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Finance Sikh

By Ashish Malaviya · First published 2/11/2026

Old vs New Tax Regime: How Salaried People Can Compare Under Current Indian Tax Rules

Compare India’s old and new tax regimes by tax year, taxable income, eligible deductions and verified official rules, using an illustrative calculation method.

To make sure you have the correct figures to compare old vs new tax regimes, you will first need to know what tax year you are looking at. From the 1st April 2026, the Income-tax Act, 2025 will apply to tax years starting from that date. There is now no reference to previous years, it will instead be called a tax year. There could be references to previous years in relation to your returns, so whilst writing your article you need to be careful not to mix up the tax year example with any sections and rules from an old assessment year article.

Whilst the new regime is the default regime for eligible taxpayers, there could be an option to choose the old regime as a taxpayer. The new regime isn’t just “lower rates versus deductions.” You will need to calculate your taxable income and tax based on the rules of both regimes. This means you need to know:

What year you are looking at?

If your income was earned between the 1st April 2026 and 31st March 2027, you will be in Tax Year 2026-27 based on the new act. If your income was earned in the previous financial year, you can still refer to this as Assessment Year 2026-27 based on the old act. Even though they can look similar, you must make sure you always use the correct year and act in the official calculator.

[REVIEW BEFORE PUBLISHING] What are the current rates, rebates, standard deduction, surcharge, cess, eligibility and any special treatment of income in Tax Year 2026-27 based on the Income-tax Act, 2025 and Finance Act? You will need to double check these figures are correct from the official portal and legislation. Don’t just copy across previous tax slabs as the title may suggest it is the latest.

Know what income you’re comparing.

You will need to start with the same salary and income. Salary can have multiple components and the amount you received into your bank account may not be the same amount of taxable income. You will need to know what changes to your taxable income based on your employer contributing, allowances, perquisites, interest, capital gains and other incomes. You will need to know based on the rules what to include, what is exempt and what you can deduct.

What deductions and exemptions are eligible?

There could be some deductions and exemptions available in the old regime that aren’t available / limited in the new regime. The new regime may also have different rates and conditions. Just because you have made a payment doesn’t mean you will get a deduction. You will need to know if they are eligible based on the provision and whether there is any documentation or limits.

How to compare step-by-step.

Start by gathering the salary statement for the year, any form 16 available, other income and eligible deductions. Calculate your taxable income based on the old regime and only the deductions available. Then calculate your taxable income based on the new regime and eligible deductions and exemptions. Apply the correct rates and rebates (double checked) for the correct tax year. Compare the total tax including any cess and surcharge.

This will give you the same income and time period for both sides of the comparison. If you are making a deduction in one regime that isn’t available in the other, this won’t be a valid comparison. Using a spreadsheet can help you see how each item has affected your total. However, you should use the official calculator to double check. It can also be useful to keep a note of your assumptions so you can go back and review if there has been any changes to your salary components or tax rules.

Example calculation.

Let’s imagine you have a taxable income of ₹10,00,000 p.a. This is just an example to show you how to make the comparison, not to work out your tax. Your taxable income will vary based on what deductions and exemptions are available in each regime. From there you can apply the correct slab rates and rebates. To make sure you have a valid numerical comparison you will need to use the verified official rates for the correct tax year.

Don’t publish the tax total until you have checked the rates you are using are correct and all your assumptions are correct. If you are using a simplified example with no capital gains, special rate income, surcharge or anything else, make this clear. Whilst it can be a good way to learn, it shouldn’t be presented as the outcome for all salaried individuals with that amount of income.

Deductions can be confusing.

You may think that having deductions means you will get a better outcome with the old regime. Or you may think the new regime will be better due to the headline rates. However, it depends on your taxable income in each regime and what rates, rebates, deductions, exemptions and other tax you have. Two employees with the same gross salary can have different outcomes based on their eligible items.

