Income Tax Calculator

Income Tax in India: Complete Guide for FY 2025-26

Income tax is a direct tax levied by the Government of India on the income earned by individuals, Hindu Undivided Families (HUFs), companies, and other entities during a financial year. It is governed by the Income Tax Act, 1961 and administered by the Central Board of Direct Taxes (CBDT). Every resident whose gross total income exceeds the basic exemption limit is required to file an income tax return (ITR) and pay any applicable tax. Understanding the tax structure helps you plan your finances better, claim legitimate deductions, and avoid penalties for non-compliance.

How Income Tax Works: Old Regime vs New Regime

India currently offers two parallel tax regimes. The Old Regime allows a wide range of deductions and exemptions such as Section 80C, 80D, HRA, home loan interest under Section 24, and LTA. However, it applies higher base slab rates. The New Regime, which is the default regime from FY 2023-24 onwards, offers significantly lower slab rates but removes nearly all deductions except the standard deduction of ₹75,000 (raised from ₹50,000 in Budget 2024). Taxpayers must evaluate both regimes every year and choose the one that results in a lower tax liability. If a salaried employee does not explicitly opt for the old regime with their employer before the start of the financial year, their TDS will be deducted as per the new regime by default.

New Regime Tax Slabs (FY 2025-26)

• Up to ₹4,00,000 — Nil (no tax)
• ₹4,00,001 to ₹8,00,000 — 5%
• ₹8,00,001 to ₹12,00,000 — 10%
• ₹12,00,001 to ₹16,00,000 — 15%
• ₹16,00,001 to ₹20,00,000 — 20%
• ₹20,00,001 to ₹24,00,000 — 25%
• Above ₹24,00,000 — 30%

A full tax rebate under Section 87A is available if your total taxable income does not exceed ₹12,00,000 under the new regime, making your tax liability effectively zero. The standard deduction of ₹75,000 means salaried individuals earning up to ₹12,75,000 pay zero tax under the new regime.

Old Regime Tax Slabs

• Up to ₹2,50,000 — Nil (₹3,00,000 for senior citizens 60–80, ₹5,00,000 for super seniors 80+)
• ₹2,50,001 to ₹5,00,000 — 5%
• ₹5,00,001 to ₹10,00,000 — 20%
• Above ₹10,00,000 — 30%

Under the old regime, a rebate of up to ₹12,500 under Section 87A is available if taxable income does not exceed ₹5,00,000. The old regime is beneficial when you have substantial deductions exceeding ₹3.75 lakh (approximately).

Example 1: Salaried Employee — New Regime (₹15 Lakh Income)

Suppose your gross salary is ₹15,00,000 per year. Under the new regime, after the standard deduction of ₹75,000, your taxable income becomes ₹14,25,000. The tax is calculated as: ₹0 on the first ₹4,00,000 + ₹20,000 (5% of ₹4,00,000) + ₹40,000 (10% of ₹4,00,000) + ₹33,750 (15% of ₹2,25,000) = ₹93,750. Add 4% health and education cess of ₹3,750, bringing the total to ₹97,500.

Example 2: Salaried Employee — Old Regime with Full Deductions (₹20 Lakh Income)

Priya earns a gross salary of ₹20,00,000 per year. She has the following deductions under the old regime: Section 80C (PPF + ELSS) = ₹1,50,000, Section 80D (health insurance for self and parents) = ₹50,000, HRA exemption = ₹2,40,000, Home Loan Interest under Section 24 = ₹2,00,000, and Standard Deduction = ₹50,000. Total deductions = ₹6,90,000. Her taxable income under the old regime = ₹20,00,000 − ₹6,90,000 = ₹13,10,000.

Tax calculation (old regime): ₹0 on the first ₹2,50,000 + ₹12,500 (5% of ₹2,50,000) + ₹1,00,000 (20% of ₹5,00,000) + ₹93,000 (30% of ₹3,10,000) = ₹2,05,500. Add 4% cess = ₹8,220. Total tax = ₹2,13,720.

Under the new regime (same ₹20 lakh income), only the ₹75,000 standard deduction applies. Taxable income = ₹19,25,000. Tax = ₹0 + ₹20,000 + ₹40,000 + ₹60,000 + ₹65,000 (20% of ₹3,25,000) = ₹1,85,000. Add 4% cess = ₹7,400. Total tax = ₹1,92,400. In this example, the new regime saves Priya ₹21,320, even though she maximised her old-regime deductions. This illustrates why comparing both regimes each year is essential.

