Which tax regime is the default now?

The new tax regime is the default option since the 2023-24 financial year. If you want to be taxed under the old regime instead, you need to actively opt for it — salaried individuals can choose each year while filing their return, while those with business income face restrictions on switching back and forth.

Can I switch between tax regimes every year?

Salaried individuals without business income can choose their preferred regime every financial year when filing their return, with no restrictions on switching. Those with business or professional income have more limited switching flexibility and should check current rules before assuming they can change every year.

Does the new tax regime allow any deductions at all?

Yes, though far fewer than the old regime. The new regime allows the standard deduction (₹75,000 for salaried individuals), employer's NPS contribution under Section 80CCD(2), and a few other limited deductions — but it excludes 80C investments, HRA exemption, and home loan interest deduction on a self-occupied property, which are the deductions most taxpayers rely on most heavily.

What is the Section 87A rebate?

Section 87A provides a tax rebate that effectively brings your tax liability to zero if your taxable income falls below a certain threshold — currently ₹12 lakh under the new regime and ₹5 lakh under the old regime. This isn't a deduction from income but a rebate applied directly against your calculated tax liability.

Is this calculator accurate for business income or capital gains?

This calculator is designed for standard salary income taxation. Business income, capital gains from stocks or property, and other special income categories often follow different tax treatment and rates, so consult a tax professional or use specialized tools for those income types.

Do I need to submit proof for my deductions?

Yes, if you're filing under the old regime and claiming deductions, you typically need to submit investment proofs to your employer during the financial year for accurate TDS calculation, and retain those documents in case of any tax department scrutiny even after filing.

What happens if my employer deducts TDS based on the wrong regime?

You can still choose your preferred regime when filing your income tax return, regardless of which regime your employer used for TDS calculation during the year. Any excess TDS deducted would be refunded to you after you file your return under your chosen regime.

Are there any income levels where the choice doesn't matter much?

At very low income levels, both regimes often result in zero or minimal tax due to rebates and basic exemptions, making the choice less consequential. The difference between regimes tends to matter most in the ₹8-20 lakh income range, where deduction utilization can meaningfully shift the outcome.

Income Tax Calculator (New Regime) — FY 2025-26

Estimate your income tax liability under India's new tax regime, FY 2025-26 slabs.

Understanding India's Two Tax Regimes

Since the 2023 Budget, every taxpayer in India effectively has two separate tax systems to choose between each year — the new tax regime and the old tax regime — and picking the wrong one for your situation can cost you tens of thousands of rupees annually. The new regime, now the default option unless you actively opt out, offers lower tax rates and a wider set of income slabs, but strips away most of the deductions and exemptions that Indian taxpayers have historically relied on. The old regime keeps the higher rates most people grew up with, but lets you claim deductions for investments, insurance, home loan interest, HRA, and a long list of other expenses.

There's no universal answer to which regime is better — it depends entirely on how much you actually invest in tax-saving instruments and what deductions you're eligible for. This calculator lets you compute your liability under both regimes side by side, so the choice becomes a matter of comparing two concrete numbers rather than guessing.

New Tax Regime Slabs

The new regime uses a wider set of slabs with progressively increasing rates, and it comes with a standard deduction of ₹75,000 for salaried individuals and pensioners. Income up to ₹4 lakh is entirely tax-free, income between ₹4-8 lakh is taxed at 5%, ₹8-12 lakh at 10%, ₹12-16 lakh at 15%, ₹16-20 lakh at 20%, ₹20-24 lakh at 25%, and anything above ₹24 lakh at 30%. A rebate under Section 87A also means individuals with taxable income up to ₹12 lakh effectively pay zero tax after the rebate is applied, making the new regime especially attractive for the large segment of taxpayers in that income bracket.

