New vs Old Tax Regime FY 2025-26: Salary Break-Even Guide

Written by : Knowledge Centre Team

2026-07-08

1343 Views

11 minutes read

Introducing BSE 500 Enhanced Value 50 Fund with Promise4Wealth

50 High-Potential Companies, One Smart Decision

Name is required Name should be Valid

Mobile Number is required Mobile Number should be Valid

Email is required Email should be Valid

DOB is required DOB should be Valid

Annual Income*

< 3 3-5 5-7 7-10 > 10

Annual Income is required

I agree that even if my contact number is registered with NDNC / NCPR, I would still want the Company to contact me on the given number and email id for the clarifications/product information sought by me and agree that I have read and understood the Privacy Policy and agree to abide by the same.

Please tick to proceed further.

Thank you for your interest in our product. Our financial expert will connect with you shortly to help you choose the best plan.

It’s June 2026, and with FY 2026-27 underway, are you still confused about which tax regime to choose - the old or the new regime? Which will end up saving your time? The answer starts with understanding India New Tax Regime Slabs FY 2026 27, unchanged since Budget 2023. We are not solely talking about slab rates; what we are focusing on here is the deductions, income, and the break-even salary point. While the old regime allows a range of exemptions, the new one provides reduced rates with minimal compliance.

Understanding the latest salary income tax slabs is crucial to making this decision, especially since Budget 2023 significantly revised them under the new regime, and as they remain unchanged for FY 2026-27. One of the most important tools in this comparison is identifying the break-even salary point, the income level at which tax liability under both regimes is nearly equal. Knowing this threshold empowers salaried individuals to optimise their tax planning with greater clarity.

Key Takeaways

For FY 2026-27, taxpayers have the choice between a new regime with lower rates and fewer deductions and an old regime with standard rates and numerous exemptions
The tax slabs differ significantly between the new and old regimes, impacting the tax liability at various income levels
Calculating the salary break-even point helps individuals identify the income level at which the tax liability is the same under both regimes
Factors like investment in tax-saving instruments, HRA, and other eligible deductions play a crucial role in determining the optimal tax regime
Analysing your specific financial situation and potential deductions is paramount before choosing between the new and old tax regimes

Break-Even Point: Old Vs New Tax Regime (FY 2026-27)

India’s dual tax regime offers salaried individuals greater flexibility, but it can also lead to confusion. The new tax regime is the default option. However, taxpayers still have the freedom to choose the old regime if they wish to claim deductions and exemptions. Ultimately, the decision often hinges on your salary’s break-even point between the two systems.

Choosing the right regime isn't just about comparing tax slabs. It also depends on the deductions you claim, the exemptions you’re eligible for, and your total taxable income. In this blog, we break down both tax regimes to help you identify the income level at which one starts to offer more financial benefits than the other.

It is also worth noticing that the Income Tax Act, 2025, has been effective since April 2026 and mainly focuses on restructuring and renumbering provisions like Section 123 (previously called Section 80C) and Section 126 (Section 80D). The real relief for salaried taxpayers focuses on a higher rebate and revised slabs.

Old Tax Regime Slabs:

The Old Regime Tax Slab FY 2026 27 offers various exemptions and deductions under sections like Section 123 (previously called Section 80C) and Section 126 (previously called Section 80D) HRA and LTA, making it beneficial for those with significant tax-saving investments. Here's how the slab rates apply based on age:

Income Slab	Individuals (< 60 years)	Income Slab	Senior Citizens (60–80 years)	Income Slab	Super Senior Citizens (80+ years)
Up to ₹ 2,50,000	Nil	Up to ₹ 3,00,000	Nil	Up to ₹ 5,00,000	Nil
₹ 2,50,001 – ₹ 5,00,000	5%	₹ 3,00,001 – ₹ 5,00,000	5%	₹ 5,00,001 – ₹ 10,00,000**	20%
₹ 5,00,001 – ₹ 10,00,000	20%	₹ 5,00,001 – ₹ 10,00,000	20%	Above ₹ 10,00,000	30%
Above ₹ 10,00,000	30%	Above ₹ 10,00,000	30%