Old vs New Regime — Side-by-Side Comparison

Key Deductions Available Under the Old Regime

The old regime remains attractive when you can claim enough deductions to bring your taxable income well below what the new regime offers. Here are the most important deductions and their limits:

• Section 80C (₹1,50,000): Covers PPF, ELSS, EPF, NSC, life insurance premiums, tuition fees for up to 2 children, tax-saver FDs (5-year lock-in), home loan principal repayment, and Sukanya Samriddhi Yojana.
• Section 80CCD(1B) (₹50,000): Additional deduction for contributions to the National Pension System (NPS), over and above the 80C limit.
• Section 80D (₹25,000–₹1,00,000): Medical insurance premiums — ₹25,000 for self/family, additional ₹25,000 for parents (₹50,000 if parents are senior citizens). Preventive health check-up of ₹5,000 is included within this limit.
• Section 24(b) (₹2,00,000): Interest on home loan for a self-occupied property. No limit for a let-out property.
• Section 80E: Interest on education loan — no upper limit, deductible for up to 8 years from the year you start repaying.
• Section 80G: Donations to specified charitable institutions — 50% or 100% deduction depending on the organisation.
• HRA Exemption under Section 10(13A): Computed as the minimum of actual HRA received, 50%/40% of salary, or rent paid minus 10% of salary.
• LTA (Section 10(5)): Leave Travel Allowance for domestic travel, claimable twice in a block of 4 years.

Surcharge and Health & Education Cess

A surcharge applies on income tax for high earners: 10% for income above ₹50 lakh, 15% above ₹1 crore, 25% above ₹2 crore, and 37% above ₹5 crore (capped at 25% under the new regime). Additionally, a 4% Health and Education Cess is levied on the total of income tax plus surcharge. This cess funds primary education and healthcare programmes across India. Importantly, the marginal relief provision ensures that the additional tax (including surcharge) does not exceed the additional income that crosses the surcharge threshold.

Common Income Tax Myths — Busted

• “If my income is ₹12.75 lakh, I pay zero tax in the new regime”: Correct for salaried employees (after ₹75,000 standard deduction, taxable income becomes ₹12 lakh, within the rebate limit). However, non-salaried individuals do not get the standard deduction, so their zero-tax limit is ₹12 lakh gross.
• “The new regime is always better”: Not necessarily. If you have HRA exemption, home loan interest, NPS, and full 80C deductions totalling over ₹3.75–4 lakh, the old regime often results in lower tax. Always compare both.
• “I don’t need to file ITR if my tax is zero”: Wrong. Filing is mandatory if your gross total income (before deductions) exceeds the basic exemption limit, even if the final tax payable is zero after rebate.
• “Switching regimes is permanent”: Salaried individuals can switch between old and new regime every financial year when filing their ITR. Business/professional income earners who opt out of the new regime can switch back only once in a lifetime.
• “All allowances are taxable under the new regime”: Employer contributions to NPS under Section 80CCD(2) up to 14% of salary, gratuity, leave encashment on retirement, and certain retrenchment compensation remain exempt even under the new regime.

Important Due Dates and Penalties

The income tax return filing deadline for salaried individuals and non-audit cases is 31st July of the assessment year (e.g., 31 July 2026 for FY 2025-26). For those requiring an audit under Section 44AB, the deadline is 31st October. Late filing attracts a penalty under Section 234F of up to ₹5,000 (₹1,000 if total income does not exceed ₹5 lakh). Additionally, interest under Section 234A at 1% per month is charged on unpaid tax from the due date until the actual filing date. Advance tax must be paid in four instalments (15 June, 15 September, 15 December, and 15 March) if your total tax liability exceeds ₹10,000 in a financial year; failure to do so attracts interest under Sections 234B and 234C.

Tips and Best Practices

• Compare both regimes every year using this calculator before filing your ITR.
• If you have home loan interest, HRA, and ₹1.5 lakh in 80C investments, the old regime may save you more tax.
• Salaried individuals with minimal investments benefit from the new regime’s lower slab rates.
• File your return before the due date (usually 31st July) to avoid a late filing fee of up to ₹5,000 under Section 234F.
• Maintain proper documentation for all deductions claimed under the old regime, including rent receipts, insurance premium receipts, and investment proofs.
• Claim NPS deduction under Section 80CCD(1B) for an additional ₹50,000 over the 80C limit — this alone can save up to ₹15,600 in tax (at the 30% slab + cess).
• If you are a senior citizen (60+), check whether the higher exemption limit under the old regime makes it more favourable than the new regime.
• Verify your Form 26AS and Annual Information Statement (AIS) on the income tax portal before filing to ensure TDS credits match and no unreported income is flagged.

When to Use This Calculator

Use this income tax calculator at the beginning of the financial year for tax planning, during salary negotiation to understand your take-home pay, before making investment decisions under Section 80C or 80D, and while filing your ITR to verify your tax computation. Comparing old and new regime results helps you make an informed choice about which regime to select when filing your return. Revisit the calculator in January–March during the proof submission window at work, and again right before the July filing deadline to ensure there are no last-minute surprises.