Tax6 min readEZER Team
Old vs New Tax Regime: Helping Employees Actually Decide
Every salaried employee in India now has to actively choose between two tax regimes, and most make that choice once, on a form, without ever seeing the actual numbers side by side.
Under the new regime, income up to ₹12 lakh is effectively tax-free, thanks to a rebate of up to ₹60,000. For salaried employees, the ₹75,000 standard deduction extends that threshold to ₹12.75 lakh gross.
Since 1 April 2026 all of this sits in the Income-tax Act, 2025, which replaced the 1961 Act. Three things change for payroll: the new regime is the default and the old one is an opt-out, the financial and assessment year are replaced by a single tax year, and the annual salary TDS certificate is Form 130 rather than Form 16. The slabs below carried over unchanged into tax year 2026-27.
The new regime, in numbers
| Slab | Rate |
|---|---|
| Up to ₹4,00,000 | Nil |
| ₹4,00,000–₹8,00,000 | 5% |
| ₹8,00,000–₹12,00,000 | 10% |
| ₹12,00,000–₹16,00,000 | 15% |
| ₹16,00,000–₹20,00,000 | 20% |
| ₹20,00,000–₹24,00,000 | 25% |
| Above ₹24,00,000 | 30% |
Plus a ₹75,000 standard deduction, and minimal other deductions. The main survivor is the employer's NPS contribution, allowed up to 14% of salary.
The old regime, in numbers
| Slab | Rate |
|---|---|
| Up to ₹2,50,000 | Nil |
| ₹2,50,000–₹5,00,000 | 5% |
| ₹5,00,000–₹10,00,000 | 20% |
| Above ₹10,00,000 | 30% |
Plus a ₹50,000 standard deduction, and the full menu of deductions: investments under what used to be section 80C (up to ₹1.5 lakh), HRA exemption, health insurance (the old 80D), home loan interest, and more. The 2025 Act renumbered these sections; the limits carried over.
So which one actually wins?
New regime tends to win when:
Little to no HRA, home loan, or 80C-style investment to claim. Common for younger employees or anyone without structured investments yet. Also simpler: no proofs to collect.
Old regime tends to win when:
Significant rent with HRA, a home loan, and maxed-out 80C-style investments. Combined deductions can outweigh the new regime's lower slabs, particularly in the ₹10–20 lakh range.
The catch: the crossover point isn't a fixed number. It shifts with every employee's actual HRA, rent, investments and home loan interest.
What HR teams can actually do
- Show employees both numbers side by side, from their actual salary structure.
- Do this before the investment declaration window opens, not after.
- Remember: salaried employees can switch every year; only business-income filers are limited to switching once.
- Show the regime that was applied on Form 130 at year end, so nobody is surprised by it.
EZER shows this comparison to every employee, automatically
Old vs new, calculated from their real declaration, before they commit, not after.
Request a DemoThis is general information about Indian payroll and statutory rules, not legal or tax advice. Rules are still being notified state by state, so check your own position with your consultant before you act on it.
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