Gross Total Income
₹ 12,00,000
Standard Deduction
₹ 75,000
Net Taxable Income
₹ 11,25,000
Base Tax Liability
₹ 65,000
Health & Education Cess (4%)
₹ 2,600
Total Net Tax Payable
₹ 67,600
About the Income Tax Calculator (India)
Our free Income Tax Calculator helps taxpayers in India estimate their annual tax liability under both the New Tax Regime and Old Tax Regime for Financial Year (FY 2025-26) / Assessment Year (AY 2026-27). It incorporates standard deductions, tax slab rates, and applicable rebates.
1. Income Tax & Slab Calculation Mathematical Rules
Income tax liability in India is computed by subtracting applicable standard deductions and tax exemptions from gross annual income to determine net taxable income, which is then taxed progressively across progressive income slabs:
Net Taxable Income = Gross Total Income − Standard Deduction − Eligible Deductions (Old Regime)
Base Tax Liability = Sum of Tax Calculated across Applicable Progressive Slabs
Health & Education Cess = Base Tax Liability × 4%
Total Net Tax Payable = Base Tax Liability + Health & Education Cess
Where the defined variables are:
- Gross Total Income: Total annual earnings from salary, business, capital gains, or other sources.
- Standard Deduction: Flat statutory deduction (₹75,000 under the New Tax Regime for FY 2025-26; ₹50,000 under the Old Tax Regime).
- Progressive Tax Slabs: Marginal tax brackets ranging from 5% to 30% depending on total taxable income and chosen regime.
2. Practical Worked Example
Let us review an individual tax calculation under the New Tax Regime for FY 2025-26:
- Gross Annual Income: ₹12,00,000 (₹12 Lakhs)
- Standard Deduction: ₹75,000
- Net Taxable Income: ₹12,00,000 − ₹75,000 = ₹11,25,000
Calculation Breakdown under New Tax Regime Slabs:
- Up to ₹3,00,000 = Nil
- ₹3,00,001 to ₹7,00,000 (4 Lakhs @ 5%) = ₹20,000
- ₹7,00,001 to ₹10,00,000 (3 Lakhs @ 10%) = ₹30,000
- ₹10,00,001 to ₹11,25,000 (1.25 Lakhs @ 15%) = ₹18,750
- Base Tax Liability = ₹20,000 + ₹30,000 + ₹18,750 = ₹68,750 (Note: exact marginal relief or slab adjustments apply depending on exact thresholds; standard slab calculation yields baseline figures).
- Health & Education Cess (4%) = ₹68,750 × 0.04 = ₹2,750
- Total Net Tax Payable = ₹68,750 + ₹2,750 = ₹71,500
Comparing your tax liability between the New and Old regimes ensures you retain maximum take-home earnings!
3. Frequently Asked Questions (FAQs)
1. What is the standard deduction under the New Tax Regime for FY 2025-26?
The standard deduction for salaried individuals and pensioners under the New Tax Regime is ₹75,000 per financial year.
2. What is the tax rebate limit under Section 87A?
Under the New Tax Regime, resident individuals having total taxable income up to ₹7,00,000 are eligible for a tax rebate equivalent to their entire tax liability, resulting in zero tax.
3. Which tax regime is better: New or Old?
The New Tax Regime generally benefits individuals with fewer traditional deductions (like 80C or home loan interest), whereas the Old Regime may still save more tax if you claim substantial deductions exceeding the threshold crossover point.
4. What deductions are available exclusively under the Old Tax Regime?
The Old Regime permits popular tax-saving deductions under Section 80C (up to ₹1.5 Lakhs), Section 80D (health insurance), House Rent Allowance (HRA), Leave Travel Concession (LTC), and home loan interest under Section 24.
5. Can salaried employees switch between New and Old regimes every year?
Yes, salaried and pensioner individuals without business income have the flexibility to choose between the New and Old tax regimes annually when filing their Income Tax Return (ITR).
6. What is the surcharge rate for high-income earners?
Under the New Tax Regime, the highest surcharge rate is capped at 25% for taxable income exceeding ₹5 Crores, whereas the Old Regime retains a maximum surcharge of 37%.
7. When is the due date for filing income tax returns in India?
For individuals whose accounts do not require audit, the standard due date for filing ITR for a financial year is July 31 of the subsequent assessment year.
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