New Tax Regime Slabs:

The New Tax Regime for FY 2026 27 offers a different set of tax slabs with generally lower rates, but without the benefit of most deductions and exemptions:

Income Slab	Tax Rate
Up to ₹4 Lakh	Nil
₹4 Lakh - ₹8 Lakh	5 %
₹8 Lakh - ₹12 Lakh	10%
₹12 Lakh - ₹16 Lakh	15%
₹16 Lakh - ₹20 Lakh	20%
₹20 Lakh - ₹24 Lakh	25%
Above ₹24 Lakh	30%

Save Taxes While Building Long-Term Wealth

Full Name* Please enter correct name Please enter the Full name

Enter your mobile number* Please enter valid mobile number Please enter Mobile Number

Email* Please enter valid email Please enter Email

...Read more Consent is required

What Are Salary Break-Even Points?

A salary break-even point is the total level of deductions at which the tax you end up paying in the old regime becomes equal to the tax you would be paying under the new regime. A value above or below this means that one tax regime ends up helping you to save more. For most of the salaried individuals, this is never a fixed number. It keeps fluctuating based on income level. The higher you earn, the more would be the number of deductions needed for you to benefit from the old regime.

How to Calculate Your Break-Even Point?

To calculate your break-even point between the old and new tax regimes, start by estimating your total income and the deductions and exemptions available under the old regime. Key deductions include Section 123 (previously called Section 80C) and Section 126 (Section 80D), HRA, LTA, and the standard deduction. Add these up to determine your taxable income under the old regime. Then, compare the tax payable under both regimes. If your deductions reduce your taxable income significantly, especially below higher tax slab thresholds, the old regime may offer more savings. Otherwise, the new regime’s lower rates and simpler structure could result in a lower tax outgo and be a better option.

Section 123 (previously called Section 80C): Investments in instruments like EPF, PPF, ELSS, NSC, etc. (up to ₹ 1,50,000)
House Rent Allowance (HRA): Exemption based on actual rent paid, salary, and location
Leave Travel Allowance (LTA): Exemption for travel expenses incurred during leave
Section 126 (previously called 80D): Premium paid for medical insurance
Section 129 (previously called 80E): Interest paid on education loan
Standard Deduction: ₹ 50,000 available to salaried individuals under the old regime

Let’s examine a few scenarios to see where the break-even point lies.

Scenario 1: Income ₹7 lakh

Component	Old Regime	New Regime
Gross Salary	₹7,00,000	₹7,00,000
Standard Deduction	₹50,000	₹50,000
Section 123 (80 C) Deduction	₹1,50,000	Not Applicable
Net Taxable Income	₹5,00,000	₹6,50,000
Tax (before rebate)	₹12,500	₹25,000
Rebate under 87A	₹12,500	₹25,000
Final Tax Payable	₹0	₹0

Conclusion: Both regimes result in zero tax due to a rebate, but under the new regime, even without Section 123 (80C), you still get a full rebate up to ₹7 lakh in taxable income.

Scenario 2: Income ₹10 lakh

Let’s assume deductions under Section 123 (80C), Section 126 (80D), and HRA add up to ₹3 lakh under the old regime.

Component	Old Regime	New Regime
Gross Salary	₹10,00,000	₹10,00,000
Deductions (Std+Others)	₹3,00,000	₹50,000 (Standard Only)
Net Taxable Income	₹7,00,000	₹9,50,000
Tax Liability	₹52,500	₹45,000

Conclusion: In this case, despite more deductions in the old regime, the new regime results in lower taxes. But with higher deductions (₹3.5 lakh+), the old regime could become more beneficial.

Did You Know?

Under the FY 2026–27 new regime, salaried taxpayers pay zero tax up to ₹12.75 lakh after standard deduction and Section 87A rebate

Source: TOI

Benefits and Limitations of Each Regime:

Choosing the right tax regime isn’t just about slab rates; it’s also about what each system offers in terms of benefits and trade-offs. Both the new and old regimes come with their own set of advantages and limitations, depending on your income and investments. Here’s a quick look at how they compare.

