- For a ₹10 lakh salary in FY 2025-26, the old tax regime offers higher deductions but lower tax slabs, while the new regime has simpler slabs but fewer deductions.
- Under the old regime, your tax outgo could be as low as ₹78,000 (with full deductions), but under the new regime, it starts at ₹93,750 (without deductions).
- Key deductions like Section 80C (up to ₹1.5 lakh), Section 80D (health insurance), and HRA can significantly reduce tax liability in the old regime.
- The new regime is beneficial if you don’t claim deductions or have fewer tax-saving investments, but the old regime can save you more if you maximize eligible deductions.
- Always use the Income Tax Calculator to compare both regimes before filing your returns.
Understanding the Basics: Income Tax Slabs and Regimes in India (2026)
Taxes are a part of every salaried professional’s life in India. For the financial year 2025-26 (assessment year 2026-27), the Income Tax Department offers two ways to calculate your tax liability: the old tax regime and the new tax regime. Each has its own set of rules, slabs, and benefits.
The old regime is the traditional system where you can claim various deductions and exemptions to reduce your taxable income. The new regime, introduced in Budget 2020, offers lower tax rates but with fewer deductions. Your choice depends on your financial situation, investments, and ability to claim deductions.
What Are Tax Slabs?
Tax slabs are income ranges where different tax rates apply. For example, if your income is ₹10 lakh, part of it may be taxed at 5%, part at 20%, and the remaining at 30%. The slabs differ between the old and new regimes, which is why your tax outgo can vary significantly.
Why Does the Regime Matter for You?
If you earn ₹10 lakh per annum (LPA), your tax liability can differ by ₹15,000 to ₹50,000 depending on the regime you choose. The old regime can be tax-efficient if you have investments in PPF, ELSS, or pay HRA. The new regime is simpler but may cost you more in taxes if you don’t claim deductions.
In this guide, we’ll break down both regimes, compare their tax outgo for a ₹10 lakh salary, and help you decide which one suits you better. Remember, this is for informational purposes only—always consult a qualified advisor before making tax decisions.
Income Tax Slabs for ₹10 Lakh Salary: Old Regime (FY 2025-26)
The old tax regime follows a progressive tax structure with multiple slabs and higher rates for higher incomes. For FY 2025-26, the slabs are as follows (for individuals below 60 years):
| Income Slab (₹) | Tax Rate | Tax Amount (₹) |
|---|---|---|
| Up to 3,00,000 | 0% | 0 |
| 3,00,001 to 6,00,000 | 5% | 15,000 |
| 6,00,001 to 9,00,000 | 10% | 30,000 |
| 9,00,001 to 12,00,000 | 15% | 45,000 |
At first glance, a ₹10 lakh salary falls into the 15% slab. But here’s the catch: the old regime allows you to reduce your taxable income using deductions. Without any deductions, your tax would be:
- ₹0 on first ₹3 lakh
- 5% of ₹3 lakh (₹6 lakh - ₹3 lakh) = ₹15,000
- 10% of ₹3 lakh (₹9 lakh - ₹6 lakh) = ₹30,000
- 15% of ₹1 lakh (₹10 lakh - ₹9 lakh) = ₹15,000
- Total tax without deductions: ₹60,000
How Deductions Can Slash Your Tax Bill
The old regime’s real power lies in deductions. Here are the key ones that can reduce your taxable income from ₹10 lakh:
- Section 80C: Up to ₹1.5 lakh for investments like PPF, ELSS, EPF, and life insurance premiums.
- Section 80D: Up to ₹25,000 for health insurance (₹50,000 if you’re a senior citizen).
- HRA (House Rent Allowance): Exempt up to 50% of basic salary (for metro cities) or 40% (non-metro) if you pay rent.
- Section 24(b): Up to ₹2 lakh on home loan interest.
- Standard Deduction: ₹50,000 flat deduction for salaried individuals.
If you invest ₹1.5 lakh in PPF and claim ₹50,000 in HRA, your taxable income drops to ₹8 lakh. Your tax would then be:
- ₹0 on first ₹3 lakh
- 5% of ₹3 lakh = ₹15,000
- 10% of ₹2 lakh (₹8 lakh - ₹6 lakh) = ₹20,000
- Total tax: ₹35,000
That’s a saving of ₹25,000 compared to no deductions!
Rebates and Surcharges in the Old Regime
The old regime also offers a tax rebate under Section 87A, which can reduce your tax by up to ₹25,000 if your total income is below ₹7 lakh. For a ₹10 lakh salary, this rebate doesn’t apply, but surcharges might:
- 10% surcharge: If income is above ₹50 lakh (not applicable here).
