Old or new tax regime? Compare the full calculation

Reviewed on 31 October 2026. Historical tax-year example: FY 2025–26 / AY 2026–27. The calculations below have been rechecked; this is not a filing guide for income earned in FY 2026–27. Check the applicable year’s rules and forms before acting.

A lower tax bill is useful. A financial commitment you do not need is still a financial commitment.

That is a sensible place to begin the old-versus-new regime discussion. Start with the income you actually earned and the deductions you can legitimately claim. Let the calculation follow.

Which year are we discussing?

This article covers FY 2025–26, assessed in AY 2026–27. It is a dated comparison, not a guide to every tax year. The salary example assumes a resident individual under 60, ordinary salary income only and no surcharge or special-rate income.

The Income Tax Department's salaried taxpayer guide lists the applicable slabs, rebate and cess. Check the year before using any calculator or article.

Start with salary, not the CTC headline

CTC is an employer's cost figure. It is not automatically the salary amount on which your tax calculation begins. Use your salary details and Form 16, and distinguish taxable components from employer costs and eligible exemptions.

Keep a simple worksheet: income, allowable exemptions, deductions, taxable income, tax and cess. Complete it once for each regime. Do not subtract a deduction simply because it appeared in an online example.

A worked example: ₹15 lakh salary

Assume ₹15,00,000 of gross salary before standard deduction. There are no other exemptions, deductions or income. For this illustration, the standard deductions are ₹75,000 under the new regime and ₹50,000 under the old regime. The Finance (No. 2) Act, 2024 introduced the higher new-regime standard deduction.

Under the new regime, taxable income is ₹14,25,000. The first ₹4 lakh is taxed at nil, the next ₹4 lakh at 5%, the next ₹4 lakh at 10%, and the remaining ₹2.25 lakh at 15%. Tax is ₹93,750; adding 4% cess gives ₹97,500.

Under the old regime, taxable income is ₹14,50,000. Tax is ₹12,500 on the ₹2.5–5 lakh band, ₹1,00,000 on the ₹5–10 lakh band and ₹1,35,000 on the remaining ₹4.5 lakh. With 4% cess, the total is ₹2,57,400.

The new regime is lower in this particular example. That conclusion belongs to these assumptions, not to every salaried person.

Now add ₹1,50,000 of genuinely eligible old-regime deductions, beyond the standard deduction. Old-regime taxable income falls to ₹13,00,000 and tax including cess becomes ₹2,10,600. It remains higher in this example. Further eligible exemptions or deductions would change the calculation again.

These figures are illustrative calculations using the published rates, not a tax-return assessment. They exclude special-rate income, other deductions and individual complications.

A deduction does not repay the purchase price

Suppose a deduction reduces taxable income by ₹1 lakh. That does not mean the government gives you ₹1 lakh back. The saving depends on the applicable tax calculation.

Before buying a product for its tax benefit, examine its cost, liquidity, risk and purpose. Insurance should meet an insurance need. An investment should make sense for your circumstances. A tax benefit can support a sound choice; it cannot make every choice sound.

Professionals and proprietors need another step

For a business, sales are not automatically the owner's taxable income. Consider a hypothetical proprietor with ₹30 lakh in receipts and ₹20 lakh in allowable expenses. The starting profit is ₹10 lakh, before other tax adjustments. The classification and evidence for those expenses matter.

The Department's business and professional income guide explains the regime-election rules for AY 2026–27, including Form 10-IEA. Business taxpayers face restrictions on switching; they should not assume the annual flexibility available in non-business cases. A company is also a different taxpayer from an individual proprietor.

If that describes your situation, establish the correct taxable income and filing requirements before comparing totals with a qualified tax professional.

Keep the decision practical

Put your real numbers into both calculations. Keep evidence for every claim. Confirm the correct financial year and any election deadline. Reconcile the result with your records rather than relying on a colleague's salary or an old screenshot.

The TROUGH salary tax calculator is scoped to FY 2025–26 / AY 2026–27; read its assumptions before using it. It does not handle business income or capital gains.

Good tax planning leaves you with a coherent financial plan as well as a correctly calculated liability. Both deserve attention.

Educational overview only. Tax treatment depends on your circumstances; consult a qualified tax professional for filing and regime-election decisions.