What it takes for the old regime to win at ₹15 lakh
Suppose Priya has ₹15,00,000 of ordinary salary in India during Tax Year 2026–27, is below age 60, is resident, has no other income and meets no special-rate tax rules. Under the default new regime she gets a ₹75,000 salary standard deduction, leaving ₹14,25,000 taxable. Applying the new slabs produces ₹93,750 basic tax and ₹3,750 cess, or ₹97,500 total. Under the old regime, the standard deduction is ₹50,000, but the higher ordinary slab rates mean she needs about ₹5,43,750 in other genuinely eligible exemptions and deductions just to tie that ₹97,500 bill.
The threshold is derived, not a one-size-fits-all slogan. A resident taxpayer with a lower salary may get a rebate; capital gains and other special-rate receipts change the result; an older taxpayer has different old-regime thresholds. First decide which tax year and kind of income you are calculating, then compare both full tax bills.
Use the correct 2026–27 Act and rates
The Income Tax Department’s transition FAQ says the Income-tax Act, 2025 applies to income from 1 April 2026 and calls the period Tax Year 2026–27. An AY 2026–27 return prepared in 2026 covers income from FY 2025–26 and continues under the 1961 Act. Those two labels look similar but are not the same filing period. Under the new Act, the default new regime is in Section 202, replacing the old Act’s Section 115BAC label.
The Finance Ministry’s FY 2026–27 rate memorandum carries the new regime’s ordinary bands: 0% to ₹4 lakh; 5% to ₹8 lakh; 10% to ₹12 lakh; 15% to ₹16 lakh; 20% to ₹20 lakh; 25% to ₹24 lakh; and 30% above that. The old bands for a non-senior person are 0% to ₹2.5 lakh, 5% to ₹5 lakh, 20% to ₹10 lakh and 30% above ₹10 lakh, as shown by the department’s old/new rate table. Budget documents and department explanations retain ₹75,000 and ₹50,000 salary standard deductions in the new and old regimes respectively.
The rate table is not the final liability by itself. An eligible resident individual with up to ₹12 lakh ordinary taxable income under the new regime can have the slab tax offset by a rebate up to ₹60,000. The Finance Ministry’s rebate FAQ explains marginal relief just above that threshold and says rebate does not offset special-rate income such as some capital gains or lottery winnings. “No tax up to ₹12.75 lakh salary” assumes only ordinary salary, the ₹75,000 standard deduction, qualifying residency and no other taxable items. It is not a blanket exemption on gross receipts.
Reproduce Priya’s two calculations
Under the default new regime, ₹15,00,000 − ₹75,000 = ₹14,25,000. Tax is 5% of ₹4,00,000 (₹20,000), 10% of the next ₹4,00,000 (₹40,000) and 15% of the remaining ₹2,25,000 (₹33,750). Basic tax is ₹93,750. The 4% health and education cess is ₹3,750, yielding ₹97,500. The ₹12 lakh rebate does not apply at ₹14.25 lakh taxable income.
Now assume the old regime and ₹3,75,000 of verified non-standard relief: ₹1,50,000 of eligible savings in one aggregate pool, ₹2,00,000 of qualifying self-occupied-home interest and ₹25,000 of eligible health-insurance premium. Including the ₹50,000 salary standard deduction, taxable income is ₹10,75,000. Old slab tax is ₹12,500 on the ₹2.5–5 lakh band, ₹1,00,000 on the ₹5–10 lakh band and ₹22,500 on the remaining ₹75,000, totaling ₹1,35,000. With 4% cess, that is ₹1,40,400—₹42,900 more than the new-regime bill. Each assumed claim still needs to satisfy its own legal conditions.
Priya’s ₹15 lakh ordinary salary: actual example totals
Suppose Priya additionally qualifies for ₹1,75,000 of HRA exemption and can document it. This assumes she rents her work residence while the eligible home loan is on a qualifying property elsewhere; both claims must stand on their own facts. The old-regime non-standard total rises to ₹5,50,000. Old taxable income is then ₹15,00,000 − ₹50,000 − ₹5,50,000 = ₹9,00,000. Basic old tax is ₹12,500 plus 20% of ₹4,00,000, or ₹92,500; 4% cess makes ₹96,200, only ₹1,300 lower than the new result. “Pays rent” alone does not establish a ₹1.75 lakh HRA exemption: actual allowance, rent, salary and city conditions control. Do not create a fictional HRA amount simply to make one regime look better.
Derive the break-even number instead of memorising it
At ₹15 lakh salary, Priya’s new-regime basic tax is ₹93,750. The same 4% cess applies to both ordinary calculations, so equal basic tax is the crossover. In the old regime, taxable income between ₹5 lakh and ₹10 lakh produces ₹12,500 + 20% × (taxable income − ₹5,00,000). Set that equal to ₹93,750: the taxable-income crossover is ₹9,06,250. Subtract that from ₹15,00,000 and remove the old ₹50,000 standard deduction; the remaining needed exemptions and deductions are ₹5,43,750. This is why the assumed ₹5,50,000 example barely wins.
Approximate additional old-regime relief needed to match new tax
The target changes with salary because both tax scales are progressive and the rebate creates a cliff with marginal relief near ₹12 lakh taxable income. Under the same resident, non-senior, ordinary-salary assumptions, a ₹10 lakh salary needs about ₹4.5 lakh of old-regime non-standard relief to reduce old taxable income to ₹5 lakh and use its rebate for nil tax. At ₹20 lakh, the new taxable income is ₹19.25 lakh, with ₹1,85,000 basic tax; matching that under old rates takes about ₹7,08,333 of non-standard old-regime relief, plus its ₹50,000 standard deduction. These are arithmetic comparison points, not promises that such exemptions are obtainable.
Verify each relief before making the election
The 2025 Act renumbers the familiar 80C-type savings pool as Section 123 with Schedule XV, according to the department’s payroll transition FAQ. This one aggregate ₹1.5 lakh pool can include eligible employee EPF, certain principal payments, qualifying tuition and other specified items. Counting the same payment twice inflates the old-regime case. Home-loan interest is a different line from home-loan principal; both require evidence and their own limits. Health premiums, HRA and employer pension deductions also have distinct conditions. Tax saved is never the face amount of a deduction.
For Tax Year 2026–27 under the Income-tax Act 2025, the notified Income-tax Rules 2026, Rule 136 put the Section 202(4) regime option or withdrawal in the return furnished under Section 263(1). A person without business or professional income makes that choice in the return for the tax year. Business/professional-income cases have the stricter election deadline and limited later switching set out in Section 202(4). The older Form 10-IEA FAQ concerns Section 115BAC of the 1961 Act and is not the filing method for this example. Priya’s employer TDS declaration affects payroll withholding but does not itself settle the return election.
Run both variants through the department’s 2025 Act income and tax estimator, selecting Tax Year 2026–27 rather than AY 2026–27. Reconcile the payslip, Form 16 or its new-Act equivalent, HRA records, lender statement and payment receipts. Priya should also check that a product bought only for a deduction fits her cash needs; a tax deduction can improve an otherwise sensible investment, but the ₹5,43,750 crossover does not justify inventing deductions or locking cash in a product she would not choose otherwise.
