What is Income Tax?
Income tax is a direct tax levied by the Government of India on an individual's total income earned during a financial year, governed by the Income Tax Act, 2025, which replaced the Income Tax Act, 1961. India uses a progressive slab system with two parallel regime options for FY 2026-27.
The new tax regime is the default from FY 2023-24 onwards. Salaried taxpayers must actively opt out if they prefer the old regime. Each regime has distinct slab rates, standard deduction amounts, and deduction eligibility rules.
Only income within each slab bracket is taxed at that bracket's rate. A taxable income of ₹15 lakh is not entirely taxed at 15%; the first ₹4 lakh faces nil tax, the next ₹4 lakh faces 5%, and so on progressively.
How Income Tax is Calculated: Eight Steps
Computing income tax on salary for FY 2026-27 follows eight steps, identical for both regimes with different numbers at each step.
Calculate Gross Total Income
Add all income sources: salary, house property income, capital gains, business income, and other sources including FD interest and rental income.
Subtract Exempt Allowances
Under the old regime, deduct exempt components like LTA and HRA (computed separately). Under the new regime, no exemptions apply.
Subtract Standard Deduction
Deduct ₹75,000 (new regime) or ₹50,000 (old regime) if salaried or a pensioner. No documentation required.
Apply Chapter VI-A Deductions (Old Regime Only)
Under old regime, subtract 80C (up to ₹1.5L), 80D, HRA exemption already deducted above, 80CCD(1B) NPS (₹50,000), home loan interest (₹2L), education loan interest 80E (no limit), and others.
Arrive at Taxable Income
Taxable Income = Gross Total Income minus standard deduction minus all Chapter VI-A deductions. Apply slab rates to this figure.
Apply Slab Tax Rates Progressively
Apply the rate for each bracket only to income within that bracket. Sum all brackets to arrive at total slab tax.
Apply Section 87A Rebate
New regime: full rebate if slab tax does not exceed ₹60,000 (taxable income up to ₹12 lakh). Old regime: full rebate if slab tax does not exceed ₹12,500 (taxable income up to ₹5 lakh).
Add Surcharge (if applicable) and 4% Cess
If taxable income exceeds ₹50 lakh, add surcharge on the base tax. Multiply (tax + surcharge) by 1.04 to include Health and Education Cess.
New Tax Regime Slabs for FY 2026-27 (AY 2027-28)
The new tax regime for FY 2026-27 has seven slabs, unchanged from FY 2025-26: 0% up to ₹4 lakh, 5% on ₹4-8 lakh, 10% on ₹8-12 lakh, 15% on ₹12-16 lakh, 20% on ₹16-20 lakh, 25% on ₹20-24 lakh, and 30% above ₹24 lakh.
Zero-tax limit: A salaried person with gross salary up to ₹12,75,000 pays zero tax under the new regime for FY 2026-27. After the ₹75,000 standard deduction, taxable income is ₹12 lakh. The slab tax of ₹60,000 is fully offset by the Section 87A rebate, resulting in zero net tax.
Key features of the new regime: standard deduction of ₹75,000, Section 87A rebate up to ₹60,000 (for slab tax not exceeding ₹60,000), NPS employer contribution 80CCD(2) allowed (14% of basic salary), and maximum surcharge capped at 25%. No Chapter VI-A deductions like 80C, 80D, or HRA exemption are available.
Old Tax Regime Slabs for FY 2026-27 (AY 2027-28)
The old tax regime for FY 2026-27 retains the three-slab structure unchanged from prior years, with slab boundaries that vary by age category.
Under the old regime, standard deduction is ₹50,000 and the Section 87A rebate limit is ₹12,500 (for taxable income up to ₹5 lakh). Senior and super senior citizens additionally benefit from higher basic exemption limits and are exempt from advance tax under Section 207 if they have no business income.
Section 87A Rebate: How Zero Tax on ₹12.75 Lakh Works
Section 87A eliminates income tax entirely when computed slab tax does not exceed the rebate ceiling: ₹60,000 under the new regime (taxable income up to ₹12 lakh) or ₹12,500 under the old regime (taxable income up to ₹5 lakh).
The 87A rebate is all-or-nothing. A gross salary of ₹12,75,001 means taxable income becomes ₹12,00,001, which exceeds the ₹12 lakh threshold. The full ₹60,000 rebate is lost. However, marginal relief applies to ensure the additional tax payable does not exceed the additional income above the threshold.
Section 87A under old regime: For old regime taxpayers, the rebate is ₹12,500 when taxable income does not exceed ₹5 lakh. A salaried person with gross salary of ₹5.5 lakh claiming ₹50,000 standard deduction gets taxable income of ₹5 lakh and pays zero tax.
Old vs New Regime Calculator
See exactly which regime saves more with your specific deductions.
New Regime vs Old Regime: Income-Wise Tax Comparison
The table below shows actual tax at common salary levels. "Old (no deductions)" uses only the standard deduction. "Old (max deductions)" assumes 80C ₹1.5L + 80D ₹25K + NPS ₹50K + home loan interest ₹2L.
* At ₹20L and above, the old regime with maximum deductions can save more, but only when those investments are actually made and claimed. Use the Old vs New Regime Calculator to compare your precise deduction set.
Deductions Available Under the Old Tax Regime
The old tax regime allows 12 categories of deductions under Chapter VI-A that reduce taxable income before slab rates apply. None of these are available under the new regime except Section 80CCD(2).
Section 80CCD(2) is the most valuable deduction available in both regimes. Employer contributions to NPS up to 14% of basic salary can be claimed without any absolute cap, making it a powerful tax-saving tool regardless of which regime you choose.
