Tax regime break-even: when the old regime wins

A guide to the tax-regime break-even: the deduction level at which the old regime beats the new for a government employee, with a table for FY 2026-27.

Updated 17 July 2026 · Reviewed by Salary-Calculator.in

Key facts

What it is: The total deductions at which the old regime's tax equals the new regime's for a given salary
Below Rs. 12.75 lakh salary: The new regime is almost unbeatable, because its tax is nil after the rebate
At Rs. 15 lakh salary: Break-even is about Rs. 6 lakh of total deductions, including the Rs. 50,000 standard deduction
At Rs. 20 lakh salary: Break-even is about Rs. 7.5 lakh of total deductions
Break-even rises with: Income; the higher the salary, the more deductions the old regime needs to win
Key differential deductions: Section 80C, 80CCD(1B), 80D, the HRA exemption, and home-loan interest under Section 24(b)
Neutral deduction: Employer NPS under 80CCD(2), allowed in both regimes, so it is left out of the comparison
Reliable method: Compute the tax both ways for the actual salary and deductions each year

The tax regime break-even is the level of deductions at which the old tax regime becomes as cheap as, and then cheaper than, the new tax regime for a given salary. It is the single number a central government employee most wants to know when choosing a regime: how many deductions do I need before the old regime, with its higher rates but full deduction set, actually beats the default new regime? This guide answers that for the financial year 2026-27 (assessment year 2027-28), with a break-even table, the deductions that count, and a step-by-step method to find your own.

The short answer is that the bar is high, and it has risen sharply since Budget 2025. When the new regime made a total income up to Rs. 12 lakh tax-free, it became cheaper for the great majority of salaried government employees and pensioners. The old regime now wins only where deductions are large, and below a salary of Rs. 12.75 lakh it cannot win at all, because the new regime’s tax is already nil.

This guide explains what break-even means, why the new regime is almost unbeatable at lower salaries, the break-even deduction level at salaries from Rs. 15 lakh to Rs. 25 lakh, which deductions move you toward the old regime, how to find your own break-even with the income-tax calculator , and the specific cases where the old regime still wins. For the full head-to-head, see old versus new tax regime ; for the mechanics of choosing, see how to switch tax regime .

What break-even between the regimes means

Think of the two regimes as two straight lines plotted against your total deductions. The new-regime tax barely moves as deductions rise, because the new regime allows almost none of them, so its tax depends mostly on your salary. The old-regime tax falls steadily as deductions rise, because every rupee of deduction reduces the income taxed at the old regime’s higher rates. The two lines cross at one point: the break-even. To the left of it, where deductions are small, the new regime is lower; to the right, where deductions are large, the old regime is lower.

Two conventions make the comparison clean. First, the employer’s contribution to the National Pension System under Section 80CCD(2) is allowed in both regimes, so it reduces both taxes equally and does not affect where the lines cross; it is left out of the break-even deduction total. Second, each regime is compared with its own standard deduction, Rs. 75,000 in the new regime and Rs. 50,000 in the old. In the tables below, the break-even is expressed as total deductions including the Rs. 50,000 old-regime standard deduction, because that is how a taxpayer adds up the figures on a return.

Why the new regime wins for most government employees

The reason the break-even is so high is the Rs. 12 lakh tax-free line. In the new regime the Section 87A rebate of up to Rs. 60,000 cancels the tax on a total income up to Rs. 12 lakh, and the Rs. 75,000 standard deduction lifts the salaried threshold to Rs. 12.75 lakh. So a government employee on a salary up to Rs. 12.75 lakh pays no tax at all in the new regime.

Tax cannot fall below zero. That is why, for any salary up to Rs. 12.75 lakh, the old regime cannot win: the best it can do is also reach nil, and it needs deductions to get there, while the new regime is already at nil for free. This is the structural fact that makes the new regime the default choice for the large body of government employees in the lower and middle pay levels. Only above Rs. 12.75 lakh, where the new regime starts to charge tax, does a break-even exist at all.

The break-even table for FY 2026-27

The table below shows, for a resident individual below 60 in the financial year 2026-27, the new-regime tax at several salaries and the total deductions (including the Rs. 50,000 standard deduction) at which the old regime matches it. All figures include the 4 per cent health and education cess , and none of these salaries reaches the surcharge threshold of Rs. 50 lakh.

