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Old vs New Tax Regime 2026: Which One Saves You More?

By Raja Mahakul · Published: June 10, 2026 · 6 min read

1. Introduction

Every salaried Indian faces the same question at the start of every financial year: Old Tax Regime or New Tax Regime? With the Union Budget 2025-26 making the New Regime even more attractive — raising the basic exemption limit to ₹4 lakh and restructuring slabs — the choice has never been more important. This guide breaks down both regimes, compares them side-by-side, and helps you decide which one puts more money in your pocket for FY 2025-26 (AY 2026-27).

2. Old Tax Regime

The Old Tax Regime has been the default system for Indian taxpayers for decades. Its key feature is a rich set of deductions and exemptions that can significantly reduce your taxable income if you invest and plan well.

Key deductions available:

Section 80C – Up to ₹1.5 lakh (PPF, ELSS, LIC, home loan principal, etc.)
Section 80D – Health insurance premium up to ₹25,000 (₹50,000 for senior citizens)
HRA Exemption – House Rent Allowance for salaried employees in rented accommodation
Section 24(b) – Home loan interest up to ₹2 lakh
Standard Deduction – ₹50,000 for salaried individuals
NPS (80CCD) – Additional ₹50,000 over the 80C limit

Old Regime slabs (FY 2025-26): 0% up to ₹2.5L · 5% (₹2.5L–₹5L) · 20% (₹5L–₹10L) · 30% above ₹10L. A rebate under Section 87A makes income up to ₹5L effectively tax-free.

3. New Tax Regime (Default from FY 2024-25)

Introduced in Budget 2020 and made the default regime from FY 2023-24, the New Tax Regime offers lower slab rates in exchange for forgoing most deductions and exemptions.

Revised slabs for FY 2025-26:

Up to ₹4,00,000 – Nil
₹4,00,001 – ₹8,00,000 – 5%
₹8,00,001 – ₹12,00,000 – 10%
₹12,00,001 – ₹16,00,000 – 15%
₹16,00,001 – ₹20,00,000 – 20%
₹20,00,001 – ₹24,00,000 – 25%
Above ₹24,00,000 – 30%

Under the New Regime, income up to ₹12 lakh is effectively tax-free for resident individuals (after the enhanced Section 87A rebate of ₹60,000). The standard deduction of ₹75,000 is also available, making the effective zero-tax threshold ₹12.75 lakh for salaried taxpayers.

4. Comparison Table

Feature	Old Regime	New Regime
Basic Exemption	₹2.5 Lakh	₹4 Lakh
80C Deduction	✅ Up to ₹1.5L	❌ Not available
HRA Exemption	✅ Available	❌ Not available
Standard Deduction	₹50,000	₹75,000
Section 87A Rebate	Up to ₹5L income	Up to ₹12L income
Home Loan Interest (24b)	✅ Up to ₹2L	❌ Not available
Best suited for	High deduction earners	Most salaried taxpayers

5. Which One is Better?

The answer depends on your total deductions. Here is a practical rule of thumb for FY 2025-26:

Income up to ₹12.75 lakh? → New Regime is almost always better (zero tax after rebate + standard deduction).
Income ₹12.75L–₹18L with large deductions? → Run both calculations. Old Regime can win if 80C + HRA + 80D together exceed ₹4–5 lakh.
Income above ₹18L with heavy investments? → Old Regime often saves more if deductions exceed ₹5.5L+.
No investments or renting without HRA? → New Regime will almost always be cheaper.

Use Numvexa's Income Tax Calculator to enter your actual numbers and compare both regimes instantly.

6. Frequently Asked Questions

Can I switch regimes every year?

Salaried individuals (without business income) can switch between regimes every financial year. Those with business income can switch only once — from New to Old — and cannot switch back.

Is NPS deduction available in the New Regime?

The employer's contribution to NPS (Section 80CCD(2)) is still available as a deduction in the New Regime. The employee's own contribution under 80CCD(1B) is not.

What happens if I don't choose a regime?

From FY 2023-24 onward, the New Tax Regime is the default. If you do not submit Form 10-IEA, your employer will deduct TDS under the New Regime automatically.

Which regime is better for a ₹10 lakh salary?

For a ₹10 lakh gross salary, the New Regime typically results in zero or very low tax after the ₹60,000 rebate and ₹75,000 standard deduction. The Old Regime may save slightly more only if you have ₹1.5L in 80C + significant HRA + 80D deductions.

7. Conclusion

The New Tax Regime 2026 is a strong default choice for most Indian salaried employees — especially those earning up to ₹12.75 lakh or those with limited deductions. For higher earners with substantial investments, HRA, and home loans, the Old Regime may still offer meaningful tax savings.

The smartest move? Calculate both. Use Numvexa's free Income Tax Calculator to get an instant, accurate comparison — no sign-up needed.

Disclaimer: This article is for informational purposes only and does not constitute professional tax advice. Tax laws are subject to change. Consult a Chartered Accountant for personalised guidance.

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CTC vs In-Hand Salary: What's the Difference?

