How Indian Income Tax Actually Works
Five moving parts: gross income, regime (Old or New), deductions (Old Regime only, mostly), standard deduction for salaried, then 87A rebate, surcharge if you're high-earning, and 4% cess on top. That's it.
New Regime Slabs (default)
Section 87A rebate kills tax to zero up to ₹12L taxable. Add the ₹75K standard deduction (salaried) and your zero-tax ceiling on gross salary is ₹12.75L.
Old Regime Slabs
Higher slab tax, but you can chip away with deductions. 87A rebate caps at ₹12,500 — zero tax only up to ₹5L taxable.
Worked Example — Salaried, ₹15L Gross
New Regime: Taxable = ₹14.25L (after ₹75K standard). Slab tax ≈ ₹93,750 + 4% cess ≈ ₹97,500. Effective rate ~6.5%.
Old Regime (₹1.5L 80C + ₹2L home loan interest + ₹25K 80D + ₹50K standard): Taxable ≈ ₹10.75L. Tax ≈ ₹1.35L + cess ≈ ₹1.40L. Effective ~9.3%.
New wins by ~₹43,000. Plug your own numbers into Compare above.
Old vs New — When Does Old Win?
Most filers default to New Regime. Old wins only if 80C + HRA + home loan interest crosses about ₹3.75L. The rough heuristic:
- Pick New if your deductions add up to less than ~₹4L. Covers most young earners, renters without HRA leverage, anyone without a home loan.
- Pick Old if you stack: ₹2L home loan interest (24(b)) + ₹1.5L 80C + meaningful HRA + ₹50K 80D. Then it usually pays off.
- Stop guessing — use Compare above. The URL encodes your inputs, so share or bookmark it.
Deductions That Only Work in Old Regime
- 80C — ₹1.5L cap. PPF, ELSS, LIC, home loan principal, EPF, tuition fees, 5-year tax-saver FD, SSY.
- 80D — Health insurance: ₹25K self + ₹50K senior parents = up to ₹75K.
- 24(b) — Home loan interest, ₹2L cap (self-occupied). See Home Loan EMI Calculator.
- 80CCD(1B) — Extra ₹50K NPS. See NPS Calculator.
- HRA (10(13A)) — Salaried renters. Find your exempt amount with the HRA Calculator.
- 80E — Education loan interest, no cap. See Education Loan EMI.
- Standard deduction — ₹50K (Old) vs ₹75K (New).
Surcharge — Only if You Cross ₹50L
- ₹50L – ₹1 Cr: 10% surcharge on tax.
- ₹1 Cr – ₹2 Cr: 15%.
- ₹2 Cr – ₹5 Cr: 25%.
- Above ₹5 Cr: 25% under New (capped); 37% under Old.
- 4% cess applies on tax + surcharge — always.
Filing Checklist
- Deadline: 31 July 2026 (audit cases: 31 October).
- Pre-fill from AIS/TIS on incometax.gov.in.
- Reconcile Form 16, Form 26AS, AIS. Mismatches = notice.
- Paying rent over ₹1L/year? You need the landlord's PAN.
- Tax-saving deadline for this year was 31 March 2026 — already past.
- Salaried can switch regimes annually. Business income earners cannot freely flip back to New once they opt out.
Combos Worth Considering
- Old + Home Loan + HRA — Renting in one city, owning in another. ₹2L (24b) + HRA exemption stacks fast.
- Old + Full 80C + NPS + 80D — ₹1.5L (PPF/ELSS) + ₹50K (NPS 80CCD(1B)) + ₹75K health = ₹86K tax saved at the 30% slab.
- New + High Salary, Few Deductions — Take the ₹75K standard, ride the ₹12L rebate ceiling, move on.
- Daughter under 10? SSY — 8.2% tax-free, eats into your 80C cap.
Frequently Asked Questions
What are the income tax slabs for FY 2025-26?
New Regime: 0% up to ₹4L; 5% on ₹4-8L; 10% on ₹8-12L; 15% on ₹12-16L; 20% on ₹16-20L; 25% on ₹20-24L; 30% above ₹24L. Section 87A rebate makes tax zero up to ₹12 Lakh taxable income.
Old Regime: 0% up to ₹2.5L; 5% on ₹2.5-5L; 20% on ₹5-10L; 30% above ₹10L. Section 87A rebate up to ₹12,500 for taxable income ≤ ₹5L.
Plus 4% Health & Education Cess on the final tax, and surcharge above ₹50L.
Is the New Regime mandatory for FY 2025-26?
No, it's the default. You can opt for the Old Regime when filing your ITR. Salaried employees can choose each year; business income earners face restrictions on switching back. Use the Compare mode in this calculator to decide.
What is the Section 87A rebate?
Section 87A provides a tax rebate that effectively cuts your tax to zero if taxable income is below a threshold. Under New Regime FY 2025-26, rebate is up to ₹60,000, making tax zero for taxable income up to ₹12 Lakh. Under Old Regime, rebate is max ₹12,500 — zero tax up to ₹5 Lakh.
What is the standard deduction?
Salaried employees and pensioners get an automatic deduction from gross salary before slabs apply. ₹75,000 under New Regime (FY 2025-26) and ₹50,000 under Old Regime. Self-employed and other-income earners do not get this.
How is the 4% Cess calculated?
The 4% Health & Education Cess applies on the total of (tax after rebate + surcharge, if any). For example, if your tax is ₹1 Lakh and surcharge ₹10K, Cess = 4% × ₹1.10 Lakh = ₹4,400.
When are tax returns due for FY 2025-26?
For individuals without audit, the ITR for AY 2026-27 (income earned in FY 2025-26) is due 31 July 2026. For audit cases, the deadline is 31 October 2026. Belated returns can be filed until 31 December 2026 with a late fee.
Which deductions are allowed in the New Regime?
Very few. Allowed: Standard deduction ₹75K (salaried), employer NPS contribution under 80CCD(2), family pension deduction ₹25K, and Agniveer corpus contribution under 80CCH. Not allowed: 80C, 80D, HRA, 80E, 24(b), 80CCD(1B), LTA, and most other common deductions.
Does this calculator save my data?
No. All calculations happen entirely inside your browser using JavaScript. Nothing is sent to any server. Your inputs are encoded in the URL when you share — your data never leaves your device.