Old vs New Tax Regime FY 2025-26: Breakeven for ₹15L+ Earners
The moment you open your ITR for FY 2025-26 (AY 2026-27, due 31 July 2026), you make a ₹40,000-plus decision: old regime or new. The new regime is now the default, so skipping the choice is a choice — and for most salaried earners above ₹15 lakh, the default is usually the right one. Here is the exact breakeven, by income band, so you stop guessing.
Summary
| Feature | Old Regime (FY 2025-26) | New Regime (FY 2025-26) |
|---|---|---|
| Standard deduction | ₹50,000 | ₹75,000 |
| Tax-free income (salaried) | Up to ₹5 lakh (87A) | Up to ₹12.75 lakh (87A ₹60,000) |
| 30% rate starts at | ₹10 lakh | ₹24 lakh |
| 80C / 80D / HRA | Allowed | Not allowed |
| Employer NPS — 80CCD(2) | Allowed (10% of basic) | Allowed (up to 14% of basic) |
| Default regime? | No — must opt out yearly | Yes |
The new regime is the default — doing nothing picks it
Under Section 115BAC(1A), the new regime applies automatically. If you want the old regime, you opt out every year inside the ITR itself — there is no separate form for salaried income (Form 10-IEA is only for those with business or professional income). Decide the regime before you start the return, because switching mid-filing resets your deduction entries.
The breakeven, by income band
The only number that matters is how much deduction you can actually claim in the old regime. Below the breakeven, the new regime wins. Here is what you need for FY 2025-26 — on top of the ₹50,000 standard deduction:
| Gross salary | Deductions needed to match the new regime |
|---|---|
| ₹12.75 lakh or less | New regime is already ₹0 tax — old cannot win |
| ₹15 lakh | ≈ ₹5.45 lakh |
| ₹20 lakh | ≈ ₹7.10 lakh |
| ₹25 lakh and above | ≈ ₹8.00 lakh (it plateaus here) |
The plateau is the part most guides miss: once both regimes tax your top rupee at 30% (around ₹24 lakh of taxable income), the gap stops widening and the breakeven freezes near ₹8 lakh. So whether you earn ₹25 lakh or ₹40 lakh, you need the same ~₹8 lakh of deductions to justify the old regime.
The deductions that survive in the new regime
The new regime is not deduction-free. Two still apply, and high earners forget the second.
Standard deduction — ₹75,000
Automatic for salaried income, and ₹25,000 higher than the old regime's ₹50,000.
Employer NPS — Section 80CCD(2)
Your employer's contribution to NPS is deductible in the new regime up to 14% of basic salary (versus 10% in the old regime). On a ₹28 lakh package with roughly ₹11 lakh basic, that is up to ₹1.54 lakh of deduction the new regime still allows. Ask payroll to route part of your CTC as employer NPS — it is the single biggest lever to cut tax without leaving the new regime.
Real example: salaried, ₹28L CTC, Bengaluru
A fully-loaded old-regime stack — full 80C, ₹50,000 NPS under 80CCD(1B), ₹50,000 health cover under 80D, and HRA on ₹40,000/month rent — totals about ₹6.68 lakh. That is still short of the ₹8 lakh breakeven.
| Item | Old Regime | New Regime |
|---|---|---|
| Deductions claimed | ₹6.68 lakh | ₹75,000 |
| Taxable income | ₹21.32 lakh | ₹27.25 lakh |
| Annual tax (incl. cess) | ₹4,70,184 | ₹4,13,400 |
| You keep extra | — | ₹56,784 / year |
Even after working to claim ₹6.68 lakh, the new regime is ₹56,784 cheaper. The reason is structural: Bengaluru is a non-metro for HRA (40% of basic, not 50%), so the HRA exemption caps lower than most people assume.
When the old regime still wins
Add a home loan and the math flips. Section 24(b) lets you deduct up to ₹2 lakh of interest on a self-occupied home. Stack that on the ₹6.68 lakh above and you cross ₹8.68 lakh — past the breakeven — and the old regime now costs about ₹4,07,784, edging out the new regime by roughly ₹5,600 a year. The rule of thumb: at ₹15 lakh-plus, the old regime usually needs a home loan plus a full HRA-and-80C stack to win. Without the loan, it rarely does.
Above ₹50 lakh: surcharge quietly favours the new regime
Once taxable income crosses ₹50 lakh, surcharge begins — 10% to ₹1 crore, 15% to ₹2 crore, the same in both regimes. But at the very top the two diverge: the new regime caps surcharge at 25%, while the old regime runs up to 37% above ₹5 crore. For the highest earners that cap alone can outweigh every old-regime deduction, which is why the ₹8 lakh breakeven is a floor, not a ceiling.
What to do this week
- Pull your Form 16 and add up every real deduction — 80C, 80D, HRA, 80CCD(1B), and home-loan interest under Section 24(b).
- Compare that total against your band in the breakeven table above.
- If you fall short of the breakeven, file under the new regime and redirect the "lost" 80C money into higher-return options instead of tax-savers.
- Ask payroll whether part of your CTC can be employer NPS under 80CCD(2) — it cuts tax in the new regime too.
The honest answer
For most salaried earners above ₹15 lakh without a home loan, the new regime wins — and the gap grows the more you earn. Run your own numbers before you click, because the default is only the right default if your deductions fall short of the breakeven.
Ready for a personalised plan? Start your free diagnosis — 6 questions, 5 minutes.
