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AY 2026-27 (FY 2025-26). Reflects Budget 2025's raised 87A rebate threshold (₹12 lakh of taxable income under the new regime). Last reviewed 7 May 2026.
A ₹10 lakh annual salary in AY 2026-27 is one of the rare income points where the regime decision is genuinely trivial: the new regime owes zero rupees of income tax, full stop. The Budget 2025 expansion of the Section 87A rebate to ₹12 lakh of taxable income — combined with the ₹75,000 standard deduction — covers every rupee of slab-rate tax this profile generates.
Here's the math, the comparison with the old regime, and why even an aggressive deduction stack can't make the old regime competitive at this income.
The new regime — straight to zero
| Component | Value |
|---|---|
| Gross salary | ₹10,00,000 |
| Standard deduction | (₹75,000) |
| Taxable income | ₹9,25,000 |
| Slab tax computed | ₹32,500 |
| Section 87A rebate | (₹32,500) — full coverage |
| Tax after rebate | ₹0 |
| 4% cess on ₹0 | ₹0 |
| Tax payable | ₹0 |
The slab arithmetic for completeness: ₹0-4L taxed at 0%, ₹4L-8L at 5% (₹20,000), ₹8L-9.25L at 10% (₹12,500). Total ₹32,500 — fully wiped out by the 87A rebate, since taxable income (₹9.25L) is well below the ₹12L rebate ceiling.
The old regime — basic deductions still leave ₹70K of tax
Even when a ₹10L earner does the standard old-regime drill — full ₹1.5L 80C, ₹25K 80D — the rebate ceiling of ₹5L taxable means significant tax remains owed:
| Component | Old regime |
|---|---|
| Gross salary | ₹10,00,000 |
| Standard deduction | (₹50,000) |
| 80C | (₹1,50,000) |
| 80D | (₹25,000) |
| Taxable income | ₹7,75,000 |
| Slab tax | ₹67,500 |
| 87A rebate | not available (>₹5L) |
| 4% cess | ₹2,700 |
| Tax payable | ₹70,200 |
Gap: the new regime saves ₹70,200 versus this old-regime profile. Equivalent to ~₹5,850 per month of additional in-hand.
Could the old regime ever win at ₹10L?
For old-regime tax to also fall to zero at ₹10 LPA, you'd need taxable income below ₹5 lakh — meaning total deductions of ₹5 lakh from gross. The realistic maximum stack:
- Standard deduction: ₹50,000
- 80C: ₹1,50,000
- 80D: ₹25,000
- 80CCD(1B) NPS: ₹50,000
- HRA exemption: ~₹2,00,000 (requires ₹40K+ monthly rent on a high-basic CTC structure)
Total: ~₹4,75,000. Old-regime taxable: ~₹5,25,000. Tax: ~₹17,500 + cess = ~₹18,200.
Even at this aggressive stack — uncommon at ₹10 LPA — the old regime owes ₹18,200 while the new regime still owes zero. The old regime cannot beat the new regime at this income.
Verify with your salary structure
What changes above ₹10L
The zero-tax outcome holds up to ₹12.75 lakh gross salary under the new regime. Above that line, the marginal relief band kicks in (typically running to roughly ₹12.7L of taxable income), then standard slab tax applies. For the math at the next decision point, see Old vs new regime for ₹15 lakh salary.
Practical implications at ₹10 LPA
- Stop optimising for 80C tax saving. The deduction provides zero tax benefit under the new regime. Treat PPF, ELSS, and life insurance as portfolio choices, not tax shelters.
- Salary structure simplifies. With no HRA exemption or special-allowance balancing required, the conversation with payroll becomes cleaner — request a higher basic share if you want larger EPF contributions, or a lower basic share for higher in-hand.
- NPS still useful. Even though 80CCD(1B) and 80C contributions don't help under the new regime, employer NPS under 80CCD(2) still does — up to 14% of basic salary. For ₹10L earners with a future income trajectory toward higher slabs, building a long-horizon NPS corpus from now is worth considering. See Section 80CCD(2): the only deduction left in the new regime.
Warning
The zero-tax result excludes EPF, professional tax, and any special-rate income (capital gains, lottery, crypto). Capital gains, in particular, are taxed independently of the slab regime — equity LTCG above ₹1.25L attracts 12.5% tax irrespective of regime. Add those separately when computing total tax.
FAQ
The follow-up questions people usually ask after the main recommendation is already clear.
How much tax do I pay on ₹10 lakh salary in 2026?
Under the AY 2026-27 new regime, you pay zero income tax on a ₹10 lakh gross salary. The ₹75,000 standard deduction brings taxable income to ₹9,25,000, which is fully covered by the Section 87A rebate (now extending to ₹12L of taxable income under the new regime). EPF contributions and professional tax still apply, but no income tax is payable.
Should I claim 80C deductions if I'm on the new regime at ₹10L?
80C deductions don't reduce your tax under the new regime — but you should still invest in PPF, EPF, and ELSS for the underlying long-term wealth-building reason, not the tax benefit. The new regime makes investing a portfolio decision rather than a tax decision, which is arguably how it should always have been.
Why does the old regime still owe tax on ₹10L when the new regime owes zero?
The old regime's Section 87A rebate caps at ₹5 lakh of taxable income. To pay zero tax under the old regime at a ₹10L salary, you would need ~₹4.5L of deductions — basic 80C (₹1.5L) plus HRA exemption (~₹2L), 80D (₹25K), and 80CCD(1B) (₹50K) all stacked. Most ₹10L earners don't have all of these, and even when they do, the new regime ties or beats it.