# Old vs new tax regime: which saves more tax? Worked examples for ₹10, ₹15 and ₹20 lakh salaries

> Is income up to ₹12 lakh really tax free? How much do you need in deductions before the old regime wins? Real slab maths for FY 2026-27, a side-by-side table from ₹8 lakh to ₹30 lakh, the break-even point, and what marginal relief does just above ₹12 lakh.

Published 2026-10-22 by Toolcloak. 5 minute read. Original: https://toolcloak.com/articles/old-vs-new-tax-regime-which-saves-more-tax-worked-examples-for-10-15-and-20-lakh-salaries
Related free tool: [Income Tax Calculator (India, New Regime)](https://toolcloak.com/tools/tax-slab-calculator-india)

Every year salaried people in India face the same question at the start of April: **old regime or new regime?** The answer is not a matter of opinion. It is arithmetic, and it comes down to one number: how much you can actually deduct. This guide does the sums for ₹8 to ₹30 lakh salaries and shows where the line falls.

> **In short**
> - **New regime, FY 2026-27:** nil tax up to ₹4 lakh, then 5%, 10%, 15%, 20%, 25% and 30% in ₹4 lakh steps. Standard deduction ₹75,000 for salaried people.
> - **Up to ₹12 lakh of taxable income pays no tax** because of the Section 87A rebate. For a salaried person that is about ₹12.75 lakh of salary.
> - **The old regime only wins if your deductions are big.** At ₹15 lakh you need roughly ₹5.4 lakh of deductions beyond the standard deduction. At ₹20 lakh, about ₹7.1 lakh.
> - Slabs were not changed in the 2026-27 Budget as per published summaries, but check the current rules before you file.

## New regime slabs for FY 2026-27

The new regime is the default. You pay tax only on the slice of income that falls in each band, not on the whole amount at the top rate. Add 4% health and education cess on the final tax.

| Taxable income | Rate | Tax on this slice |
| --- | --- | --- |
| Up to ₹4,00,000 | Nil | ₹0 |
| ₹4,00,001 to ₹8,00,000 | 5% | ₹20,000 (full slice) |
| ₹8,00,001 to ₹12,00,000 | 10% | ₹40,000 (full slice) |
| ₹12,00,001 to ₹16,00,000 | 15% | ₹60,000 (full slice) |
| ₹16,00,001 to ₹20,00,000 | 20% | ₹80,000 (full slice) |
| ₹20,00,001 to ₹24,00,000 | 25% | ₹1,00,000 (full slice) |
| Above ₹24,00,000 | 30% | 30% of the rest |

*Old regime for comparison: nil up to ₹2.5 lakh, 5% to ₹5 lakh, 20% to ₹10 lakh and 30% above that, with a ₹50,000 standard deduction and many deductions allowed.*

Try it: [Income Tax Calculator (India, New Regime)](https://toolcloak.com/tools/tax-slab-calculator-india). Enter your income and see the new-regime tax with the standard deduction, rebate and 4% cess. The slabs are editable if the rules change.

## Why income up to ₹12 lakh pays nothing

Under Section 87A, taxable income up to ₹12 lakh gets a rebate that wipes out the whole tax, which would otherwise be ₹60,000. A salaried person also gets a ₹75,000 standard deduction first, so **a salary of ₹12.75 lakh gives taxable income of exactly ₹12 lakh and zero tax.**

**Salary ₹12,75,000 in the new regime**

1. **Start with salary.** ₹12,75,000.
2. **Subtract standard deduction.** ₹12,75,000 − ₹75,000 = ₹12,00,000 taxable.
3. **Work out slab tax.** ₹20,000 + ₹40,000 = ₹60,000.
4. **Apply the 87A rebate.** ₹60,000 − ₹60,000 = **₹0** tax.

*Allowances such as HRA exemption are not available in the new regime, so the taxable figure is what is left after the standard deduction.*

## Just above ₹12 lakh: marginal relief

Without a special rule, earning ₹1 more than ₹12 lakh would suddenly cost ₹60,000 in tax. **Marginal relief** stops that cliff: the tax cannot be more than the amount you earn above ₹12 lakh. It fades out around ₹12.7 lakh of taxable income, where normal slab tax becomes smaller than the excess.