- 15% surcharge: If income is above ₹1 crore (not applicable here).
- Health and Education Cess: 4% on the total tax + surcharge.
Income Tax Slabs for ₹10 Lakh Salary: New Regime (FY 2025-26)
The new tax regime was introduced to simplify tax filing by offering lower rates but fewer deductions. For FY 2025-26, the slabs are:
| Income Slab (₹) | Tax Rate | Tax Amount (₹) |
|---|---|---|
| Up to 3,00,000 | 0% | 0 |
| 3,00,001 to 6,00,000 | 5% | 15,000 |
| 6,00,001 to 9,00,000 | 10% | 30,000 |
| 9,00,001 to 12,00,000 | 15% | 45,000 |
| 12,00,001 to 15,00,000 | 20% | 60,000 |
At ₹10 lakh, your tax under the new regime (without any deductions) would be:
- ₹0 on first ₹3 lakh
- 5% of ₹3 lakh = ₹15,000
- 10% of ₹3 lakh = ₹30,000
- 15% of ₹1 lakh = ₹15,000
- Total tax before cess: ₹60,000
Now, add the 4% health and education cess:
- 4% of ₹60,000 = ₹2,400
- Final tax: ₹62,400
Key Differences in the New Regime
The new regime eliminates most deductions, but it does offer some benefits:
- Standard Deduction: ₹50,000 (same as old regime).
- Family Pension Deduction: ₹15,000 or 1/3rd of pension, whichever is lower.
- No Section 80C, 80D, or HRA exemptions: You lose these unless you opt out of the new regime (more on this later).
- Lower tax rates for higher slabs: The new regime has a 20% slab starting at ₹12 lakh, which can benefit higher earners.
If you’re used to claiming deductions like Section 80C or HRA, the new regime may not be tax-efficient for you. Always compare both regimes before filing.
Rebates and Surcharges in the New Regime
The new regime offers a more generous rebate under Section 87A:
- Rebate of up to ₹25,000 if your total income is below ₹7.5 lakh (earlier ₹5 lakh).
- For a ₹10 lakh salary, this rebate doesn’t apply, but surcharges might:
- 10% surcharge: If income is above ₹50 lakh (not applicable here).
- 15% surcharge: If income is above ₹1 crore (not applicable here).
- Health and Education Cess: 4% on the total tax + surcharge.
Step-by-Step Comparison: Old vs New Regime for ₹10 Lakh Salary
Let’s compare the two regimes with realistic scenarios. We’ll assume you’re a salaried professional below 60 years, paying rent in a metro city, and have some tax-saving investments.
Scenario 1: Minimal Deductions (Old Regime Wins)
Suppose you claim only the standard deduction (₹50,000) and no other investments:
- Taxable Income: ₹10 lakh - ₹50,000 = ₹9.5 lakh
- Tax Calculation:
- ₹0 on first ₹3 lakh
- 5% of ₹3 lakh = ₹15,000
- 10% of ₹3.5 lakh (₹9.5 lakh - ₹6 lakh) = ₹35,000
- Total tax: ₹50,000
- Add 4% cess: ₹50,000 + ₹2,000 = ₹52,000
Under the new regime (no deductions except standard deduction):
- Taxable Income: ₹10 lakh - ₹50,000 = ₹9.5 lakh
- Tax Calculation:
- ₹0 on first ₹3 lakh
- 5% of ₹3 lakh = ₹15,000
- 10% of ₹3.5 lakh = ₹35,000
- Total tax: ₹50,000
- Add 4% cess: ₹50,000 + ₹2,000 = ₹52,000
Result: Both regimes yield the same tax outgo (₹52,000) in this scenario. But if you can claim more deductions, the old regime wins.
Scenario 2: Full Deductions (Old Regime Dominates)
Now, let’s assume you maximize deductions:
- Section 80C: ₹1.5 lakh (PPF, ELSS, EPF)
- Section 80D: ₹25,000 (health insurance)
- HRA: ₹2 lakh (50% of basic salary in a metro city)
- Standard Deduction: ₹50,000
- Total Deductions: ₹1.5L + ₹25k + ₹2L + ₹50k = ₹4.25 lakh
- Taxable Income: ₹10 lakh - ₹4.25 lakh = ₹5.75 lakh
- Tax Calculation:
- ₹0 on first ₹3 lakh
- 5% of ₹2.75 lakh (₹5.75 lakh - ₹3 lakh) = ₹13,750
- Total tax: ₹13,750
- Add 4% cess: ₹13,750 + ₹550 = ₹14,300
Under the new regime (no deductions except standard deduction):
- Taxable Income: ₹10 lakh - ₹50,000 = ₹9.5 lakh
- Tax Calculation: ₹52,000 (as above)
Result: The old regime saves you ₹37,700 (₹52,000 - ₹14,300) in taxes. This is why the old regime is often better for those with investments and expenses that qualify for deductions.
