Old vs New Tax Regime 2026: As salaried employees across organisations are being asked to formally choose between the old and new tax regimes, confusion around which option is more beneficial has intensified. Tax experts have highlighted a key concept that simplifies this decision — the ‘break-even point’, which determines when one regime becomes more beneficial than the other based on income structure and deductions.

Speaking with Zee Business, tax experts Sunil Garg and Vivek Jalan explained that the choice between regimes is not universal and depends entirely on how much deduction a taxpayer can actually claim versus the simplified structure of the new tax regime.

Sunil Garg explained that FY 2025–26 (AY 2026–27) is a significant year as many employees are now defaulted into the new tax regime unless they actively opt for the old one.

• The old tax regime allows multiple deductions such as HRA, Section 80C, 80D, home loan interest, education loans, and other exemptions.
• The new tax regime offers simplified taxation with fewer deductions but more relaxed income slabs.

He further highlighted that salaried taxpayers can now switch regimes while filing returns in many cases, making it even more important to evaluate both options carefully.

The break-even point refers to the level of total deductions a taxpayer must claim so that the old tax regime becomes more beneficial than the new tax regime.

Experts explained it in simple terms:

• If deductions are low, the new regime is better due to simplicity and lower compliance.
• If deductions are high and properly utilised, the old regime provides higher tax savings.

A small structural difference between regimes at lower income levels exists, but the real decision depends on how deductions scale with income.

Tax experts explained the practical work of break-even point through the following scenarios:

Rs 15 lakh salary scenario

• At a Rs 15 lakh salary level, HRA plays a major role in reducing taxable income.
• HRA alone can reduce taxable income significantly (in some cases around Rs 4 lakh depending on rent and location).
• Along with deductions under 80C, 80D, and other exemptions, the old regime can become competitive.
• At this level, tax savings depend heavily on how well deductions are structured.

Vivek Jalan explained a clearer break-even benchmark for higher incomes:

At around Rs 25 lakh income, the old regime becomes beneficial only if deductions are approximately Rs 6.87 lakh or more.

If deductions are below this level:

The new tax regime is generally more beneficial and simpler

Rs 40 lakh salary scenario

For higher salary brackets, the break-even threshold increases further:

The old regime becomes advantageous only if deductions are in the range of Rs 8 lakh to Rs 10 lakh or more

• HRA
• Section 80C and 80D investments
• Home loan interest
• Education loans and other exemptions

Garg also provided a practical guideline:

If total deductions exceed approximately Rs 7 lakh, the old tax regime generally becomes more beneficial

This acts as a simplified reference point before detailed salary-wise calculation.

According to the experts, the old regime is more suitable for:

• Salaried individuals with high HRA (especially in metro cities)
• Taxpayers with home loans
• Those actively investing under Section 80C and 80D
• Individuals with education loans or multiple exemptions

In such cases, total deductions can often cross the break-even threshold, making the old regime more tax-efficient.

Jalan explained that the new regime is better for taxpayers who:

• Do not claim significant deductions
• Prefer a simpler tax structure without documentation
• Do not have major HRA or investment-linked exemptions

For such individuals, the new regime often results in comparable or better tax outcomes with much less compliance effort.

Experts also highlighted that employer contributions can influence the break-even calculation:

• Employer contributions to NPS (National Pension System) can significantly reduce taxable income.
• Other benefits such as car perquisites for higher-income employees can also affect final tax liability.

These factors must be included while evaluating which regime is more beneficial.

Garg cautioned taxpayers to avoid incorrect or unsupported claims:

• Fake deductions can lead to tax scrutiny and notices
• Proper documentation is required for HRA, insurance, donations, and other exemptions
• The tax system now has strong verification mechanisms

Tax experts concluded that the choice between old and new tax regimes depends entirely on individual financial structure.

• The new tax regime offers simplicity and fewer compliance requirements.
• The old tax regime offers higher savings potential but requires careful planning and proper documentation.

Ultimately, the break-even point—where deductions outweigh the benefits of the new regime—is the key factor that should guide every salaried taxpayer’s decision in 2026.