**New-regime tax including 4% cess, as taxable income rises past ₹12 lakh (₹)**

|  | Value |
| --- | --- |
| 12.0 L | ₹0 |
| 12.1 L | ₹10,400 |
| 12.2 L | ₹20,800 |
| 12.5 L | ₹52,000 |
| 12.7 L | ₹72,800 |
| 12.8 L | ₹74,880 |

*At ₹12.1 lakh the plain slab tax would be ₹61,500 before cess. With relief you pay only the ₹10,000 above ₹12 lakh, plus cess. Past about ₹12.7 lakh the slab tax is lower and relief stops.*

## A worked example: ₹15 lakh salary

Take a salaried person earning ₹15 lakh. Here is the new regime first.

**₹15 lakh salary, new regime**

|  | Value | Note |
| --- | --- | --- |
| Taxable income | ₹14.25 L | 15,00,000 − 75,000 |
| Slab tax | ₹93,750 | 20,000 + 40,000 + 33,750 |
| 4% cess | ₹3,750 | On ₹93,750 |
| Total tax | ₹97,500 | About 6.5% of salary |

*The 15% slice is ₹2.25 lakh (from ₹12 lakh to ₹14.25 lakh), which gives ₹33,750.*

Now the old regime with a fairly full set of deductions: standard deduction ₹50,000, Section 80C ₹1.5 lakh, health insurance (80D) ₹25,000 and NPS (80CCD(1B)) ₹50,000. That leaves taxable income of ₹12.25 lakh.

**Same ₹15 lakh salary, two regimes**

| New regime | Old regime, ₹2.75 lakh deductions |
| --- | --- |
| ₹97,500 | ₹1,87,200 |
| Taxable income ₹14.25 lakh | Taxable income ₹12.25 lakh |
| No paperwork for deductions | ₹12,500 + ₹1,00,000 + ₹67,500, plus cess |
| No HRA or 80C needed | Still ₹89,700 more than the new regime |

*To make the old regime win at ₹15 lakh you need around ₹5.4 lakh of deductions beyond the standard deduction, which means a big HRA claim or a home loan on top of the usual list.*

## Side by side: ₹8 lakh to ₹30 lakh

Tax including 4% cess for a salaried person with no other income. The three old-regime columns show how much difference deductions make. Extra deductions are on top of the ₹50,000 standard deduction.

| Salary | New regime | Old, no extra deductions | Old, ₹2 L extra | Old, ₹4 L extra |
| --- | --- | --- | --- | --- |
| ₹8 lakh | ₹0 | ₹65,000 | ₹23,400 | ₹0 |
| ₹10 lakh | ₹0 | ₹1,06,600 | ₹65,000 | ₹23,400 |
| ₹12.75 lakh | ₹0 | ₹1,87,200 | ₹1,24,800 | ₹80,600 |
| ₹15 lakh | ₹97,500 | ₹2,57,400 | ₹1,95,000 | ₹1,32,600 |
| ₹20 lakh | ₹1,92,400 | ₹4,13,400 | ₹3,51,000 | ₹2,88,600 |
| ₹30 lakh | ₹4,75,800 | ₹7,25,400 | ₹6,63,000 | ₹6,00,600 |

*Even with ₹4 lakh of extra deductions the old regime costs more at ₹15 lakh and above. Below ₹8 lakh the old regime can tie, since ₹5 lakh of taxable income also gets a rebate there.*

## The break-even point

For each salary there is a level of deductions at which both regimes cost the same. Below it the new regime wins. Above it the old one does.