Scenario 3: No Deductions (New Regime Slightly Better)
If you don’t claim any deductions (not recommended, but possible):
- Old Regime: ₹62,400 (as calculated earlier)
- New Regime: ₹62,400 (same as old regime in this case)
Result: No difference. But if you have even ₹1 of deductions, the old regime can become more tax-efficient.
Which Regime Should You Choose for ₹10 Lakh Salary?
Your choice depends on your financial situation. Here’s a quick decision guide:
Choose the Old Regime If:
- You have investments under Section 80C (PPF, ELSS, EPF, life insurance).
- You pay rent and can claim HRA.
- You have health insurance and can claim Section 80D.
- You have a home loan and can claim interest under Section 24(b).
- Your total deductions exceed ₹1 lakh.
Choose the New Regime If:
- You don’t have any tax-saving investments or expenses.
- You prefer simplicity and lower paperwork.
- You’re in a higher tax slab (above ₹15 lakh) and the new regime’s lower rates benefit you.
- You don’t want to track investments or receipts for tax filing.
The Income Tax Department allows you to switch regimes every year. So, you’re not locked in. Use the Income Tax Calculator to compare both regimes before filing your ITR.
Real-World Example: A ₹10 Lakh Salary Earner
Let’s take the case of Priya, a 30-year-old software engineer in Bengaluru earning ₹10 lakh per year. Here’s her tax breakdown:
- Basic Salary: ₹6 lakh
- HRA: ₹2.4 lakh (40% of basic)
- Other Allowances: ₹1.6 lakh
- Total CTC: ₹10 lakh
Priya invests ₹1.5 lakh in PPF and pays ₹20,000 for health insurance. She rents a house for ₹15,000/month.
Old Regime Calculation:
- Deductions:
- Standard Deduction: ₹50,000
- Section 80C: ₹1.5 lakh
- Section 80D: ₹20,000
- HRA Exemption: ₹2 lakh (50% of basic)
- Total Deductions: ₹4.2 lakh
- Taxable Income: ₹10 lakh - ₹4.2 lakh = ₹5.8 lakh
- Tax: ₹14,000 + 4% cess = ₹14,560
New Regime Calculation:
- Deductions: Only standard deduction (₹50,000)
- Taxable Income: ₹10 lakh - ₹50,000 = ₹9.5 lakh
- Tax: ₹52,000
Savings with Old Regime: ₹52,000 - ₹14,560 = ₹37,440
Common Mistakes to Avoid When Choosing a Regime
Many salaried professionals make these errors when picking a tax regime:
Mistake 1: Assuming the New Regime is Always Better
While the new regime offers simplicity, it’s not always tax-efficient. If you have investments or expenses that qualify for deductions, the old regime can save you more. Always run the numbers.
Mistake 2: Not Claiming All Eligible Deductions
Under the old regime, you might forget to claim deductions like Section 80D for health insurance or HRA. Keep your rent receipts, insurance premiums, and investment proofs handy.
Mistake 3: Ignoring the Standard Deduction
Both regimes offer a ₹50,000 standard deduction. Don’t overlook this—it’s automatic and reduces your taxable income without any effort.
Mistake 4: Not Comparing Regimes Annually
Your financial situation changes every year. A regime that worked last year might not be optimal this year. Re-evaluate your investments, loans, and expenses before filing your ITR.
Mistake 5: Overlooking Surcharges and Cess
Surcharges (10% or 15%) and the 4% health and education cess can add up. Always calculate the final tax outgo, not just the base tax.
If you switch from the old regime to the new regime, you cannot claim deductions like Section 80C or Section 80D for that year. Choose wisely!
How to Switch Between Regimes: A Step-by-Step Guide
You’re not stuck with one regime forever. Here’s how to switch:
For Salaried Employees (Form 16)
Your employer deducts TDS based on the regime you choose at the start of the financial year. To switch:
- Inform your HR or accounts team about your preferred regime (old or new) before the start of the financial year (April).
- If you don’t specify, the employer may default to the old regime.
- You can still switch when filing your ITR, but TDS deductions will be based on your initial choice.
