ITR 2026: The new tax regime saves taxpayers earning Rs 25 lakh-Rs 1 crore up to Rs 1.5 lakh; here's how

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The Income Tax Return (ITR) filing season for Assessment Year 2026-27 has once again brought the spotlight back to one of the biggest decisions for salaried taxpayers—whether to choose the old tax regime or the new tax regime. While many taxpayers continue to believe that the old regime is better because it offers deductions and exemptions, recent tax comparisons indicate that individuals earning between ₹25 lakh and ₹1 crore could actually save up to approximately ₹1.5 lakh by opting for the new tax regime, depending on their income structure and eligible deductions.

The new tax regime has gradually become the preferred option for many professionals because it offers lower tax rates, a higher standard deduction for salaried employees, and a much simpler filing process. However, the final decision should always depend on your individual financial profile rather than following a one-size-fits-all approach.

Why the New Tax Regime Is Becoming More Attractive

When the new tax regime was first introduced, taxpayers were hesitant because they had to give up several popular deductions such as Section 80C investments, health insurance deductions, House Rent Allowance (HRA), and home loan benefits for self-occupied properties.

Over the last few years, however, the government has steadily improved the new regime by increasing the standard deduction and revising tax slabs to reduce the overall tax burden for salaried individuals. As a result, many taxpayers with higher incomes now find the new regime more rewarding than before.

The biggest advantage is simplicity. Instead of planning multiple investments solely for tax-saving purposes, taxpayers can focus on their financial goals while benefiting from lower tax rates.

How Tax Savings Can Reach ₹1.5 Lakh

A recent tax comparison based on a salaried resident employee earning between ₹25 lakh and ₹1 crore demonstrates that the new tax regime can significantly reduce overall tax liability even after considering common deductions available under the old regime.

The comparison assumes that under the old regime, the taxpayer claims deductions such as:

• Section 80C investments
• Health insurance deduction under Section 80D
• House Rent Allowance (HRA)
• Standard deduction

Despite these deductions, the lower slab rates available under the new tax regime often result in a lower final tax outgo for higher-income earners. At salary levels of ₹75 lakh and ₹1 crore, where surcharge also becomes applicable, the new regime may still deliver savings of nearly ₹1.5 lakh compared with the old regime in common scenarios.

Illustrative Tax Comparison

Although actual tax liability depends on each individual's income structure and deductions, a broad comparison shows the trend:

These figures are indicative and can vary depending on exemptions, allowances, capital gains, and other sources of income.

Standard Deduction Makes a Big Difference

One of the biggest improvements in the new tax regime is the higher standard deduction available to salaried employees.

Unlike earlier years, salaried taxpayers no longer lose this important benefit simply because they choose the new regime. This change has narrowed the gap between both tax systems and made the new regime attractive for professionals who have limited investments under Section 80C or minimal deductible expenses.

Who Should Consider the New Tax Regime?

The new tax regime may be suitable for taxpayers who:

• Earn a regular salary.
• Have limited tax-saving investments.
• Do not claim significant HRA exemptions.
• Do not have a large self-occupied home loan deduction.
• Prefer a simple and hassle-free ITR filing process.
• Want to avoid making unnecessary investments only for tax savings.

Such taxpayers often discover that lower tax rates compensate for the deductions they give up.

When the Old Tax Regime May Still Be Better

The old regime has certainly not become irrelevant.

It can still be beneficial if you regularly claim substantial deductions and exemptions such as:

• Maximum investment under Section 80C.
• Health insurance premium deduction.
• Significant House Rent Allowance exemption.
• Interest deduction on eligible home loans.
• Other salary exemptions available under the old regime.

If the total deductions are high enough, the old regime may continue to produce a lower tax liability for some individuals. This is why taxpayers should calculate taxes under both systems before filing their return.

Tax Planning Should Go Beyond Saving Tax

Financial experts often advise taxpayers not to invest merely for tax benefits.

For example, investing in a product only because it qualifies under Section 80C may not always align with long-term financial objectives. The new tax regime gives taxpayers greater flexibility to choose investments based on returns, liquidity, and personal financial goals rather than tax considerations.

This approach helps improve overall financial planning instead of focusing only on reducing tax liability.

Additional Benefits Still Available Under the New Regime

A common misconception is that the new tax regime offers no deductions at all.

In reality, several important benefits continue to remain available, including:

• Standard deduction for salaried employees.
• Employer contribution to the National Pension System (NPS), subject to applicable limits.
• Employer contribution to EPF within prescribed limits.
• Deduction for interest on let-out property in eligible cases.
• Certain exempt allowances and employer-provided perquisites.
• Tax exemptions for gratuity, leave encashment, and specified retirement benefits, wherever applicable.

These provisions further strengthen the appeal of the new tax regime for many salaried individuals.

Before Filing Your ITR

Before selecting your preferred tax regime, consider the following checklist:

• Calculate tax under both regimes.
• Verify your Form 16, AIS, and Form 26AS.
• Include all sources of income.
• Review eligible deductions carefully.
• Consider future investment goals instead of tax savings alone.
• Consult a qualified tax professional if your income includes capital gains, business income, foreign assets, or multiple income sources.

Making an informed comparison can prevent paying unnecessary tax and ensure that you choose the most beneficial option.

Conclusion

The 2026 ITR filing season highlights how significantly the tax landscape has evolved. For salaried taxpayers earning between ₹25 lakh and ₹1 crore, the new tax regime has emerged as a compelling option, with potential savings reaching nearly ₹1.5 lakh in many standard scenarios. Lower tax rates, a higher standard deduction, and reduced compliance make it particularly attractive for individuals who do not claim substantial deductions.

That said, the decision should never be based solely on income level. Taxpayers with significant investments, housing benefits, or other eligible exemptions may still find the old regime more advantageous. The smartest approach is to compare tax liability under both regimes and select the one that best aligns with your financial profile and long-term objectives. 

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