salaried individuals earning around Rs 1 crore annually, the choice between the old and new tax regimes can significantly impact the final tax outgo. While the old tax regime continues to offer multiple deductions and exemptions, the new one is increasingly looking attractive because of lower tax slabs and higher standard deduction benefits.
A comparison based on an annual salary income of Rs 1 crore shows that the new regime may result in lower tax liability even after accounting for deductions available under the old regime.
“Considering the mix of salary components, employer‑provided benefits, and available deductions, the new tax regime yields a slightly lower tax outgo in this case ,” said Preeti Gupta, director, Deloitte India.
Though the old regime offers additional relief through house rent allowance (HRA) and other exemptions, its benefit is higher only when such components form a significant portion of the compensation. In their absence or limited use, the new regime remains more efficient and straightforward, Gupta said.
Tax Calculation for Income above Rs 1 Crore
| Particulars | Old Tax Regime | New Tax Regime |
|---|---|---|
| Total gross salary (from all employers) | 10,000,000 | 10,000,000 |
| Benefits | ||
| Assumed Value of Leased Car benefit provided by the employer (including fuel and driver salary reimbursement) | 1,000,000 | 1,000,000 |
| Value of Meal Coupons/ Card provided by the employer | 105,600 | 105,600 |
| Cost to the Company | 11,105,600 | 11,105,600 |
| Add: Perquisite value for Car owned by employer given to employee for business and personal purpose with Chauffeur and engine capacity >1600CC | 120,000 | 120,000 |
| Add: Perquisite value for Meal Coupons/ Card | – | – |
| Total Net salary (from all employers) | 10,120,000 | 10,120,000 |
| Maximum commonly claimable deductions/ exemptions | ||
| Standard deduction | 50,000 | 75,000 |
| Section 123 (PF/ELSS/LIC) | 150,000 | – |
| Section 126 (medical insurance) | 25,000 | – |
| Section 124(1) – Employer contribution to NPS (assumed) | 500,000 | 700,000 |
| Section 124(3) – Employee contribution to NPS | 50,000 | – |
| LTA / allowances (realistic average) – assuming no HRA exemption claimed | 200,000 | – |
| Interest paid on Housing Loan (self-occupied property) | 200,000 | – |
| Net Total Income | 8,945,000 | 9,345,000 |
| Tax along with Surcharge and Education Cess | 2,855,424 | 2,726,724 |
Notes (as per image):
No other relief/benefit/deduction/exemption has been considered other than the ones specified above in the illustration.
Source: Deloitte India
How the salary structure looks
The calculation assumes a gross salary income of Rs 1 crore received from employers. In addition, the employee receives certain perks and benefits from the employer including a leased car facility and meal coupons. The salary structure includes:
Gross salary of Rs 1 crore
Employer-provided leased car benefit worth Rs 10 lakh, including fuel and driver reimbursement
Meal coupons/card benefit of Rs 1.05 lakh annually
Employer-owned car used for both personal and official purposes with chauffeur supportAfter considering taxable perquisites, the total net salary comes to Rs 1.012 crore under both tax regimes.
Deductions available under old tax regime
The old tax regime allows taxpayers to reduce taxable income through various exemptions and deductions. The following deductions have been assumed:
- Standard deduction of Rs 50,000
- Section 80C investments such as PF, ELSS and LIC worth Rs 1.5 lakh
- Section 80D medical insurance deduction of Rs 25,000
- Employer contribution to NPS of Rs 5 lakh
- Additional employee NPS contribution of Rs 50,000
- LTA and other allowances worth Rs 2 lakh
- Home loan interest deduction of Rs 2 lakh on self-occupied propertyAfter claiming these deductions, the net taxable income under the old regime comes down to Rs 89.45 lakh. The total tax liability, including surcharge and education cess, works out to Rs 28.55 lakh.
What changes under the new tax regime?
- The new tax regime removes most exemptions and deductions but compensates through lower tax slab rates and a higher standard deduction. The following deductions have been assumed:
- Standard deduction of Rs 75,000
- Employer contribution to NPS deduction of Rs 7 lakhHowever, deductions under Sections 80C and 80D, home loan interest benefit, LTA exemption and additional employee NPS contribution are not available.
- As a result, the taxable income under the new regime stands at Rs 93.45 lakh.Despite the higher taxable income, the overall tax liability under the new regime comes to Rs 27.26 lakh, which is around Rs 1.29 lakh lower compared to the old regime.
Why the new regime is still beneficial
According to tax experts, the new regime is increasingly emerging as a more practical option for high-income salaried taxpayers, particularly when exemptions and deductions are limited.The comparison highlights a key trend emerging among high-income earners. Even after claiming multiple deductions under the old regime, the lower slab rates under the new regime are helping taxpayers reduce their overall tax burden.
The benefit becomes more visible for salaried individuals who do not have substantial deductions beyond mandatory investments or whose salary structure already includes tax-efficient employer benefits such as NPS contributions.
The enhanced deduction available for employer contribution to NPS under the new regime also plays a crucial role in reducing taxable income for high earners.
Experts generally advise taxpayers to calculate taxes under both regimes before filing returns, as the difference can vary significantly based on salary structure and deductions claimed.