Old Tax Regime Slabs and Deductions

The old regime retains its familiar three-slab structure: income up to ₹2.5 lakh is tax-free, ₹2.5-5 lakh is taxed at 5%, ₹5-10 lakh at 20%, and above ₹10 lakh at 30%. What makes the old regime competitive despite its higher headline rates is the sheer range of deductions available to reduce your taxable income before these slabs even apply. Section 80C alone allows deductions up to ₹1.5 lakh for investments in PPF, ELSS mutual funds, life insurance premiums, home loan principal repayment, and children's tuition fees. Section 80D adds up to ₹25,000-1,00,000 for health insurance premiums depending on your age and your parents' age. House Rent Allowance (HRA) exemption, home loan interest deduction under Section 24(b), and the standard deduction of ₹50,000 for salaried employees add further room to reduce taxable income.

Which Regime Should You Choose?

As a rough guide, if your total eligible deductions — 80C, 80D, HRA, home loan interest, and others combined — comfortably exceed ₹3.5-4 lakh a year, the old regime often works out cheaper despite its higher rates. If you don't invest heavily in tax-saving instruments, don't pay significant rent, or don't have a home loan, the new regime's lower rates typically win by a clear margin. Salaried employees with a home loan on a self-occupied property and full 80C utilization are the classic case where the old regime still makes sense; young professionals renting a small flat with minimal investments are the classic case where the new regime wins.

It's worth actually running both calculations every year rather than assuming your previous year's choice still holds — a new home loan, a jump in HRA-eligible rent, or maxing out 80C for the first time can all flip which regime is cheaper for you.

Common Deductions Explained

Section 80C — ₹1.5 Lakh Limit

This is the most commonly used deduction and covers a wide basket of instruments: Public Provident Fund contributions, Employee Provident Fund (your own contribution), Equity Linked Savings Scheme (ELSS) mutual funds, National Savings Certificates, five-year tax-saving fixed deposits, life insurance premiums, and principal repayment on a home loan. Because the limit is shared across all of these, the strategy isn't to invest in every single option but to pick the ones that also serve your broader financial goals — ELSS for younger investors comfortable with equity volatility, PPF for a more conservative, long-term option.

Section 80D — Health Insurance

Premiums paid for health insurance covering yourself, your spouse, and children qualify for a deduction up to ₹25,000 a year (₹50,000 if you or your spouse is a senior citizen). An additional deduction up to ₹25,000 (₹50,000 if they're senior citizens) is available for premiums covering your parents, making this one of the few deductions that rewards taking care of your parents' health coverage as well as your own.

HRA Exemption

If you receive House Rent Allowance as part of your salary and actually pay rent, a portion of that HRA is exempt from tax — calculated as the lowest of your actual HRA received, rent paid minus 10% of basic salary, or 50% of basic salary for those in metro cities (40% for non-metros). This exemption is only available under the old regime and disappears entirely if you switch to the new one.

Cess and Surcharge

Beyond the slab-based tax, a 4% Health and Education Cess is added on top of your calculated tax liability under both regimes. High earners face an additional surcharge — 10% on income above ₹50 lakh, 15% above ₹1 crore, and rising further at higher income levels, though the new regime caps the maximum surcharge rate lower than the old regime for very high earners, which is a lesser-known but meaningful factor for those in the top income brackets.

Tax Planning Beyond Just Picking a Regime

Choosing between regimes is only one part of managing your tax liability — timing also matters. Making your full 80C and 80D investments early in the financial year rather than scrambling in March gives that money more time to actually grow, since tax-saving instruments like ELSS and PPF are also investments in their own right, not just deduction vehicles. Similarly, if you're close to a slab boundary, small adjustments — an additional NPS contribution under Section 80CCD(1B), which offers an extra ₹50,000 deduction beyond the 80C limit exclusively for retirement savings — can sometimes pull you into a meaningfully lower effective tax bracket.

How to Use This Calculator

Enter your gross annual income and, if you want to compare both regimes accurately, your eligible deductions under the old regime — 80C investments, 80D health insurance, HRA exemption, and home loan interest if applicable. The calculator computes your tax liability under both regimes side by side, so you can see the actual rupee difference rather than relying on general advice that may not apply to your specific income and deduction profile.

