Income Tax Slab for Salaried Employees: Old vs New Regime

Last updated: Sept 2026

Income tax slab for salaried employees depends on two separate choices layered together. First, which regime applies. Second, which slab within that regime their net income falls into.

• New regime standard deduction: Rs. 75,000; old regime: Rs. 50,000
• Section 87A rebate: makes tax liability zero for net taxable income up to Rs. 12 lakh under the new regime
• Effective tax-free threshold: Rs. 12.75 lakh gross salary under the new regime, after standard deduction and rebate combine
• Old regime retains: HRA, Section 80C, home loan interest, and other deductions unavailable under the new regime
• Regime choice can be changed each financial year for most salaried employees, subject to current switching rules

Compare your actual tax liability under both regimes using your specific income and eligible deductions, since the better regime depends entirely on your own numbers.

This depends entirely on how many deductions you can claim under the old regime, weighed against the new regime's higher standard deduction and rebate threshold. Neither regime is universally better for every salaried employee.

The comparison comes down to one practical question — do your old-regime deductions exceed the gap between the two regimes' standard deductions and slab structures? This is the actual decision behind every income tax slab for salaried employees comparison. The realistic scenarios a salaried employee falls into are:

• Few deductions (no home loan, minimal 80C investment, no significant HRA claim): the new regime's higher standard deduction and rebate threshold result in lower tax, as a rule
• Substantial deductions (home loan interest, full 80C usage, significant HRA claim): the old regime can result in lower tax despite its lower standard deduction

• Borderline cases: the two regimes can produce a very close result, making an actual calculation worthwhile rather than a general assumption

  
  

Running both calculations against your specific numbers, rather than assuming based on general advice, is the only reliable way to know which regime suits you.

The two regimes use genuinely different slab structures, not just different deduction rules layered onto the same rates.

The new regime's more gradual slab structure, with more bands at lower rates, is what makes it favourable for many salaried employees even before accounting for the higher standard deduction.

Five steps produce a genuine side-by-side comparison rather than a guess.

1. Calculate your gross salary, including all taxable allowances and perquisites.
2. Under the new regime, subtract Rs. 75,000 standard deduction, apply the new slab rates, then apply the Section 87A rebate if net taxable income is Rs. 12 lakh or below.
3. Under the old regime, subtract Rs. 50,000 standard deduction plus all eligible deductions (80C, HRA, home loan interest, and others), then apply the old slab rates.
4. Compare the two resulting tax figures directly.

5. Choose the regime with the lower figure when filing, confirming current switching rules if you have changed regimes in a prior year.

   
   

Skipping step 3's full deduction list is the most common reason someone incorrectly concludes the new regime is better, when a fuller old-regime calculation would have shown otherwise.

Consider Rishika, a 33-year-old marketing manager in Pune with a gross salary of Rs. 13 lakh a year, an active home loan, and a CIBIL Score of 752.

Formula used: Net taxable income = Gross salary − Standard deduction − Other eligible deductions (old regime only). Tax = Applicable slab rates on net taxable income, minus Section 87A rebate where applicable.

Despite the new regime's higher standard deduction, Rishika's substantial old-regime deductions from her home loan and 80C investments bring her old-regime net taxable income down enough that the comparison is closer than the headline rates alone would suggest, though the new regime still comes out lower in her specific case.

A home loan's interest deduction under Section 24(b) is available only under the old regime, so factor this into your regime comparison if you are planning a purchase. Approval timelines can extend where self-employed applicants' income documentation needs cross-verification, and minimum income thresholds can differ by city. Check your home loan eligibility with your regime choice and net income confirmed.