It’s that time of the year again. Your HR is asking for "Investment Proofs," and you are staring at two options: Old Regime or New Regime.
In 2024, the government made the New Regime the "Default." In 2026, they made it even more attractive by tweaking the slabs. But does that mean the Old Regime is dead?
Not yet. As a finance student, I ran the numbers. There is a specific "Magic Number" where the Old Regime still wins. Here is the math.
1. The "Zero Tax" Reality (Income up to ₹7.5 Lakh)
If your total annual income is ₹7.5 Lakh or less, stop reading.
Choose the New Regime.
Why? Because with the Standard Deduction (₹50,000) and the Section 87A Rebate, your tax liability is ZERO. You don't need to invest in PPF, LIC, or HRA. Just select New Regime and enjoy your full salary.
2. The "Breakeven" Formula (For Income ₹10L - ₹15L)
This is where it gets tricky. If you earn more than ₹7.5 Lakh, you have to pay tax. But which bucket saves you more?
The Rule of ₹3.75 Lakhs:
Do you have deductions (HRA + 80C + 80D + Home Loan) greater than ₹3,75,000?
- YES? → Stick to the OLD Regime. You will save more.
- NO? → Switch to the NEW Regime. It’s simpler and cheaper.
NJ's Tip: Don't buy a useless LIC policy just to save tax. If you are forced to lock money for 20 years to save ₹10,000 in tax, you are actually losing money.
3. 2026 Tax Slabs Comparison Table
| Income Slab | New Regime Rate | Old Regime Rate |
|---|---|---|
| 0 - ₹3 Lakh | Nil | Nil |
| ₹3L - ₹6L | 5% | 5% (above 2.5L) |
| ₹6L - ₹9L | 10% | 20% (above 5L) |
| ₹12L - ₹15L | 20% | 30% (above 10L) |
Note: The New Regime rates are lower, but you lose all exemptions like HRA and LTA.
4. Who Should 100% Avoid the New Regime?
Stay in the Old Regime if you fall into this category:
- You live in a rented house in a Metro city (High HRA).
- You have a Home Loan (Section 24b deduction up to ₹2 Lakh).
- You contribute heavily to EPF and PPF.
If you check all three boxes, the Old Regime is a goldmine. For everyone else (especially freshers), the New Regime is usually better.
Final Verdict
Stop overcomplicating it. Calculate your total deductions. If they are less than ₹3.75 Lakhs, switch to New Regime and relax.