Case study: ₹18 lakh salary with interest income, old vs new regime (2026-27)
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Updated 03 Oct 2026
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AI summary
A worked example for tax year 2026-27 comparing both regimes for a salaried person with deductions and interest income.
6 sections
The situation
Neha earns a salary of ₹18,00,000 in tax year 2026-27. She also has ₹60,000 FD interest and ₹10,000 savings interest. She is under 60. Under the old regime she could claim:
- ₹1,50,000 under section 123 (old 80C: PF, PPF, home loan principal)
- ₹25,000 health insurance (section 126, old 80D)
- ₹2,00,000 home loan interest on her self-occupied house
- ₹10,000 savings interest deduction (old 80TTA)
New regime (default)
| Item | ₹ |
|---|---|
| Gross total income (18,00,000 + 60,000 + 10,000) | 18,70,000 |
| Less: standard deduction | 75,000 |
| Taxable income | 17,95,000 |
| Tax: 0–4 lakh nil; 4–8 lakh 5% = 20,000; 8–12 lakh 10% = 40,000; 12–16 lakh 15% = 60,000; 16–17.95 lakh 20% = 39,000 | 1,59,000 |
| Health & education cess 4% | 6,360 |
| Total tax | 1,65,360 |
Old regime
| Item | ₹ |
|---|---|
| Gross total income | 18,70,000 |
| Less: standard deduction | 50,000 |
| Less: section 123 (80C) | 1,50,000 |
| Less: section 126 (80D) | 25,000 |
| Less: home loan interest | 2,00,000 |
| Less: savings interest (80TTA) | 10,000 |
| Taxable income | 14,35,000 |
| Tax: 2.5–5 lakh 5% = 12,500; 5–10 lakh 20% = 1,00,000; 10–14.35 lakh 30% = 1,30,500 | 2,43,000 |
| Cess 4% | 9,720 |
| Total tax | 2,52,720 |
Result
The new regime saves ₹87,360, even after ₹4.35 lakh of deductions in the old regime. For most salaried people at this level, the old regime wins only if deductions (including HRA exemption) are well above about ₹7–8 lakh.
Points to remember
- The new regime is the default. Salaried people can switch every year when filing the return.
- Tell your employer your choice at the start of the year so TDS matches.
- The FD interest of ₹60,000 is above ₹50,000, so the bank will deduct 10% TDS (₹6,000). Claim it in the ITR from Form 168.
Sources
Law as of October 2026. Verify against the latest notifications before relying on it for filings.
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