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Every March, the same question

If you are salaried, you have two ways to be taxed in India: the old regime and the new regime. Since 2023, the new regime is the default – your employer deducts tax assuming it unless you say otherwise. But “default” does not mean “best for you”. The two regimes work quite differently, and which one costs you less depends on your own salary and deductions, not on anyone else’s.

The good news: comparing them is a thirty-minute exercise you can do yourself, once a year. This article shows you how.

The two regimes in plain words

The old regime has higher tax rates, but lets you reduce your taxable income with a long list of deductions and exemptions – the familiar ones like section 80C investments, HRA, home loan interest and medical insurance premiums.

The new regime has lower tax rates and simpler slabs, but gives up almost all of those deductions. You keep only a few, like the standard deduction that salaried people get.

So the comparison always comes down to one question: are your deductions big enough that the old regime’s higher rates still cost less overall?

What the numbers look like now (FY 2026-27)

Under the new regime, the slabs are: nothing up to Rs 4 lakh, then 5% up to Rs 8 lakh, 10% up to Rs 12 lakh, 15% up to Rs 16 lakh, 20% up to Rs 20 lakh, 25% up to Rs 24 lakh, and 30% above that. Salaried taxpayers also get a standard deduction of Rs 75,000. On top of the slabs, a rebate under section 87A wipes out the tax – up to Rs 60,000 – when your total taxable income is Rs 12 lakh or less. That is why a salary up to about Rs 12.75 lakh can end up with zero tax under the new regime.

Two things people often miss. First, the rebate applies to ordinary income like salary – income taxed at special rates, such as capital gains, does not get the rebate even within the Rs 12 lakh limit. Second, “Rs 12.75 lakh tax-free” is not a universal rule: it describes a salaried person with no other taxable income, and it shifts if your situation differs.

Under the old regime, the slabs for most people are: nothing up to Rs 2.5 lakh, 5% up to Rs 5 lakh, 20% up to Rs 10 lakh, and 30% above. The standard deduction here is Rs 50,000. A rebate of up to Rs 12,500 applies when taxable income is Rs 5 lakh or less.

Whichever regime you pick, a 4% health and education cess is added to the final tax.

The deductions the old regime hangs on

The big ones, in plain terms:

• Section 80C – up to Rs 1.5 lakh a year across EPF, PPF, ELSS mutual funds, life insurance premiums, tax-saving fixed deposits and home loan principal.
• HRA – if you rent and get house rent allowance, part of it can be exempt, depending on your rent, salary and city.
• Home loan interest – up to Rs 2 lakh a year on a self-occupied home.
• Section 80D – medical insurance premiums, Rs 25,000 for your family and more for senior-citizen parents.
• NPS – an extra Rs 50,000 under section 80CCD(1B) beyond the 80C limit.

None of these exist under the new regime. If your salary structure includes HRA and you invest for 80C anyway, the old regime has something real to work with. If you claim almost nothing, the new regime’s lower rates usually win by default.

A worked example

Illustration, not advice – the numbers are invented, and your own will differ.

Say your gross salary is Rs 15 lakh, you rent, and you invest Rs 1.5 lakh under 80C and pay Rs 25,000 of medical insurance premium.

New regime: taxable income is Rs 15,00,000 minus Rs 75,000 standard deduction, so Rs 14,25,000. The slabs give a tax of Rs 93,750; with the 4% cess, Rs 97,500.

Old regime: start with Rs 15,00,000 minus Rs 50,000 standard deduction, then subtract your deductions – 80C Rs 1,50,000, an HRA exemption of say Rs 1,50,000, and 80D Rs 25,000. Taxable income: Rs 11,25,000. Tax: Rs 1,50,000; with cess, Rs 1,56,000.

Here the new regime wins by about Rs 58,500. But change the picture and the answer changes: add a home loan interest deduction of Rs 2 lakh and the NPS Rs 50,000, and the old regime’s tax falls to about Rs 91,000 – now the old regime wins. Same salary, different life, different answer. That is the whole point of running your own numbers.

Compare it yourself, step by step

1. Take your gross salary from your payslip or Form 16.
2. List what you can genuinely claim this year: rent for HRA, 80C investments, insurance premiums, home loan interest, NPS.
3. Work out taxable income under both regimes – the new one skips almost all of that list.
4. Apply the slab rates to each, add the 4% cess, and check the rebate if your taxable income is near the limit.
5. Compare the two final numbers. The smaller one is your regime for the year.

You can double-check your arithmetic with the tax calculator on the Income Tax Department’s website. And if you are salaried, you can make this choice fresh every year when you file – it is worth re-running after a salary jump, a new home loan, or a move into your own house, because the winning side can flip.

One honest caveat: tax rules change with budgets. These figures are for FY 2026-27 as of November 2026 – re-check the current numbers when you actually sit down to compare.

