakh the break-even settles at roughly ₹5.4 to ₹8 lakh.

Can you actually reach those deductions?

The usual old-regime deductions have caps:

A strong package of 80C ₹1,50,000 + 80D ₹25,000 + NPS ₹50,000 + home loan interest ₹2,00,000 is ₹4,25,000. Compare that with the break-even column. It is above the break-even at a ₹9 lakh salary, but below it at every other salary in the table. 80G donations, education loan interest (80E), HRA and 80D for parents can add more, so check your own numbers.

Tested with the full package

Same salaries, with ₹4,25,000 of extra deductions (80C ₹1,50,000, 80D ₹25,000, NPS ₹50,000, home loan interest ₹2,00,000):

Even with that package, the new regime wins at every salary above ₹9 lakh here. The old regime started to win only with larger deductions, such as a big HRA claim, education loan interest or donations.

What is not in the comparison

• Employer NPS (80CCD(2)). It is allowed in both regimes (up to 14% of salary in the new regime), so it does not change which wins. See Section 80CCD(2).
• HRA and other salary exemptions. They can be large for people who pay rent. The comparison above does not include them, so if you claim a big HRA exemption, run both regimes with your exact numbers.
• Capital gains and special-rate income. The new regime rebate does not cover tax on special-rate income such as short-term gains on shares.

A quick rule of thumb

1. Add up your old-regime deductions beyond the standard deduction.
2. Compare the total with the break-even for your salary above.
3. If you are below it, the new regime is cheaper. If you are well above it, run both regimes with your exact numbers.

Remember the regime is chosen in each return, and a belated return cannot use the old regime in TaxCare's rules.

These rules are not yet signed off against the Income-tax Act, 2025, so check them before relying on them for the tax year 2026-27.

Read the full comparison in old vs new tax regime and the old-regime rates in income tax slabs under the old regime.

How TaxCare helps

TaxCare runs the same tax engine used for the table above on your own income and deductions, shows the old and new regimes side by side, and tells you how much extra deduction would change the answer. Try it on the income tax calculator. When you file, nothing is submitted until you approve. See pricing.

This guide gives general information and is not professional tax advice.