Gross salary (Rs.)	New-regime tax (Rs.)	Break-even total deductions (Rs.)
12,75,000 or below	Nil	New regime unbeatable
15,00,000	about 97,500	about 6,00,000
16,00,000	about 1,13,100	about 6,20,000
18,00,000	about 1,50,800	about 6,90,000
20,00,000	about 1,92,400	about 7,50,000
25,00,000	about 3,19,800	about 8,50,000

Two patterns stand out. The break-even rises with income, because the higher the salary, the more tax the new regime charges and the more deductions the old regime needs to catch up. And even at Rs. 25 lakh the break-even is about Rs. 8.5 lakh of deductions, a total only a taxpayer with a full Section 80C, the extra NPS deduction, substantial health insurance, a large House Rent Allowance, and a home loan can realistically reach. For most government employees the actual deductions fall well short of the break-even, which is why the new regime is usually cheaper.

Which deductions move you toward the old regime

Only the differential deductions count, meaning those the old regime allows but the new regime removes. In rough order of size for a government employee, they are:

Section 80C, up to Rs. 1,50,000, filled by the General Provident Fund subscription, life insurance, children’s tuition, and the like. This is the largest and most common lever. See Section 80C .
Section 80CCD(1B), an extra Rs. 50,000 for the employee’s own contribution to the National Pension System , over and above Section 80C.
Section 80D, health-insurance premiums, up to Rs. 25,000 for the family and a further Rs. 25,000 or Rs. 50,000 for parents depending on age. See Section 80D .
The House Rent Allowance exemption under Section 10(13A), which for an employee paying substantial rent in a metro can be the single biggest differential. See HRA exemption under Section 10(13A) .
Home-loan interest on a self-occupied house, up to Rs. 2,00,000 under Section 24(b). See home-loan interest under Section 24(b) .

An employee who cannot fill several of these will not reach the break-even and should stay in the new regime. An employee who fills most of them, especially one with a large HRA and a home loan, is the classic old-regime case.

How to find your own break-even

The break-even table uses a standard salary and no other income; your own position may differ, so the reliable method is to compute the tax both ways for your actual figures. The steps are:

Take your gross salary for the financial year 2026-27, and add any other taxable income such as bank interest or rent.
Compute the new-regime tax. Subtract the Rs. 75,000 standard deduction, apply the new-regime slabs, apply the Section 87A rebate if the total income is up to Rs. 12 lakh, and add the 4 per cent cess.
Add up your old-regime deductions. Include Section 80C, Section 80CCD(1B), Section 80D, the House Rent Allowance exemption, and home-loan interest, but leave out the employer NPS under 80CCD(2), which is neutral.
Compute the old-regime tax. Subtract the Rs. 50,000 standard deduction and your deductions, apply the old-regime slabs, apply the Rs. 12,500 rebate if the total income is up to Rs. 5 lakh, and add the cess.
Compare the two figures. The lower one is your regime for the year. If they are close, remember that the old regime needs a return filed on time to be chosen at all.

The quickest way to run steps 2 to 4 is the income-tax calculator , which computes both regimes at once from your salary and deductions, so you can read the break-even off directly by adjusting the deduction figure until the two taxes meet.

A worked example from the old-regime side

Take an employee on a gross salary of Rs. 15,00,000 who claims the full range of old-regime deductions: Rs. 1,50,000 under Section 80C , Rs. 50,000 under Section 80CCD(1B) , Rs. 25,000 under Section 80D , Rs. 2,00,000 of home-loan interest under Section 24(b), and a House Rent Allowance exemption of about Rs. 1,45,000, together with the Rs. 50,000 standard deduction. Those deductions total about Rs. 6,20,000, bringing taxable income down to roughly Rs. 8,80,000. The old-regime tax on that is about Rs. 88,500 before cess, or about Rs. 92,000 with cess.

Against the new regime’s Rs. 97,500 on the same salary, the old regime now wins, but only by about Rs. 5,500. This is the reality of the break-even: even an employee who claims almost every available deduction beats the new regime by a small margin at Rs. 15 lakh. Reduce any one of those deductions, drop the home loan or the large HRA, and the advantage disappears.

Cases where the old regime still wins

Three profiles cross the break-even often enough to make the old regime worth checking:

The fully-loaded metro employee, with a full Section 80C, the extra NPS deduction, a large House Rent Allowance from renting in a metro, and a home loan running near the Rs. 2 lakh interest cap.
The senior-citizen pensioner with significant interest income, who claims Section 80TTB up to Rs. 50,000 and health-insurance premiums under Section 80D, and who also benefits from the old regime’s higher Rs. 3 lakh or Rs. 5 lakh basic exemption.
The high earner near a surcharge threshold, where the interaction of deductions and surcharge can shift the answer, though at the very top the new regime’s 25 per cent surcharge cap gives it a structural edge over the old regime’s 37 per cent band.