Just because you can make a payment to save on tax, doesn’t mean it is a good financial decision. You shouldn’t make a contribution just to save on tax without considering any lock-in, liquidity, risk of investment, insurance need or cash flow in your household. The tax rules only tell you what will happen in terms of tax. It doesn’t mean it will be suitable for your goals.

Declaration to employer.

You may be asked to declare to your employer which regime you want to use. This will affect the amount of tax you have had deducted throughout the year. However, this doesn’t mean you will be using that option for your final calculation. Based on the rules you may have an option, however you may not be as flexible if you are a non-business taxpayer. [REVIEW BEFORE PUBLISHING] What is the current process for declaring your regime? Is there a Form 10-IEA or equivalent required for your taxpayer category based on the Income-tax Act, 2025?

Before you file your return, you should review your calculation. If you have a different amount of tax deducted at source, you may find you have a balance to pay or receive a refund based on the facts. Try not to assume this is an error by your employer or tax portal. Instead look into what the issue is using the official records.

Special considerations.

There are a number of factors that can make comparing the regimes more complicated. This can include capital gains, dividends, foreign income, multiple employers, house property, business income and certain deductions. Some income may be taxed at special rates. This example only covers salary. If your facts are complicated, you should seek advice from a qualified tax professional. General blogs shouldn’t be treated like a personal calculation.

Tax rules can be amended via legislation, notifications and official guidance. Make sure to state when this article was last checked and update if any rules have changed. Direct people to the official Income Tax Department portal and current legislation.

Common mistakes to avoid.

Don’t get confused between financial year, tax year and assessment year. Don’t use the same deductions for both regimes without checking they are eligible. Don’t compare tax before cess with tax after cess. Don’t assume you will use the same regime in your return as you declared to your employer. Don’t use the same slab rates from a previous year without checking the official source.

Conclusion.

To make a fair comparison between old and new regimes, you need to have the same income, correct tax year, verified rules and only eligible deductions. The headline slab rate is only part of the calculation. As there has been a change in the legal framework from April 2026, you need to be careful with the terminology used for tax years and statutory references. This article shows you how to calculate, but doesn’t recommend a regime or calculate your tax.

Salary slips, Form 16 and taxable income.

A salary slip can be a useful tool but it isn’t a full calculation. Make sure your salary components for the year match what your employer has stated in their tax statement. Check if there is any income from a previous employer, interest from your bank, rent or investments. If you have received a salary from multiple employers in the year, make sure the information is added together correctly. Any deductions you have included in your payroll calculation should still meet the legal criteria for your final return.

Keep any evidence to support your eligible deductions and exemptions. Depending on the provision, you may need specific evidence. Not everything you see in your bank statement will be eligible to deduct. If there has been a change to the tax rule during the transition to the Income-tax Act, 2025, make sure you have verified the provision for the exact tax year.

Why is my take home pay different to my taxable income?

Your take home pay shows what you have had deducted and paid in your payroll. Your taxable income is calculated based on the rules. They can be different due to tax, eligible deductions, exemptions, perquisites, employer contributions and other incomes. Starting with the amount you have received into your bank account could lead to an incorrect comparison. Start with the correct income details and use the official calculation.

Keep a note of your comparison.

Make sure you keep a note of your income details, deductions assumptions, tax year, calculator results and official references. This can help you explain why your result has changed if there are any corrections to your salary components or updates to any rules. Don’t just keep a note of the final figure. Without knowing what has gone into the calculation, you won’t be able to check. If there is a discrepancy between what you’ve had deducted in your payroll, compare the employer’s records and official calculation to see what has caused the difference.

You should also consider the difference between your tax liability and cash flow decisions. You may have an eligible deduction but it is linked to a product that has a lock-in or other cost. The tax calculation will show you how much you would have based on the rules. However, it won’t tell you if it is a sensible payment to make in your household.

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Sources

Educational information only. Verify current rules and consider qualified advice for personal decisions.