Income Tax on ₹10 Lakh Salary: Old vs New Regime Explained

Earning a ₹10 lakh annual salary is a significant career milestone, but it often comes with a common question: how much of that is staying in your pocket and how much is going to the government? With two distinct tax systems in place and with the new provisions of the Union Budget 2026, many salaried professionals find themselves confused about their actual tax liability.

Recent data suggests that nearly 70% of salaried individuals moved to the simplified new regime in the last assessment year to avoid the paperwork of investments. In 2026, the government further incentivised this by increasing the tax-free threshold to ₹12 lakh under the New Regime. It is crucial to re-evaluate which path offers the best savings for your specific financial profile. This guide will break down the calculations for a ₹10 lakh salary to help you choose the most beneficial regime for your tax-saving habits.

How Income Tax Is Calculated on a ₹10 Lakh Salary

Before diving into the regimes, it is essential to understand that your gross salary is not what you are taxed on. To find your taxable income, you start with your annual package and subtract the standard deduction (a flat amount given to all taxpayers).

For a ₹10 lakh salary, the calculation works in two steps:

• Taxable Income: Subtract the standard deduction from the gross income (₹50,000 for Old Regime or ₹75,000 for New Regime). 
• Apply Slabs: The remaining amount is taxed according to the slab rates of your chosen regime. 

Income Tax on ₹10 Lakh Salary Under Old Tax Regime

The old tax regime is designed for those who are active in tax-saving investments. Under this system, you can significantly lower your taxable income by utilising various exemptions.

You start with a ₹50,000 standard deduction. You can further reduce your taxable base using Section 80C (as per IT Act,1961) / 123 (as per IT Act,2025) deductions (up to ₹1.5 lakh for PPF, ELSS, or Life Insurance) and Section 80D (as per IT Act,1961) / 126 (as per IT Act,2025) (₹25,000-₹50,000 for health insurance premiums). You also get benefits like House Rent Allowance (HRA) and Leave Travel Allowance (LTA) deductions, which can further reduce your tax outgo.

While the tax slabs are lower compared to the new regime, the ability to deduct these investments often results in a lower final tax bill for disciplined savers.

Income Tax on ₹10 Lakh Salary Under New Tax Regime

The new tax regime offers a simplified approach to taxation. It features higher slabs but removes almost all popular deductions and exemptions. From April 1, 2026, the slabs have been widened to provide more relief to the middle class.

The standout feature of the 2026-27 landscape is the Section 87A (as per IT Act,1961) / 156 (as per IT Act, 2025) rebate. If your taxable income is up to ₹12 lakh, your tax liability is effectively zero.

If you opt for this regime with a ₹10 lakh salary, you will benefit from the  ₹75,000 standard deduction instead of ₹50,000 (as per old regime), but you cannot claim benefits for HRA, 80C, or 80D. This structure is ideal for individuals who prefer higher immediate liquidity and do not want to lock their money into specific tax-saving instruments. The essential practice of financial planning can still continue, but not solely for tax rebates.

The Calculation: For a ₹10 lakh salary, after a ₹75,000 standard deduction, your taxable income is ₹9.25 lakh. Since ₹9.25 lakh is well within the ₹12 lakh limit, you pay zero income tax.

Old vs New Tax Regime: Which Is Better for ₹10 Lakh Salary?

The “better” regime depends entirely on your investment threshold.

How to Save Tax on a ₹10 Lakh Salary?

To minimise your tax outgo, consider these practical strategies: 

• Maximise Section 80C (as per IT Act,1961) / 123 (as per IT Act,2025): Invest ₹1.5 lakh in instruments like life insurance, PPF, ELSS, or National Savings Certificates. 
• Health Insurance: Use Section 80D (as per IT Act,1961) / 126 (as per IT Act,2025) to claim deductions on insurance premiums paid for yourself and your parents. 
• HRA Claims: If you live in a rented house, ensure you provide rent receipts to claim deductions on house rent allowance. 
• NPS Contributions: An additional deduction of ₹50,000 is available under Section 80CCD(1B) (as per IT Act,1961) / 124(3) (as per IT Act,2025). 
• Home Loan Interest Deductions under Section 24(b) (as per IT Act,1961) / 22 (as per IT Act,2025) and Section 80EE (as per IT Act,1961) / 130 (as per IT Act,2025): You can claim a deduction of up to ₹2 lakh for a self-occupied property. First-time home buyers can claim an additional deduction of ₹50,000. 

How Tax-Saving Investments Affect Your Choice

Your decision to stay in the old regime often hinges on your commitment to long-term financial goals. Life Insurance, for instance, provides both a safety net for your family and a critical tax deduction that can tip the scales in favour of the old regime.

Similarly, ELSS and PPF serve the dual purpose of wealth creation and tax reduction. If your total deductions exceed a certain break-even point (roughly ₹2.5 lakh to ₹3 lakh for this income bracket), the old regime usually remains the winner.

Conclusion

The choice of old or new tax regimes for a ₹10 lakh salary is a factor of your lifestyle and savings habits. While the new regime offers zero tax liability for this bracket and more immediate cash, the old regime rewards those who prioritise long-term financial planning through deductions. Evaluate your total eligible exemptions before the next filing season to ensure you keep more of your hard-earned money. 

Frequently Asked Questions

1. How much tax do I pay on a ₹10 lakh salary?

Under the New Tax Regime (FY 2026-27), you pay ₹0 tax because your taxable income falls below the ₹12 lakh rebate threshold. Under the Old Regime, you could pay upwards of ₹70,000 depending on your deductions.

2. Which tax regime is better for an income of ₹ 10 lakh?

For most individuals, the New Tax Regime is better as it requires no investments to reach zero tax liability. The Old Regime is only better if your total deductions (80C/123, HRA, etc.) exceed ₹3.75 lakh.

3. Can I change the tax regime every year?

If you are a salaried individual without business income, you can choose your preferred regime every year when filing your returns. However, those with business or professional income only have a one-time option to switch back to the New Regime.