Income Tax Calculator
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How it is calculated
The calculator applies the AY 2026-27 (Budget 2025) slabs. The new regime gives a ₹75,000 standard deduction and makes income up to ₹12 lakh effectively tax-free via the Section 87A rebate. The old regime gives a ₹50,000 standard deduction but lets you claim 80C, 80D, HRA and home-loan interest. It computes tax under both (including 4% cess) and shows which is lower for you.
The new regime is the default, so inaction chooses it
The new regime under section 115BAC now applies unless you opt out, which reverses the position most people learned. If you tell your employer nothing, tax is deducted under the new regime, and the deductions you might have claimed simply do not enter the computation. That is not an error to be corrected but the consequence of the default. Two things follow. First, if the old regime is better for you, the declaration has to be made at the start of the year for your TDS to reflect it. Second, and more usefully, the choice at filing is not bound by what your employer did: a salaried taxpayer may file under whichever regime is better and the difference resolves as a refund or an additional payment. So a missed declaration costs you the use of your money during the year, not the benefit itself.
What the ₹12 lakh nil-tax point really is
The figure most quoted about the new regime is also the most misunderstood. Tax on taxable income up to ₹12 lakh comes to nil because of the rebate under section 87A, which is worth up to ₹60,000 — it is a rebate applied after computing tax, not a slab of income that is exempt. That distinction matters when income crosses the line: above ₹12 lakh the rebate is not available, and tax is computed on the whole income through the slabs rather than only on the excess. Because a rupee of extra income could otherwise create a disproportionate jump in tax, marginal relief applies just above the threshold and stops binding at roughly ₹12,70,588. For a salaried taxpayer the ₹75,000 standard deduction sits before this, so the equivalent gross salary is about ₹12.75 lakh.
What survives in the new regime
The new regime removes most deductions, but not all, and knowing which survive is worth more than a general impression. Salaried taxpayers keep the standard deduction, now ₹75,000. The employer's contribution to the National Pension System under section 80CCD(2) remains deductible, and for someone in a higher bracket whose employer offers it, that is the single largest remaining lever — often worth restructuring salary to include. Interest on a let-out property continues to be treated under its own rules, unlike interest on a self-occupied property, which is not deductible here. What goes is the familiar list: 80C, 80D, HRA, leave travel allowance, section 24(b) on a self-occupied house, and most of Chapter VI-A. The surcharge position is also more favourable, capped at 25% rather than the old regime's 37%.
Surcharge, cess and marginal relief
Three things sit on top of the slab computation and are frequently omitted from mental arithmetic. Surcharge applies at higher incomes — 10% above ₹50 lakh, 15% above ₹1 crore and 25% above ₹2 crore under the new regime, where the old regime's 37% band does not apply. Health and education cess of 4% is then charged on tax plus surcharge, so it is not simply 4% of the slab tax. Marginal relief operates at each surcharge threshold as well as at the rebate threshold, ensuring that crossing a boundary by a small amount does not increase tax by more than the additional income. The practical implication is that effective rates near these boundaries are not intuitive, and a calculator is more reliable than an estimate — particularly for anyone whose income sits within a lakh or so of ₹50 lakh, ₹1 crore or ₹12 lakh.
Compute, then check against what the department already sees
A tax computation built only from salary is incomplete, and the gap is what produces intimations under section 143(1). Before treating any figure as final, open the Annual Information Statement and check what the department has already been told about you: savings and deposit interest, dividends, mutual fund and share transactions, property dealings, large payments and foreign remittances. Then reconcile the tax credits you intend to claim against Form 26AS rather than against the certificates in your hand, because 26AS is the record the system matches. Interest on a savings account is a frequent omission — it has to be added to income first, and only then does the deduction under section 80TTA apply. Do this before filing rather than after, because correcting an omission voluntarily is straightforward while responding to an intimation is not.
When the old regime still wins
The old regime charges more on the same income and pays for it with deductions, so it wins only where those deductions are large. In practice that usually means a combination rather than any single item: a home loan generating interest under section 24(b), rent paid generating an HRA exemption, and 80C filled by provident fund, tuition fees and loan principal, often with 80D and the additional NPS deduction under 80CCD(1B) on top. A rough crossover sits somewhere around ₹3.5 to ₹4 lakh of total deductions, but it moves with income level because the two regimes apply different rates at different slabs, so it should be computed rather than assumed. Salaried taxpayers may choose afresh each year, so the answer can legitimately change when you buy a house, move city or repay a loan. Anyone with business income faces a much more restrictive switching rule.
Switching rules differ for business income
The freedom to choose each year belongs to taxpayers whose income is from salary and other ordinary sources. Where there is income from business or profession the position is materially tighter: you may opt out of the new regime into the old one, but having returned to the new regime you cannot generally go back to the old again while the business income continues. That makes the decision close to one-way for freelancers, consultants and business owners, and it deserves a projection across several years rather than a comparison of the current one. Opting out also requires filing the prescribed form within the time allowed, and missing that deadline means the default applies whatever your computation showed. If your circumstances are about to change — a house purchase, a large loan, a move to a metro — factor that in before exercising a choice that may be difficult to reverse.
Frequently asked questions
What happens if my income is just above Rs 12 lakh?
The section 87A rebate is not available above that point and tax is computed through the slabs on the whole income. Marginal relief applies just above the threshold so that a small amount of extra income cannot increase tax by more than the income itself, and it stops binding at roughly Rs 12,70,588.
Can I choose a different regime from the one my employer used?
Yes, if your income is from salary and other ordinary sources — the choice at filing is not bound by your employer's TDS basis, and the difference resolves as a refund or additional payment. Anyone with business income faces much tighter switching rules and should project across years.
Is income up to ₹12 lakh really tax-free?
Under the new regime for AY 2026-27, the Section 87A rebate makes income up to ₹12 lakh effectively tax-free (with the standard deduction, a salaried person's break-even is a little higher). Above that, normal slabs apply.
Which regime should I choose?
It depends on your deductions. If you claim large 80C/80D/HRA/home-loan deductions, the old regime can win; otherwise the new regime is usually better. The calculator compares both for you.
Does this include HRA and home-loan interest?
This quick calculator uses 80C and 80D. HRA and Section 24(b) interest (old regime) can change the result — use our HRA calculator and confirm with a CA.
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India Law Simplified is an AI-assisted tool, not a substitute for a licensed CA or advocate. Tax rules and limits change with each Finance Act — verify before relying on any figure.