Earning ₹30 lakh? The wrong tax regime could cost you over ₹1 lakh
The tax changes announced in Budget 2025 have strengthened the case for the new tax regime, with lower slab rates and a higher standard deduction reducing the tax burden for many salaried individuals. However, for those earning ₹30 lakh a year, the choice between the two regimes isn’t always straightforward.
At this income level, the decision depends on whether the old regime’s exemptions and deductions, such as HRA, LTA, tax-saving investments, health insurance and home loan benefits, can outweigh the lower tax rates offered under the new regime. Here’s how the two regimes compare for a salaried taxpayer earning ₹30 lakh annually.
How much tax do you pay under the new regime?
The new tax regime offers lower slab rates but allows only a limited number of deductions. For most salaried taxpayers, the ₹75,000 standard deduction is the primary benefit, reducing the taxable income on a ₹30 lakh salary to ₹29.25 lakh.
Apart from the standard deduction, taxpayers can also claim a deduction for an employer’s contribution to the National Pension System (NPS) under Section 80CCD(2), interest on a let-out property’s home loan under Section 24, and exemptions on retirement benefits such as gratuity and leave encashment, subject to prescribed conditions.
Based on calculations by ClearTax, the total tax liability, including the 4% health and education cess, comes to ₹4,75,800.
Particulars |
Amount ( ₹) |
| Gross salary | 30,00,000 |
| Less: Standard deduction | 75,000 |
| Taxable income | 29,25,000 |
| Tax payable (including 4% cess) | 4,75,800 |
Source: ClearTax tax computation for FY 2025-26.
For taxpayers with limited deductions, the lower tax rates under the new regime generally translate into a lower overall tax outgo.
Can the old regime’s deductions lower your tax bill?
The old regime continues to offer several exemptions and deductions that are unavailable under the new regime. These include HRA, LTA, children’s education allowance, deductions under Sections 80C, 80D and 80E, home loan benefits and employer contributions to the National Pension System.
To understand whether these tax breaks can offset the higher tax rates, consider the example of a salaried employee earning ₹30 lakh annually who claims the following:
- HRA exemption: ₹1.60 lakh
- LTA exemption: ₹55,000
- Children’s education allowance: ₹9,600
- Professional tax deduction: ₹2,400
- Section 80C deduction: ₹1.50 lakh
- Section 80D deduction: ₹50,000
- Section 80E deduction: ₹25,000
After accounting for these exemptions and deductions, the income under the head ‘Salary’ falls to ₹27.23 lakh, while the net taxable income is reduced to ₹24.98 lakh.
How much tax is payable under the old regime?
| Particulars | Amount ( ₹) |
| Gross salary | 30,00,000 |
| Less: HRA exemption | 1,60,000 |
| Less: LTA exemption | 55,000 |
| Less: Children’s education allowance | 9,600 |
| Less: Standard deduction | 50,000 |
| Less: Professional tax | 2,400 |
| Income under the head ‘Salary’ | 27,23,000 |
| Less: Section 80C deduction | 1,50,000 |
| Less: Section 80D deduction | 50,000 |
| Less: Section 80E deduction | 25,000 |
| Net taxable income | 24,98,000 |
| Tax payable (including 4% cess) | 5,84,376 |
Source: ClearTax tax computation for FY 2025-26.
The calculations show that even after claiming more than ₹4.5 lakh worth of exemptions and deductions, the taxpayer would still pay over ₹5.84 lakh in income tax under the old regime.
Which tax regime saves more at ₹30 lakh?
For a salaried individual earning ₹30 lakh annually, the new tax regime results in a lower tax bill. Based on the above calculations, the tax liability works out to ₹4,75,800 under the new regime, compared with ₹5,84,376 under the old regime. That translates into a tax saving of ₹1,08,576 by opting for the new regime.
However, this does not mean the old regime has become irrelevant. Its advantage grows as the value of deductions and exemptions increases. According to ClearTax, taxpayers would need to claim more than ₹8 lakh in total deductions and exemptions for the old regime to become more beneficial than the new regime. This could apply to individuals with substantial HRA exemptions, home loan interest deductions, higher employer NPS contributions and other eligible tax benefits.
For most salaried taxpayers earning ₹30 lakh, however, the lower slab rates under the new regime continue to outweigh the benefits available under the old regime, making it the more tax-efficient option.
