📌 Key Takeaway: Complete comparative analysis of the New Tax Regime (Section 115BAC) versus Old Tax Regime: updated slab rates, ₹75,000 standard deduction, Section 87A rebate, and the breakeven calculation.
The Default Regime Paradigm (Section 115BAC)
For Assessment Year 2026-27 (Financial Year 2025-26), the New Tax Regime under Section 115BAC continues as the default tax regime for individual taxpayers, Hindu Undivided Families (HUF), and Association of Persons (AOP). While the New Regime offers lower progressive slab rates and a higher rebate limit, taxpayers retain the legal option to switch to the Old Tax Regime if their aggregate itemized deductions (80C, 80D, HRA, Home Loan Interest) exceed the calculated breakeven threshold.
Revised Slab Rates under New Tax Regime (AY 2026-27)
| Total Income Slab (₹) | New Regime Tax Rate | Old Regime Tax Rate |
|---|---|---|
| Up to ₹3,000,000 | Nil | Nil (Up to ₹2.5L) |
| ₹3,00,001 to ₹7,00,000 | 5% | 5% (₹2.5L to ₹5L) |
| ₹7,00,001 to ₹10,00,000 | 10% | 20% (₹5L to ₹10L) |
| ₹10,00,001 to ₹12,00,000 | 15% | 30% (Above ₹10L) |
| ₹12,00,001 to ₹15,00,000 | 20% | 30% |
| Above ₹15,00,000 | 30% | 30% |
The ₹7.75 Lakh Zero-Tax Benefit for Salaried Professionals
Under the New Tax Regime, salaried employees pay ₹0 Income Tax on annual earnings up to ₹7,75,000. This is achieved through:
- Enhanced Standard Deduction: Flat ₹75,000 deduction under Section 16(ia) directly reducing gross salary.
- Section 87A Tax Rebate: Full tax rebate up to ₹25,000 on taxable income up to ₹7,00,000, bringing net income tax liability to absolute zero.
Breakeven Deduction Threshold Calculation
For an individual earning ₹15 Lakhs, the Old Regime is beneficial ONLY if total deductions (Section 80C ₹1.5L + Section 80D ₹50k + Section 24b Home Loan Interest ₹2L + HRA exemption) exceed ₹3,75,000 to ₹4,00,000. For earners with modest investment deductions, the New Tax Regime delivers superior net in-hand savings with zero documentation paperwork.