1. Background
Priya (hypothetical) is a 37-year-old salaried employee in Hyderabad. She pays rent and invests in PPF and health insurance.
2. Facts and assumptions
Basic salary Rs 9,00,000; HRA received Rs 3,60,000; special allowance Rs 2,40,000; rent paid Rs 3,00,000; 80C investments Rs 1,50,000; health insurance Rs 25,000; savings interest Rs 12,000; FD interest Rs 30,000; long-term gain on equity mutual fund Rs 1,50,000. Assumes Tax Year 2026-27 rates (Income-tax Act, 2025), resident individual below 60.
3. Applicable law or financial principles
New regime under section 202 and old regime provisions of the Income-tax Act, 2025; standard deduction; HRA exemption; deductions corresponding to sections 80C, 80D and 80TTA; LTCG on listed equity at 12.5% above Rs 1.25 lakh.
4. Analysis
Under the old regime, HRA exemption is the lowest of HRA received (Rs 3,60,000), rent minus 10% of salary (Rs 2,10,000) and 50% of salary (Rs 4,50,000), i.e. Rs 2,10,000. Deductions total Rs 1,85,000 (80C Rs 1,50,000, 80D Rs 25,000, 80TTA Rs 10,000). Under the new regime, these are not available, but the standard deduction is Rs 75,000.
5. Calculations
| Particulars | Old regime | New regime |
|---|---|---|
| Taxable income | Rs 12,47,000 | Rs 16,17,000 |
| Tax incl. LTCG and 4% cess | Rs 1,50,510 | Rs 1,07,300 |
Computed with ArthaKara's Income Tax Calculator.
6. Outcome
The new regime saves about Rs 43,210 for these figures.
7. Key learning
Large deductions do not automatically make the old regime better. Always compute both.
8. Limitations
Hypothetical figures; rules pending ArthaKara professional review; excludes employer-specific perquisites and surcharge.
9. Disclaimer
This is a hypothetical case study. Names and figures are illustrative and do not relate to any client.