New Tax Regime Advantages: The New Tax Regime, introduced to simplify compliance, offers lower tax rates but with limited deductions. Here's a quick look at its key benefits and drawbacks:
1. Simplified tax slabs and computations
2. Higher exemption limit (up to ₹ 12.75 lakh with standard deduction), along with Lower effective tax for middle-income salary earners
  
  The limitations of this tax regime are that there are no major deductions like HRA, Section 123 (previously 80C), or LTA, which affect taxpayers with significant investments.
Old Tax Regime Advantages: The Old Tax Regime appeals to those who maximise deductions and exemptions through investments and expenses. Below are its main strengths and limitations.
1. Availability of multiple deductions/exemptions (HRA, LTA, Section 123, home loan interest)
2. Lower tax liability for taxpayers with high investments or expenses
  
  The older tax regime has the limitation of complex paperwork, requiring investment declarations and compliance.

What is the Strategy to Choose the Right Regime?

Choosing the right tax regime can significantly impact your tax liability. To make an informed decision, consider the following strategy to compare both the old and new regimes:

Estimate your gross salary and deduct allowable exemptions/deductions to calculate net taxable income under the old regime
Calculate tax payable under both old and new regimes
Compare the tax liability and choose the regime offering the lower tax payable
Use break-even points as guidance: If your deductions meet or exceed the break-even threshold for your income group, opt for the old regime; otherwise, the new regime would be better.

How Does Insurance Help Save More Taxes?

Policies such as ULIPs, term insurance, and traditional savings plans help taxpayers maximise their deductions under Section 123 (previously called 80C) and Section 10(10D). By investing in such plans, policyholders can effectively lower their taxable income, sometimes enough to make the old regime more favourable, especially at higher salary levels.

Conclusion

Choosing between the new and old tax regimes in FY 2026-27 depends on how effectively you can reduce your taxable income. The new regime offers simplicity and lower income tax slabs, making it suitable for those with minimal deductions. On the other hand, the old regime may offer greater savings if you maximise deductions under Sections like 123 (previously called 80C) and 126 (previously called 80D). Use a tax calculator to find your break-even point and make an informed decision.

For those opting for the old regime, term insurance can help you meet long-term financial goals while offering Section 123 (previously called 80C) deductions. If conditions are met, the maturity value is also tax-free under Section 126 (Section 10(10D)). It’s an effective way to reduce your tax burden under the current salary income tax slabs.

Glossary

Gross Salary: Total salary before any deductions like taxes, PF, or professional tax
Net Taxable Income: Income left after all deductions; this is the amount on which tax is calculated
Tax Slab: Income range that determines the rate of income tax you pay in a financial year
Standard Deduction: A fixed amount that is allowed to be subtracted from gross income to lower taxable income
Section 87A Rebate: An Income Tax Act provision in India that permits eligible residents to eliminate or reduce income tax liability

FAQs

No, LTA is part of the exemptions not permitted under the new regime. Only the standard deduction of ₹50,000 is allowed.

No, since most deductions are not applicable under the new regime, you’re not required to submit proofs for deductions.

Yes, HRA is not exempt under the new regime. So, the rent you pay will not reduce your taxable income in this regime.

Salaried individuals can switch between these regimes every financial year, but non-salaried individuals can switch only once in a lifetime.

No, retirement benefits such as gratuity and provident fund remain tax-exempt as per existing rules, even under the new regime.No, retirement benefits such as gratuity and provident fund remain tax-exempt as per existing rules, even under the new regime.

Disclaimer - This article is issued in the general public interest and meant for general information purposes only. The views expressed in this blog are solely those of the writer and do not necessarily reflect the official policy or position of Canara HSBC Life Insurance Company Limited or any affiliated entity. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the blog or the information, products, services, or related graphics contained in the blog for any purpose. Any reliance you place on such information is therefore strictly at your own risk. You should consult with a qualified professional regarding your specific circumstances before taking any action based on the content provided herein.