**Extra deductions needed (beyond the ₹50,000 standard deduction) for the old regime to match the new one, ₹ lakh**

|  | Value |
| --- | --- |
| ₹10 L | 4.5 L |
| ₹12 L | 6.5 L |
| ₹15 L | 5.4 L |
| ₹18 L | 6.4 L |
| ₹20 L | 7.1 L |
| ₹25 L | 8.0 L |
| ₹30 L | ~8.0 L |

*The bar for ₹12 lakh is high because the new regime already charges nothing there. Above ₹25 lakh the figure settles near ₹8 lakh because both regimes top out at 30%.*

Now compare with what people can usually claim:

| Deduction (old regime) | Typical limit |
| --- | --- |
| Section 80C (PPF, EPF, ELSS, life insurance, tuition) | ₹1,50,000 |
| NPS extra, Section 80CCD(1B) | ₹50,000 |
| Health insurance, Section 80D | ₹25,000 for you and family; more for senior-citizen parents |
| Home loan interest on a self-occupied house, Section 24(b) | ₹2,00,000 |
| HRA exemption | Least of three rules; depends on rent and city |

*Without HRA this basket adds up to about ₹4.25 lakh. For the old regime to win above ₹15 lakh you generally need HRA or other large claims as well.*

> **What stays allowed in the new regime:** The standard deduction and the employer's contribution to your NPS account (Section 80CCD(2)) are available in the new regime. Section 80C, 80D, HRA exemption and home-loan interest on a self-occupied house are not.

## When the old regime still makes sense

- You pay **substantial rent** and your HRA is a big part of your salary. See [HRA exemption: the least of three rules](https://toolcloak.com/articles/hra-exemption-the-least-of-three-rules-with-a-worked-example).
- You are repaying a **home loan** and claiming the full ₹2 lakh interest deduction.
- You already invest ₹1.5 lakh a year in PPF or EPF and pay insurance for senior-citizen parents, so the deductions exist whatever you decide.
- Your taxable income is in the **₹5 lakh to ₹10 lakh** range and you can bring it to ₹5 lakh with deductions.

## A simple way to choose

1. Work out tax in the new regime. For salaries up to ₹12.75 lakh it is zero.
2. Add up the deductions you really have (documents, not hopes). Include the ₹50,000 standard deduction.
3. Work out old-regime tax on what is left.
4. Pick the lower number. Tell your employer your choice so TDS matches, and recheck each year because rules and your life both change.

> **Education, not tax advice:** Slabs, rebates and the list of deductions change with the Budget. Special rates for capital gains, other income and surcharge above ₹50 lakh are not covered here. Check the Income Tax Department's current rules or ask a chartered accountant before you file.

See also: [how much NPS pension ₹5,000 a month gives at 60](https://toolcloak.com/articles/nps-calculator-how-much-pension-will-rs-5000-a-month-give-you-at-60-and-what-the-new-withdrawal-rules-change).

## Frequently asked questions

### Which tax regime is better for a ₹15 lakh salary?

For most people the new regime. It gives about ₹97,500 of tax at ₹15 lakh. The old regime needs roughly ₹5.4 lakh of deductions beyond the standard deduction to match it, which usually means a large HRA claim or home loan on top of 80C, 80D and NPS.

### Is income up to ₹12 lakh tax free in India?

Under the new regime, taxable income up to ₹12 lakh pays no tax because of the Section 87A rebate. For a salaried person the standard deduction of ₹75,000 lifts that to a salary of about ₹12.75 lakh.

### What is the standard deduction in the new tax regime?

₹75,000 for salaried employees and pensioners. In the old regime it is ₹50,000.

### What is marginal relief in income tax?

It is a rule that stops tax from jumping suddenly when income crosses the rebate limit. Just above ₹12 lakh of taxable income, your tax cannot exceed the amount by which your income is above ₹12 lakh.

### Can I switch between the old and new regime?

Salaried people can generally choose each year when they file, and tell their employer for TDS. People with business income have tighter rules on switching back, so check before choosing.

### Is HRA allowed in the new tax regime?

No. HRA exemption, 80C and most other deductions are for the old regime. The new regime keeps the standard deduction and the employer NPS contribution.

### How much is cess on income tax?

4% health and education cess is added to the tax after rebate and relief. On ₹93,750 of tax it adds ₹3,750.

### Are the slabs for 2026-27 different from last year?

Published summaries say the 2026-27 Budget did not change the income tax slabs. Rules can change, so confirm on the official income tax website before filing.