By Raja Mahakul · Published: June 11, 2026 · 5 min read

1. Introduction

You just got a job offer. The letter says your CTC is ₹8,00,000 per year. You do the quick math — that's about ₹66,667 a month. But when your first salary actually hits your bank account, it's closer to ₹52,000. What happened to the rest?

This is one of the most common surprises for first-time employees in India. The gap between your CTC (Cost to Company) and your in-hand salary is real, and it's not a mistake. This guide explains exactly why, in plain language.

2. What is CTC?

CTC stands for Cost to Company. It is the total amount your employer spends on you in a year. This includes your actual salary plus all the extra costs the company pays on your behalf — like their share of your Provident Fund, gratuity provision, health insurance, and any other benefits.

Think of CTC as the employer's total bill for hiring you. It is not the amount you take home.

CTC typically includes:

Basic Salary – The fixed base component, usually 40–50% of CTC.
House Rent Allowance (HRA) – Paid to help cover rent costs.
Special / Performance Allowances – Variable top-up components.
Employer's PF Contribution – 12% of basic salary paid by your employer to your EPF account.
Gratuity – A retirement benefit provisioned at ~4.81% of basic salary per year.
Medical / Insurance Benefits – Any health cover the company provides.
Bonuses – Annual or performance-linked pay-outs (sometimes included, sometimes extra).

3. What is In-Hand (Take-Home) Salary?

In-hand salary (also called take-home salary) is the amount actually credited to your bank account every month after all deductions. It is always lower than what your CTC suggests, because several amounts are either deducted from your pay or set aside before you see the money.

4. Why Are CTC and In-Hand Salary Different?

The difference comes from two directions:

Items included in CTC but not paid as cash — For example, the employer's PF contribution and gratuity go into a retirement fund, not your bank account. Medical insurance is paid to a provider, not to you.
Deductions from your gross salary — Your employee PF contribution, Professional Tax, and TDS (income tax) are cut from your gross pay before you receive it.

5. Common Deductions Explained

Employee Provident Fund (EPF)

You contribute 12% of your Basic Salary every month to your EPF account. Your employer also contributes 12% — but that is already counted inside your CTC, so it does not increase your take-home. Your own 12% is deducted from your gross salary.

Professional Tax

Professional Tax is a state-level tax levied on salaried employees. The amount varies by state — in most states it is around ₹200 per month (₹2,400 per year), with the maximum capped at ₹2,500 per year. Not all states charge it (e.g., Delhi does not).

Income Tax (TDS)

Your employer deducts Tax Deducted at Source (TDS) from your salary every month based on your projected annual income and tax regime. If you declare investments under 80C, HRA, or other deductions to your employer, your TDS will be lower. If you do not declare anything, TDS will be higher. Use Numvexa's Income Tax Calculator to estimate your TDS.

6. Simple Example: ₹8 LPA CTC

Let's walk through a real-world example for someone with a CTC of ₹8,00,000 per year.

Component	Per Month	Per Year
Basic Salary (40% of CTC)	₹26,667	₹3,20,000
HRA (20% of CTC)	₹13,333	₹1,60,000
Special Allowance	₹16,933	₹2,03,200
Employer's PF (12% of Basic)	₹3,200	₹38,400
Gratuity provision (~4.81%)	₹1,067	₹12,800
Medical Insurance (employer)	₹517	₹6,200
= Total CTC	≈ ₹61,717	₹7,40,600*

* Rounded. Actual CTC structure varies by company.

Now let's calculate in-hand salary:

Deduction	Per Month
Gross Salary (Basic + HRA + Allowance)	₹56,933
— Employee PF (12% of Basic)	− ₹3,200
— Professional Tax	− ₹200
— Income Tax (TDS, estimated)	− ₹1,500
= In-Hand Salary	≈ ₹52,033

So from a CTC of ~₹66,667/month, you actually receive roughly ₹52,000 in hand. That's a difference of about ₹14,600 — going towards PF savings, taxes, and employer-funded benefits.

7. Quick Tips to Maximise Your In-Hand Salary

Declare your HRA – If you pay rent, submit your rent receipts to your employer to reduce your TDS.
Use Section 80C – Declare PPF, ELSS, or LIC investments up to ₹1.5L to lower taxable income (Old Regime).
Choose the right tax regime – Use our Income Tax Calculator to compare Old vs New Regime and pick the one with lower TDS.
Check your salary structure – Ask HR if allowances can be restructured (e.g., meal coupons, LTA, internet allowance) — some are fully or partially tax-exempt.
Voluntary PF opt-out – For salaries above ₹15,000 basic, you may choose not to contribute to PF beyond the mandatory limit, increasing take-home.

8. Conclusion

CTC is your employer's total cost — it includes components that never land in your account. In-hand salary is what you actually get after PF contributions, Professional Tax, and income tax deductions. For a ₹8 LPA CTC, you can realistically expect around ₹50,000–₹54,000 in hand per month.

The best way to know your exact take-home? Use Numvexa's free Salary Calculator — enter your CTC and get a full breakdown instantly.

Disclaimer: This article is for informational purposes only. Actual salary structures vary by company and state. Consult your HR or a Chartered Accountant for personalised guidance.

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