Reason To Receive Tax Notices On Inheritance Thum Desktop

Tax Notices on Inheritance in India: Reasons & Solutions

How Do Health Riders In Life Insurance Thum Desktop

Maximise 80D Deductions with Add-on Health Riders

Recent Blogs

How to Cancel GST Registration Online in 2026?

09 July '26

1116 Views

8 minute read

Learn how to cancel GST registration online, required documents and important steps involved in the process.

Tax Saving

Section 24 Income Tax Act: Its Exemptions and Deduction Limits

08 July '26

924 Views

4 minute read

Explore Section 24 of the Income Tax Act, its exemptions, and deduction limits. Stay informed and make smart tax decisions with Canara HSBC Life Insurance.

Tax Saving

Taxation of Interest on EPF Contribution: All You Need to Know

08 July '26

1821 Views

7 minute read

Learn how to calculate taxable interest on provident fund (EPF) contributions to maximize your savings. Understand the EPF interest rate and its tax benefits.

Tax Saving

How To Budget For A Dream Vacation Thum Desktop

LTA Tax Benefits Explained: Claim Leave Travel Allowance Smartly

08 July '26

852 Views

6 minute read

Discover how Leave Travel Allowance (LTA) helps you save tax on domestic travel. Learn eligibility, exemption limits, and how to file claims under Section 10(5).

Tax Saving

What is CGST? Meaning, Rates & Features Explained

08 July '26

1265 Views

7 minute read

Learn what CGST means, its full form, key features, tax rates, and how Central GST is applied under India’s GST framework.

Tax Saving

Old vs New Tax Regime: Things You Need to Know

07 July '26

6795 Views

10 minute read

Explore the new tax regime vs the old one and choose what suits you best. Learn key differences and gain valuable insights with Canara HSBC Life Insurance.

Tax Saving

GST Portal Login Guide: Step-by-Step Instructions for Registration

07 July '26

1199 Views

5 minute read

Need help with GST login? Follow this step-by-step guide to access the GST portal easily and manage your tax filings without any confusion.

Tax Saving

Ways To Save Capital Gain Tax On Sale Property Thum Desktop

3 Ways To Save Capital Gain Tax on The Sale of a Property

07 July '26

2544 Views

10 minute read

Want to know how you can save capital gain tax on property sales? Understand best and safe ways to save capital gain tax on the sale of a property.

Tax Saving

How To Save Tax For Salary Above 10lakhs Thum Desktop

Do You Pay Income Tax on a ₹5 Lakh Salary? FY 2026 - 27 Tax Guide

18 June '26

1674 Views

6 minute read

Wondering if you need to pay income tax on a ₹5 lakh salary? Check your tax liability under the new and old tax regimes, understand rebate eligibility, and calculate your tax for FY 2026–27.

Tax Saving

Tax Savings - Top Selling Plans

We bring you a collection of popular Canara HSBC life insurance plans. Forget the dusty brochures and endless offline visits! Dive into the features of our top-selling online insurance plans and buy the one that meets your goals and requirements. You and your wallet will be thankful in the future as we brighten up your financial future with these plans.

Family Shield: Enhanced Protection

iSelect Smart360 Term Plan

3 Plan options
Life cover till 99 years
Steady income benefit
Block your premium at inception

Fixed Returns, Zero Risks & Worries

iSelect Guaranteed Future Plus

4 Plan options
Life cover + Guaranteed benefits
Accidental death benefit
Premium protection cover

Start Young, Pay Less, Stay Secured

Young Term Plan

Life cover till 99 years
Coverage for spouse
Block your premium rate
Covers 40 critical illness

Popular Searches

New Fund Launched with Promise4Wealth

Reinstate Your Lapsed Policy

Mandatory KYC Update as per PML Rules 2005

We Stand with Families Affected by the Ahemdabad Plane Crash