Salary Tax Planning for Tax Year 2026-27: Maximise Take-Home Pay
At a Glance
| Parameter | New Regime (Default) | Old Regime (Opt-in) |
|---|---|---|
| Basic exemption | ₹4 lakh | ₹2.5 lakh (below 60) |
| Standard deduction | ₹75,000 | ₹50,000 |
| Effective zero-tax limit (salaried) | ₹12.75 lakh gross | ₹5 lakh net (with full 87A rebate) |
| Section 87A rebate | ₹60,000 — income up to ₹12 lakh | ₹12,500 — income up to ₹5 lakh |
| Section 80C (Section 123) | ❌ Not available | ✅ ₹1.5 lakh |
| HRA exemption | ❌ Not available | ✅ Available — based on formula |
| LTA | ❌ Not available | ✅ Available — 2 journeys in 4 years |
| Home loan interest — Section 24(b) [22(b)] | ❌ Not available | ✅ ₹2 lakh (self-occupied) |
| Employer NPS — Section 80CCD(2) | ✅ Up to 14% of basic salary | ✅ Up to 14% of basic salary |
| Children education allowance | ✅ ₹3,000/child/month (IT Rules 2026) | ✅ ₹3,000/child/month |
| Professional tax | ❌ Not available | ✅ Actual amount |
| Break-even deduction threshold | If deductions > ₹3.75 lakh | Old regime becomes better |
The Regime Decision — The Most Critical Annual Choice
Every salaried employee faces one essential decision at the start of each Tax Year: old regime or new? This choice determines TDS deductions throughout the year and must be communicated to the employer in writing. Getting it wrong means either excess TDS (followed by a refund claim) or a shortfall leading to interest under Section 234B.
As a general rule, if your deductions under the old regime — Section 80C, HRA, home loan interest, etc. — exceed ₹3.75 lakh in total, the old regime may save you more. On the other hand, if your deductions fall below that threshold, the new regime will likely result in lower overall liability.
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