- New tax regime is default for salaries, risking overpayment of Rs 1.5 lakh for some taxpayers
- New regime offers zero tax up to Rs 12.75 lakh but removes deductions like HRA and 80C
- Old regime keeps deductions but has higher slabs and no Rs 60,000 rebate
A quiet default switch in India's tax system is leaving some salaried professionals unknowingly overpaying, and the difference could run into lakhs.
Chartered accountant Nitin Kaushik warns that the new tax regime, now automatically applied to salaries, is not the universal win it appears to be.
"The new tax regime is now the default setting for your salary, but following the herd could cost you over Rs 1.5 lakh in unnecessary taxes," Kaushik wrote in an X post, urging taxpayers to rethink before filing.
At the heart of FY 2026-27 is what he calls a "binary choice between high exemptions and low rates."
The new regime offers a zero-tax threshold up to Rs 12.75 lakh, including standard deduction, but eliminates deductions like HRA, 80C, and 80D. The old regime, meanwhile, keeps those benefits but comes with steeper tax slabs and forfeits the Rs 60,000 rebate.
Kaushik highlights a critical "break-even point" many miss.
"If your total deductions...are less than Rs 4.25 lakh, the new regime is a mathematical no-brainer," he explained. But once deductions cross roughly Rs 4.5 lakh, "the old regime starts winning back every rupee."
He illustrates this with two employees earning Rs 18 lakh. One, with minimal deductions of Rs 1.5 lakh, could save about Rs 85,000 by switching to the new regime. The other, with a Rs 40 lakh home loan, Rs 2 lakh in interest, and high rent in Bengaluru, clocks deductions of Rs 5.5 lakh, making the old regime cheaper by around Rs 40,000 annually.
Recent tweaks have further complicated the decision. The expansion of the 50% HRA bracket to cities like Pune and Bengaluru has "given the old regime a new lease on life," particularly for tech professionals.
"The government isn't forcing you to switch," Kaushik noted. "They are just making the default so attractive that you only stay in the old regime if you are aggressively investing in your future."
"If you aren't running your numbers through a 2026 calculator this week, you're just guessing with your savings," he said.