For everyone else, and that is most government employees and pensioners, the new regime is lower, and the old regime should be chosen only after the tax has been computed both ways.

Frequently Asked Questions (FAQs)

What is the break-even point between the old and new tax regime?

The break-even is the level of total deductions at which the old regime’s tax equals the new regime’s tax for a given salary. Below that level the new regime is cheaper; above it the old regime is cheaper. The break-even rises with income: around a Rs. 15 lakh salary it is roughly Rs. 6 lakh of total deductions, and around Rs. 20 lakh it is about Rs. 7.5 lakh, counting the Rs. 50,000 standard deduction.

At what deduction level does the old regime become better?

It depends on the salary. For a resident individual on a Rs. 15 lakh salary in the financial year 2026-27, the old regime overtakes the new when total deductions, including the Rs. 50,000 standard deduction, cross about Rs. 6 lakh. On a Rs. 20 lakh salary the figure is about Rs. 7.5 lakh, and on a Rs. 25 lakh salary about Rs. 8.5 lakh. Below a gross salary of Rs. 12.75 lakh the new regime is almost unbeatable, because its tax is already nil.

Why is the new regime unbeatable below Rs. 12.75 lakh?

Because the new regime’s tax is nil there. The Section 87A rebate makes a total income up to Rs. 12 lakh tax-free, and the Rs. 75,000 standard deduction lifts the salaried threshold to Rs. 12.75 lakh. Since tax cannot go below zero, no amount of old-regime deductions can beat a nil tax, so the new regime is the better or equal choice for any salary up to Rs. 12.75 lakh.

Which deductions count toward the break-even?

The differential deductions, meaning those the old regime allows but the new regime does not: Section 80C up to Rs. 1.5 lakh, the extra Rs. 50,000 under Section 80CCD(1B), Section 80D health insurance, the House Rent Allowance exemption, and home-loan interest of up to Rs. 2 lakh under Section 24(b). The employer’s NPS contribution under Section 80CCD(2) is allowed in both regimes, so it is neutral and is left out of the break-even comparison.

How do I calculate my own break-even?

Compute the tax both ways. First work out the new-regime tax on your salary after the Rs. 75,000 standard deduction. Then add up your old-regime deductions, subtract them and the Rs. 50,000 standard deduction from your salary, and compute the old-regime tax. Whichever is lower is your regime for the year. The income-tax calculator does both computations at once, so the quickest method is to enter your figures and read off the lower tax.

Does the break-even change every year?

It can, whenever a Finance Act changes the slabs, the rebate, or the standard deduction. For the financial year 2026-27 the Finance Act 2026 left everything unchanged from 2025-26, so the break-even is the same as for assessment year 2026-27. Because a salaried person may choose the regime afresh each year, the break-even should be checked every year against the current deductions.

External references

References

Finance Act, 2025 and Finance Act, 2026: the new-regime slab table (nil up to Rs. 4 lakh, then 5, 10, 15, 20, 25, and 30 per cent), the Section 87A rebate of up to Rs. 60,000 for a total income up to Rs. 12 lakh, and the Rs. 75,000 standard deduction, all unchanged for the financial year 2026-27.
Income-tax Act, 1961, the old-regime slab rates (nil up to Rs. 2.5 lakh, 5 per cent to Rs. 5 lakh, 20 per cent to Rs. 10 lakh, and 30 per cent above), the Section 87A rebate of up to Rs. 12,500 for a total income up to Rs. 5 lakh, and the Rs. 50,000 standard deduction.
Income-tax Act, 1961, the differential deductions that the old regime allows and the new regime disallows: Section 80C (up to Rs. 1.5 lakh), Section 80CCD(1B) (additional Rs. 50,000 for NPS), Section 80D, Section 10(13A) House Rent Allowance, and Section 24(b) home-loan interest (up to Rs. 2 lakh), with Section 80CCD(2) allowed in both regimes.
Income-tax Act, marginal relief at the rebate threshold and at each surcharge threshold, and the 4 per cent health and education cess, applied in both regimes.
Break-even figures computed on the above rates for a resident individual below 60 for the financial year 2026-27, illustrative and to be confirmed for the individual’s own salary and deductions using the income-tax calculator.