Calculating your tax liability in India is essential for annual financial planning, salary structuring, and filing your Income Tax Return (ITR). With recent Union Budget revisions, the income tax calculator FY 2025-26 and income tax calculator FY 2026-27 help taxpayers easily navigate the updated tax slabs, revised standard deduction, and enhanced section 87A rebate under Section 115BAC. Using an intuitive income tax calculator online ensures accurate calculations without manual errors.
Whether you are a salaried executive receiving monthly pay, a freelance consultant, or a business owner, our free income tax calculator India provides instant side-by-side comparison between the old vs new tax regime. It factors in all tax brackets for Assessment Year (AY 2026-27 & AY 2027-28), calculates exact Health & Education Cess, and highlights your net monthly take-home salary.
How to Calculate Income Tax on Salary (Step-by-Step)
Understanding how to calculate income tax on salary involves converting your gross pay package into net taxable income, applying the relevant slab rates, applying tax rebates, and adding statutory surcharges or cess. Here is the step-by-step methodology used by our new income tax calculator:
- Step 1: Compute Gross Total Income — Add annual basic salary, HRA, special allowances, annual bonuses, side business income, savings account interest, and capital gains.
- Step 2: Subtract Standard Deduction — Salaried employees deduct ₹75,000 under the New Tax Regime or ₹50,000 under the Old Tax Regime automatically.
- Step 3: Deduct Chapter VI-A Exemptions (Old Regime Only) — Subtract eligible Old Regime deductions such as Section 80C (up to ₹1.5 Lakhs), Section 80D health insurance, HRA exemption under Section 10(13A), and Section 24(b) home loan interest.
- Step 4: Calculate Slab Tax — Apply progressive income tax slab rates to your net taxable income based on your chosen regime.
- Step 5: Apply Section 87A Tax Rebate — If net taxable income is ≤ ₹12,00,000 in the New Regime, claim up to ₹60,000 tax rebate (reducing slab tax to zero). In the Old Regime, claim up to ₹12,500 rebate if taxable income is ≤ ₹5,00,000.
- Step 6: Add 4% Health & Education Cess — Compute 4% cess on total net income tax before payment.
Worked Example: Income Tax on ₹15 Lakh Salary (New Tax Regime FY 2025-26 & 2026-27)
Suppose an employee earns a gross annual salary of ₹15,00,000 in FY 2025-26 under the income tax calculator new regime. Here is the detailed computation:
| Component | Amount (₹) | Calculation Details |
|---|---|---|
| Gross Annual Salary | ₹15,00,000 | Total Cost to Company / Annual Pay |
| Less: Standard Deduction | - ₹75,000 | Flat statutory deduction for salaried staff |
| Net Taxable Income | ₹14,25,000 | ₹15,00,000 - ₹75,000 |
| Slab 1: Up to ₹4,00,000 (0%) | ₹0 | Nil rate slab |
| Slab 2: ₹4,00,001 to ₹8,00,000 (5%) | ₹20,000 | 5% on ₹4,00,000 |
| Slab 3: ₹8,00,001 to ₹12,00,000 (10%) | ₹40,000 | 10% on ₹4,00,000 |
| Slab 4: ₹12,00,001 to ₹14,25,000 (15%) | ₹33,750 | 15% on ₹2,25,000 |
| Total Slab Tax Before Cess | ₹93,750 | ₹20,000 + ₹40,000 + ₹33,750 |
| Section 87A Rebate | ₹0 | Not eligible as taxable income > ₹12L |
| Health & Education Cess (4%) | ₹3,750 | 4% of ₹93,750 |
| Total Net Income Tax Payable | ₹97,500 | Effective Tax Rate: 6.50% |
| Annual Net Take-Home Salary | ₹14,02,500 | ₹1,16,875 per month take-home |
Tax & Salary Breakup for ₹15 Lakh Gross Income (New Regime)
Distribution of salary into net take-home pay, slab tax, and 4% cess
New Tax Regime Slabs (FY 2025-26 & FY 2026-27)
The new tax regime under Section 115BAC is the default tax regime in India. Designed with wider brackets and lower percentage rates, it eliminates the need to maintain investment proofs or insurance policies purely for tax saving. The tax slabs for income tax slab 2025-26 and income tax slab 2026-27 (applicable to AY 2026-27 and AY 2027-28) are structured as follows:
| Net Taxable Income Bracket (₹) | New Tax Regime Rate (%) | Tax in Bracket (₹) | Cumulative Base Tax (₹) |
|---|---|---|---|
| Up to ₹4,00,000 | Nil (0%) | ₹0 | ₹0 |
| ₹4,00,001 to ₹8,00,000 | 5% | ₹20,000 | ₹20,000 |
| ₹8,00,001 to ₹12,00,000 | 10% | ₹40,000 | ₹60,000 (100% Tax-Free u/s 87A) |
| ₹12,00,001 to ₹16,00,000 | 15% | ₹60,000 | ₹1,20,000 |
| ₹16,00,001 to ₹20,00,000 | 20% | ₹80,000 | ₹2,00,000 |
| ₹20,00,001 to ₹24,00,000 | 25% | ₹1,00,000 | ₹3,00,000 |
| Above ₹24,00,000 | 30% | 30% on excess over ₹24L | ₹3,00,000 + 30% of excess |
*Note: Salaried individuals receive an automatic ₹75,000 standard deduction under the New Regime, meaning zero income tax is charged on a gross annual salary of up to ₹12,75,000.