For Self-Employed or Freelancers
Since you don’t have an employer to deduct TDS, you can choose the regime when filing your ITR. Use the Income Tax Calculator to compare both and pick the one that saves you more.
Changing Regimes in ITR
If you realize mid-year that another regime is better, you can switch when filing your ITR. The tax department allows this flexibility. Just ensure you have all your investment proofs and receipts ready.
Tax-Saving Strategies for ₹10 Lakh Salary Earners
Even if you choose the old regime, you can optimize your taxes further. Here are some strategies:
Maximize Section 80C Investments
The ₹1.5 lakh limit under Section 80C is your best friend. Invest in a mix of instruments:
- PPF: Safe, government-backed, and offers 7.1% interest (as of April 2026).
- ELSS: Equity-linked savings schemes offer higher returns (12-15% CAGR) but come with a 3-year lock-in.
- EPF: Mandatory for salaried employees, with 8.25% interest (as of April 2026).
- NPS: Additional ₹50,000 deduction under Section 80CCD(1B).
If you’ve already invested ₹1.5 lakh in PPF and ELSS, consider topping up your EPF contributions to reach the ₹1.5 lakh limit.
Claim HRA to the Fullest
If you pay rent, don’t leave money on the table. The HRA exemption is calculated as the minimum of:
- Actual HRA received from your employer.
- 50% of basic salary (for metro cities) or 40% (non-metro).
- Actual rent paid minus 10% of basic salary.
For example, if your basic salary is ₹6 lakh and you pay ₹15,000/month rent in Mumbai:
- Actual HRA received: ₹2.4 lakh (40% of basic)
- 50% of basic: ₹3 lakh
- Rent paid - 10% of basic: ₹1.8 lakh - ₹60,000 = ₹1.2 lakh
- HRA Exemption: ₹1.2 lakh
Buy Health Insurance and Claim Section 80D
Health insurance premiums are deductible under Section 80D:
- Up to ₹25,000 for self, spouse, and children.
- Additional ₹25,000 for parents (₹50,000 if they’re senior citizens).
- Total deduction: Up to ₹50,000 (₹75,000 if parents are senior citizens).
For a family of four, a ₹10 lakh health cover might cost ₹15,000/year. Claim the full amount under Section 80D.
Consider a Home Loan for Tax Benefits
If you’re planning to buy a home, a home loan can reduce your tax liability:
- Section 24(b): Up to ₹2 lakh on home loan interest.
- Section 80C: Up to ₹1.5 lakh on principal repayment.
- Joint Home Loan: If you and your spouse take a joint loan, both can claim deductions separately.
For example, if you pay ₹2.5 lakh in home loan interest, you can claim ₹2 lakh under Section 24(b) and ₹50,000 under Section 80C (if you’ve used the remaining ₹1 lakh for other investments).
Invest in NPS for Additional Deduction
The National Pension System (NPS) offers an extra ₹50,000 deduction under Section 80CCD(1B), over and above the ₹1.5 lakh under Section 80C. It’s a good option if you want to save more for retirement while reducing taxes.
Frequently Asked Questions About Income Tax on ₹10 Lakh Salary
Frequently Asked Questions
Can I switch between the old and new tax regimes every year?
Yes, you can switch between regimes every financial year. The choice is flexible, but once you file your ITR, you cannot change it for that year. Use the Income Tax Calculator to compare both before deciding.
What happens if I don’t declare my investments or deductions?
If you don’t declare eligible deductions like Section 80C or HRA, you’ll pay more tax than necessary. Always keep receipts and proofs handy to claim deductions while filing your ITR.
Is the new tax regime better for higher salaries (above ₹15 lakh)?
The new regime’s lower tax rates (20% and 30%) can be beneficial for higher salaries, but you lose out on deductions. For a ₹15 lakh salary, the new regime might save you tax, but for ₹10 lakh, the old regime is usually better if you have investments.
Can I claim both HRA and home loan benefits?
Yes, you can claim both HRA (if you’re paying rent) and home loan benefits (if you’ve taken a loan). However, you cannot claim HRA if you own a house in the same city where you’re claiming HRA. Consult a tax advisor to optimize both benefits.
What is the deadline to choose a tax regime for TDS deductions?
The deadline is usually the start of the financial year (April 1). If you don’t specify, your employer may default to the old regime. You can still switch when filing your ITR, but TDS will be based on your initial choice.
This article is for informational purposes only and does not constitute financial advice. Tax rates, slabs, and deductions are subject to change based on government notifications. Always consult a SEBI-registered advisor or a chartered accountant before making tax-related decisions. InvestingPro.in may earn a commission when you apply through our links.