Everyone seems to have a SIP. What is one, actually?

Ask around any office and half the room will say they “do SIPs”. Ask what a SIP is, and the answers get vague quickly. If you have nodded along to those conversations without fully following them, this article is for you.

Before starting your first SIP, four things are worth understanding: what a mutual fund is, what a SIP does, what risk really means for you, and who can help. None of this needs formulas. It needs plain words, which is what money conversations rarely get.

What a mutual fund is

A mutual fund pools money from many people and hands it to a professional fund manager, who invests it across a basket of shares, bonds or other assets. You own a slice of that basket, measured in units. The price of one unit is the NAV – the net asset value – which moves up and down as the value of the basket moves.

Two things follow from this. First, your money is spread across many investments, not bet on one company. Second, the value will not move in a straight line. Some months the NAV rises, some months it falls. That movement is not the fund failing – it is what market-linked investing looks like up close.

What a SIP does

A SIP – a systematic investment plan – is simply a way of putting a fixed amount into a mutual fund every month, automatically. Instead of investing Rs 60,000 in one go, you might invest Rs 5,000 a month for a year.

This does two useful things. It builds the habit without willpower, because the money leaves on its own. And it spreads your buying across market ups and downs: when the NAV is lower, your fixed amount buys more units; when it is higher, it buys fewer. Over time this averages your purchase price without you having to guess the right day to invest.

A SIP is not a product and it is not a promise. It is a method of investing regularly – what your money is invested in still matters, and its value still moves with the market.

Risk is personal

Different mutual funds take different levels of risk. Some swing hard and aim for higher long-term growth; some move gently and aim lower. Neither is “better” in the abstract – what matters is the match with you.

That match has three parts. Your goal and its timeline: money needed in two years and money needed in fifteen cannot be treated the same. Your ability to take risk: how much a temporary fall would hurt your actual life. And your temperament: how you will honestly feel seeing your investment down twenty percent on a screen. A fund that suits your colleague – different salary, different family, different nerves – may be entirely wrong for you.

Recent returns tell you what a fund did. Your goal, timeline and temperament decide what it can do for you.

About that market-risk line you hear everywhere

You have heard it at the end of every mutual fund advertisement, read at high speed: mutual fund investments are subject to market risks. It is easy to tune out. Do not.

What it means in practice: the value of your investment can fall as well as rise, past performance does not guarantee future results, and nobody – no advertisement, no agent, no app – can honestly promise you a fixed return from a market-linked fund. If anyone does promise one, walk away. That line is not fine print. It is the deal.

Who can help, and what to ask

A mutual fund distributor is a person registered with AMFI – the Association of Mutual Funds in India – whose work is to help investors choose and invest in mutual funds. You can, and should, ask for their ARN, the AMFI registration number, and verify it. Registration does not make anyone’s advice perfect, but it means they are accountable under a real framework.

Before your first SIP, a good conversation with a distributor covers questions like:

1. What am I investing for, and when will I need this money?
2. How much risk am I actually comfortable with – and is that different from what I said last year?
3. Which kind of fund fits that goal, timeline and risk level, and why?
4. What will this cost me, and how are you paid?
5. If the market falls right after I start, what should I expect and do?

If a distributor welcomes these questions and answers them plainly, that is a good sign. If everything is a hurry and a hot tip, that is a sign too.

What this sets up

Once the basics are clear, the starting itself is small: an amount you will not miss, a goal you can name, a timeline you respect. Our next article switches topics to something every salaried person meets each year anyway – choosing between the old and new tax regimes.

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Mutual fund investments are subject to market risks. Read all scheme related documents carefully.

The expense nobody plans for

Most months, a salary has a rhythm: money comes in, bills go out, life carries on. Then one day something breaks the rhythm. A job ends with two weeks of notice. A parent needs a hospital deposit by evening. The car that gets you to work needs a repair that cannot wait.

These moments are stressful enough on their own. What makes them truly frightening is reaching for money that is not there – and being forced towards a credit card, a loan app, or a call to relatives.

Emergency savings exist for exactly this. Not to grow your wealth. To make sure a bad month stays a bad month, instead of becoming a bad year.

What actually counts as an emergency

This matters more than it seems, because the fund only works if it is still there when you need it. A good rule of thumb: an emergency is unexpected, necessary and urgent.

A job break, a medical need, an urgent family expense, a critical home or vehicle repair – yes. A phone upgrade, a sale that ends tonight, a holiday deal, festival shopping – no, however tempting. Those are wants wearing an emergency costume.

If you are not sure, ask: would I borrow money for this at high interest? If the honest answer is no, it is not an emergency.

So, how much?

The common guide is three to six months of essential expenses. Essential means the number your household cannot go below: rent or EMI, groceries, utilities, school fees, insurance premiums, basic travel. Not your full lifestyle – your floor.