HRA Exemption: Formula, Calculation, and Conditions
HRA exemption under Section 10(13A) reduces taxable salary for salaried employees who pay rent, available only under the old tax regime. The exempt amount is the minimum of three values computed as follows.
If rent paid minus 10% of basic salary is negative or zero, no HRA exemption is available regardless of how much HRA you receive. You must also have rent receipts and the landlord's PAN if annual rent exceeds ₹1 lakh. Use the HRA Calculator to compute your exact exempt amount.
Income Tax Worked Examples for FY 2026-27
Example 1: Ms. Divya, ₹15 Lakh Salary (New Regime)
Example 2: Mr. Arjun, ₹25 Lakh Salary, Both Regimes with Deductions
Mr. Arjun saves ₹1,80,700 with the new regime even with ₹2.25 lakh in deductions. He would need approximately ₹8 lakh in total Chapter VI-A deductions for the old regime to match the new regime at ₹25 lakh income. At ₹30 lakh, the NPS Calculator shows that employer NPS 80CCD(2) of ₹4.2 lakh (14% of ₹30L) alone can shift the balance.
NPS Calculator
Compute your NPS corpus and 80CCD(2) employer deduction at retirement.
Monthly Take-Home After Tax: What You Actually Receive
Monthly in-hand salary is gross salary divided by 12, minus monthly TDS, minus EPF deduction, minus professional tax. The calculator shows this estimate in the results panel once you enter your salary and basic pay.
EPF is compulsory for employees earning up to ₹15,000 per month basic pay under the EPFO regulations. For higher earners, many employers continue EPF on the actual basic salary; enter your basic pay in the HRA section of this calculator to get the correct EPF deduction in the monthly take-home estimate. Use the In-Hand Salary Calculator for a detailed CTC-to-take-home breakdown.
Surcharge and Education Cess for FY 2026-27
Surcharge is an additional levy on income tax for high earners, calculated on base tax (after rebate, before cess). A 4% Health and Education Cess then applies on the combined tax plus surcharge.
Above ₹5 crore, the old regime surcharge of 37% results in an effective tax rate up to 42.74% (30% tax + 37% surcharge + 4% cess on both). The new regime caps surcharge at 25%, making the maximum effective rate 39%. This is the primary driver of the new regime advantage for very high earners without significant deductions.
Budget 2025 Key Changes to Income Tax
Union Budget 2025, presented on 1 February 2025, introduced five major changes to income tax effective from FY 2025-26, all of which carry forward to FY 2026-27 unchanged.
Section 87A rebate raised to ₹60,000 (new regime)
Previously ₹25,000, the rebate now covers the full slab tax for taxable income up to ₹12 lakh, making gross salary up to ₹12.75 lakh completely tax-free for salaried individuals.
New regime slabs revised
Zero-tax bracket extended to ₹4 lakh (from ₹3 lakh). A new 25% slab added for ₹20-24 lakh. The 30% slab now starts at ₹24 lakh (previously ₹15 lakh), substantially reducing tax for middle-income earners.
Standard deduction raised to ₹75,000 (new regime)
Increased from ₹50,000 to ₹75,000 under the new regime. Combined with the revised slabs and higher 87A rebate, this is what makes ₹12.75 lakh salary tax-free.
NPS employer contribution deduction at 14%
Section 80CCD(2) deduction for employer NPS contribution raised from 10% of salary to 14% under the new regime, providing additional tax saving for employees in NPS-linked organisations.
TDS threshold on rent raised to ₹50,000 per month
Section 194-IB TDS on rent now triggers at ₹50,000 per month (previously ₹50,000 per year for individuals), reducing TDS compliance burden for most salaried tenants.
For detailed slab history comparing FY 2023-24, FY 2024-25, and FY 2025-26, see the Income Tax Slabs FY 2025-26 analysis which includes the full slab evolution table and worked examples.
Income Tax by Salary Level: Detailed Breakdowns
Each guide below has a slab-by-slab tax computation, old vs new regime comparison, Section 87A rebate analysis, and monthly in-hand salary breakup for that specific salary level.
How to Use This Income Tax Calculator
- Enter gross salary: Use the log-scale slider or click the value to type an exact amount. The slider covers ₹0 to ₹5 crore with ₹20 lakh at the centre position.
- Select financial year and age: Choose FY 2026-27, FY 2025-26, or FY 2024-25. Pick your age category to apply the correct old regime slab boundaries.
- Add HRA details (old regime): Click "HRA Exemption" to expand the section and enter basic salary, HRA received, and annual rent paid. Select metro or non-metro city. The calculator applies the HRA formula automatically.
- Enter deductions (old regime): Expand "Deductions" to enter 80C, 80D, NPS, home loan interest, education loan interest (80E), savings interest (80TTA), and donations (80G). The employer NPS 80CCD(2) field applies to both regimes.
- Compare regimes: Both regime tax results appear side by side. Click either card to select it and see the detailed breakdown. The winning regime is marked automatically.
- Check monthly take-home: The results panel shows monthly in-hand after TDS, EPF, and professional tax. Enter your basic salary in the HRA section for an accurate EPF deduction in the take-home estimate.
Your inputs are saved automatically in your browser. Refreshing the page restores your last calculation. No account or sign-up required.
Frequently Asked Questions
Disclaimer: All calculations on this page are indicative only. Income tax rules are subject to change. This calculator is for educational and planning purposes only and does not constitute tax or financial advice. Verify your exact tax liability with a SEBI-registered investment adviser or a chartered accountant before filing your ITR. Results assume standard employment income and do not account for special assessment orders, retrospective amendments, or income from foreign sources.