A Worked Example: Comparing Both Regimes

Numbers make this clearer than general rules. Take a salaried individual earning ₹15 lakh a year, paying ₹15,000 a month in rent (metro city), fully utilizing 80C at ₹1.5 lakh, and paying ₹20,000 a year in health insurance premiums.

Under the new regime, after the ₹75,000 standard deduction, taxable income is ₹14.25 lakh. Running this through the new slabs gives a tax liability of roughly ₹1,17,500 before cess, working out to about ₹1,22,200 after the 4% cess.

Under the old regime, after the ₹50,000 standard deduction, ₹1.5 lakh under 80C, ₹20,000 under 80D, and an HRA exemption of roughly ₹1.2 lakh (assuming a basic salary component that supports this), taxable income drops to around ₹11.6 lakh. Running this through the old slabs gives a tax liability of roughly ₹1,54,500 before cess, or about ₹1,60,700 after cess.

In this specific example, the new regime saves this taxpayer close to ₹38,000 a year — despite the old regime's deductions, the new regime's lower rates and higher exemption still come out ahead. Change the rent to ₹35,000 a month and add a home loan with ₹2 lakh in annual interest, however, and the old regime can easily flip to being the cheaper option. This is exactly why running your own numbers through a calculator, rather than relying on a general rule of thumb, matters so much.

Senior Citizen Tax Slabs

Senior citizens (60-79 years) and super senior citizens (80 years and above) get a higher basic exemption limit under the old regime — ₹3 lakh and ₹5 lakh respectively, compared to ₹2.5 lakh for those under 60. This higher exemption doesn't apply under the new regime, where the same slab structure applies regardless of age, except that senior citizens above 75 with only pension and interest income from a single specified bank may be exempt from filing a return altogether under certain conditions, since the bank handles TDS directly.

Advance Tax and TDS: Paying as You Earn

India's tax system is designed to collect tax throughout the year rather than in one lump sum at filing time. For salaried employees, this happens automatically through Tax Deducted at Source (TDS), where your employer withholds an estimated tax amount from each month's salary based on your declared regime and investment declarations. For income beyond salary — freelance work, rental income, capital gains — taxpayers with a liability exceeding ₹10,000 in a financial year are required to pay advance tax in quarterly instalments, with interest penalties under Sections 234B and 234C for shortfalls. Underestimating your tax liability and paying too little through the year is one of the more common and avoidable causes of unexpected interest charges at filing time.

Beyond Deductions: Other Ways to Manage Your Tax Liability

While Sections 80C and 80D get the most attention, a few other provisions are worth knowing. Section 80CCD(1B) allows an additional ₹50,000 deduction for contributions to the National Pension System, over and above the 80C limit — a straightforward way to create extra deduction room if you've already maxed out 80C elsewhere. Section 80TTA allows a deduction up to ₹10,000 on savings account interest (₹50,000 under Section 80TTB for senior citizens on all deposit interest), often overlooked since it doesn't require any additional investment, just correctly claiming interest you're already earning. And Section 80G allows deductions for donations to eligible charitable institutions, with the deductible percentage varying by the specific organization — useful both for tax planning and for those already inclined toward charitable giving.

Filing Your Return: Forms and Deadlines

Most salaried individuals with income from salary, one house property, and other basic sources file using ITR-1 (Sahaj), while those with capital gains, multiple properties, or foreign income need ITR-2 or higher forms. The standard filing deadline for individuals not requiring an audit is July 31 following the end of the financial year, though this has occasionally been extended in past years — always confirm the current deadline rather than assuming it hasn't changed. Filing late doesn't just risk a penalty; it can also delay any refund you're owed and, past certain thresholds, attracts interest on any unpaid tax under Section 234A.

Before filing, gather your Form 16 from your employer (which summarizes salary paid and TDS deducted), Form 26AS or the Annual Information Statement (which shows all TDS and high-value transactions reported against your PAN), investment proofs for any deductions claimed, and bank statements for interest income. Cross-checking your Form 16 against Form 26AS before filing catches most of the common mismatches that otherwise trigger a tax department notice later.

Income Tax Calculator (New Regime)