Where you sit in that range depends on your situation:

• Closer to six months, or more: a single income supporting the family, dependents, a variable or commission-based income, or a job in an industry that is shedding people.
• Closer to three months: two stable incomes in the household, a secure job, and good health insurance already absorbing the medical risks.

Neither end is wrong. The point is to pick your number consciously instead of landing on one by accident.

Where to keep it

Emergency money has one job: be there, in full, quickly. That makes the choice of home for it boring by design. A savings account, or something similarly safe and easy to reach, does the job. Some people keep a part of it in a fixed deposit they can break without a long wait.

What it should not chase is returns. Money that can fall in value, or that takes days or penalties to unlock, is doing a different job. Boring is the feature here, not the bug.

Building it on a monthly salary

Illustration, not advice – these numbers are invented, only to show the shape of the journey. Your essentials and your pace will be your own.

Say your essential expenses are Rs 40,000 a month, and you can set aside Rs 8,000 a month. In five months you have one month of cushion. In about fifteen months, three months of cushion. That may feel slow – but every month of cushion you bank changes how you sleep.

And you do not have to finish the whole fund before money does anything else for you. Build it steadily, month by month, alongside your other goals. The monthly money check from the previous article is what tells you how much you can sustainably set aside.

An emergency fund is not built in a month. It is built by months.

What this sets up

Once the cushion is taking shape, the money you save stops being only protection and can start being growth. That is where investing enters the picture – and for most salaried people, the simplest door in is the SIP. The next article covers what to understand before starting your first one.

The question every salary month ends with

The message arrives on the last working day of the month: salary credited. For a few days the account looks healthy. Then, somewhere around the twentieth, a familiar question turns up – where did it all go?

Not on anything big. There was no large purchase, no emergency. The money simply went, in dozens of small spends that each felt too small to matter.

If that sounds familiar, you do not need a finance degree or a complicated spreadsheet to fix it. You need thirty minutes, once a month.

Why the money seems to disappear

It does not actually disappear. It leaks, in amounts small enough that we never feel ourselves deciding. A food order here, a subscription renewal there, three quick UPI taps at a shop. Each one is forgettable. Together, they are often a quarter of a salary.

Big expenses announce themselves. Rent, the EMI, school fees – you know those numbers. It is the uncounted middle, the flexible spending, that quietly decides whether anything is left at the end of the month.

Checking once a month is not about guilt. Nobody is grading you. It is about seeing your own money clearly, maybe for the first time.

The 30-minute check

Pick a fixed day. Salary day works well, or the first Sunday of the month. Sit down with your bank statement or banking app and write down four numbers:

1. What came in – your take-home salary, plus any other income.
2. What went to fixed bills – rent, EMIs, utilities, school fees. The amounts that barely change month to month.
3. What went to flexible spending – groceries, eating out, fuel, shopping, subscriptions, everything else.
4. What got saved – what you actually kept, not what you meant to keep.

That is the whole exercise. Four numbers, once a month. Most people have never seen their own four numbers side by side, and the first look is usually a surprise – sometimes a pleasant one, often not.

A worked example

Illustration, not advice – these numbers are invented, only to show how the check works. Your four numbers will look different, and that is fine.

Say your take-home salary is Rs 60,000. The check shows: fixed bills Rs 23,000, flexible spending Rs 27,000, saved Rs 10,000.

Now look one level deeper at just the flexible number. Inside that Rs 27,000 you find Rs 4,500 on food delivery, Rs 1,300 on subscriptions – including one you have not opened in months – and about Rs 3,000 on cabs for trips the metro would have covered.

None of these is a crime. But they are no longer invisible, and that changes the next decision. You cancel the unused subscription and set up an automatic transfer of Rs 2,000 to a separate savings account, timed for salary day. Next month the check shows Rs 12,000 saved instead of Rs 10,000 – and you did not feel poorer for it.

An optional helper: three accounts

If you want the check to be even easier, some people split their money across three plain savings accounts: one for bills, one for spending, one for saving. On salary day, the bill money and the saving money move out. What remains is safe to spend without mental maths.

This is completely optional – the monthly check works with a single account too. The accounts are a convenience, not the point. The point is the thirty minutes.

What to do with what you find

Do not overhaul your life in the first month. Pick one small change – one subscription, one habit, one automatic transfer – and let the next check show you what it did. Small changes you keep beat a strict plan you abandon by the third week.

The habit matters more than any single month’s numbers.

If the first check takes longer than thirty minutes, that is normal. By the third or fourth month, you will know exactly where to look, and it gets fast.

What this sets up

Once you can see what is left each month, the natural next question is what to do with it. A good first answer is a financial cushion for the surprises life does not warn you about – and that is exactly what the next article covers: how much emergency savings do you really need?

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