New Tax Regime Slabs (FY 2025-26 & FY 2026-27)
Progressive tax rate slabs under Section 115BAC applicable for AY 2026-27 and AY 2027-28
Old Tax Regime Slabs & Key Deductions
The Old Tax Regime maintains traditional tax rates but allows taxpayers to reduce taxable income through various deductions and exemptions under Chapter VI-A. Below are the basic exemption limits and tax slab rates for individual taxpayers below 60 years of age:
| Taxable Income Slab (Old Regime) | Individuals (< 60 Yrs) | Senior Citizens (60–80 Yrs) | Super Seniors (80+ Yrs) |
|---|---|---|---|
| Up to ₹2,50,000 | Nil (0%) | Nil (0%) | Nil (0%) |
| ₹2,50,001 to ₹3,00,000 | 5% | Nil (0%) | Nil (0%) |
| ₹3,00,001 to ₹5,00,000 | 5% (87A Rebate) | 5% (87A Rebate) | Nil (0%) |
| ₹5,00,001 to ₹10,00,000 | 20% | 20% | 20% |
| Above ₹10,00,000 | 30% | 30% | 30% |
Popular Old Regime Deductions
- Section 80C (Max ₹1.5 Lakhs): Employee Provident Fund (EPF), Public Provident Fund (PPF), ELSS Mutual Funds, Life Insurance Premium, Children Tuition Fees, and Home Loan Principal repayment.
- Section 80D (Max ₹25,000 to ₹1,00,000): Medical insurance premiums paid for self, spouse, children, and senior citizen parents.
- HRA Exemption (Section 10(13A)): House Rent Allowance exemption based on actual rent paid minus 10% of basic salary. You can calculate exact exemption with our HRA Calculator.
- Section 24(b) Home Loan Interest (Max ₹2 Lakhs): Interest paid on home loans for self-occupied property.
- Section 80CCD(1B) NPS (Max ₹50,000): Additional tax deduction for self-contributions to National Pension System.
Old vs New Tax Regime — Which Tax Regime is Better?
Choosing between the old vs new tax regime depends directly on your total eligible tax deductions. To evaluate which tax regime is better, taxpayers need to calculate their breakeven deduction threshold.
✅ When to Choose New Tax Regime
- • Gross annual salary up to ₹12.75 Lakhs (100% tax-free for salaried).
- • Total Old Regime deductions are less than ₹3.75 Lakhs to ₹4.0 Lakhs.
- • You prefer hassle-free tax filing without investing in 80C/ELSS or keeping rent receipts.
- • You do not have an ongoing home loan interest payment.
🏛️ When to Choose Old Tax Regime
- • Total deductions exceed ₹3.75 Lakhs to ₹4.0 Lakhs per year.
- • You pay high rent in metro cities (claiming substantial HRA exemption).
- • You pay home loan interest up to ₹2.0 Lakhs under Section 24(b).
- • You make maximum investments in 80C (₹1.5L), 80D (₹50k), and NPS (₹50k).
For an exhaustive side-by-side comparison tailored to your exact salary structure, try our dedicated Old vs New Tax Regime Calculator. You can also estimate your post-tax salary in hand using the In-Hand Salary Calculator.
Annual Tax Liability: New vs Old Regime (Salaried Employee)
Comparative tax payable across income levels assuming ₹2,25,000 Old Regime Chapter VI-A deductions
Section 87A Rebate & Standard Deduction Explained
Two primary mechanisms protect middle-income earners from heavy tax burdens:
1. Section 87A Tax Rebate
Section 87A rebate is a tax credit offered by the Government of India to resident individuals. Under the New Tax Regime for FY 2025-26 and FY 2026-27, Section 87A grants a maximum tax rebate of ₹60,000 if your net taxable income does not exceed ₹12,00,000. Because total slab tax on ₹12 Lakhs is exactly ₹60,000 (5% on 4L + 10% on 4L), the net tax payable becomes ₹0. Under the Old Tax Regime, Section 87A rebate is capped at ₹12,500 for taxable income up to ₹5,00,000.
2. Standard Deduction
The standard deduction is a flat deduction granted to all salaried employees and pensioners. Under FY 2025-26 & FY 2026-27 rules, it stands at ₹75,000 in the New Tax Regime and ₹50,000 in the Old Tax Regime. It requires zero documentation or proof submissions during ITR filing.
FY vs AY, TDS & ITR Filing Deadlines
When using an income tax calculator AY 2025-26 or income tax calculator AY 2026-27, it is crucial to understand tax terminology:
- Financial Year (FY): The 12-month period in which income is earned (e.g. FY 2025-26 runs from 1 April 2025 to 31 March 2026).
- Assessment Year (AY): The 12-month period immediately following the financial year, during which tax returns are assessed and filed (e.g. AY 2026-27 corresponds to FY 2025-26).
- Tax Deducted at Source (TDS): Employers deduct monthly salary TDS based on projected annual tax liability. Check your TDS deductions with our TDS Calculator.
- ITR Filing Due Date: For non-audit individual taxpayers, the annual deadline to file ITR is 31st July following the end of the financial year.
📌 Tax Disclaimer
This income tax calculator and guide are provided for informational and educational purposes only based on Indian Income Tax laws under the Finance Acts. Tax calculations may vary based on surcharge brackets, capital gains, marginal relief, or special income rates. Always consult a certified Chartered Accountant (CA) or tax professional for personalized tax advice.