Income Tax Calculator India 2025-26: Complete Guide with Examples
Confused about how much income tax you'll pay in FY 2025-26? You're not alone. With the new tax regime offering zero tax up to ₹12 lakh and the old regime allowing multiple deductions, choosing the right option can save you thousands. This comprehensive guide will help you understand income tax calculation and choose the best regime for your situation.
What You'll Learn:
- How to calculate income tax for FY 2025-26
- Old vs New regime comparison with examples
- Which regime is better for your salary
- Tax deductions you shouldn't miss
- Step-by-step calculator guide
What is Income Tax?
Income tax is a mandatory payment made by individuals and entities to the government based on their annual income. In India, if your income exceeds the basic exemption limit (₹3 lakh for FY 2025-26 under new regime), you must file an Income Tax Return (ITR) and pay applicable taxes.
Who Needs to Pay Income Tax?
- Salaried individuals with income above exemption limit
- Business owners and professionals
- Freelancers and consultants
- Anyone with income from house property, capital gains, or other sources
Financial Year vs Assessment Year
Financial Year (FY) 2025-26: The year in which you earn income (April 1, 2025 to March 31, 2026).
Assessment Year (AY) 2026-27: The year in which you file ITR for income earned in FY 2025-26.
ITR Filing Deadline: July 31, 2026 for salaried individuals.
Income Tax Slabs FY 2025-26
New Tax Regime (Default)
Tax Free
on ₹4 lakh = ₹20,000
on ₹3 lakh = ₹30,000
on ₹2 lakh = ₹30,000
on ₹3 lakh = ₹60,000
Highest Slab
💰 Zero Tax Up to ₹12 Lakh!
With the ₹60,000 rebate under Section 87A, income up to ₹12 lakh is completely tax-free under the new regime. Plus 4% Health & Education Cess applies on calculated tax.
New Tax Regime Explained
The new tax regime (default from FY 2023-24) offers lower tax rates but doesn't allow most deductions and exemptions. It's designed for simplicity and is ideal for those with minimal deductions.
Key Features
- Lower tax rates: Significantly reduced compared to old regime
- No deductions allowed: Section 80C, 80D, HRA, etc. not available
- ₹60,000 rebate: Effective tax-free income up to ₹12 lakh
- Simplified calculation: No need to track investments for tax saving
- No investment pressure: Don't need to invest ₹1.5 lakh in 80C
Who Should Choose New Regime?
✅ New Regime is Better For:
- Young professionals aged 25-35 years
- Income between ₹8 lakh to ₹15 lakh
- No major deductions (no HRA, no home loan)
- Those who prefer simplicity over tax planning
- First-time taxpayers
Example Calculation - New Regime
Annual Income: ₹12,00,000
Taxable Income: ₹12,00,000 (no deductions)
Tax Calculation:
• ₹0 - ₹3L: ₹0
• ₹3L - ₹7L: ₹4L × 5% = ₹20,000
• ₹7L - ₹10L: ₹3L × 10% = ₹30,000
• ₹10L - ₹12L: ₹2L × 15% = ₹30,000
Tax Calculated: ₹80,000
Less: Rebate u/s 87A: ₹60,000
Tax After Rebate: ₹20,000
Add: Cess (4%): ₹800
Total Tax Payable: ₹20,800 🎉
Old Tax Regime Explained
The old tax regime (optional choice) has higher tax rates but allows multiple deductions and exemptions. It's beneficial for individuals with significant deductible expenses or investments.
Key Features
- Higher tax rates: More tax brackets with higher percentages
- Multiple deductions allowed: 80C, 80D, HRA, home loan interest, etc.
- Standard deduction: ₹50,000 for salaried individuals
- ₹25,000 rebate: For income up to ₹7 lakh only
- Requires tax planning: Must invest to save tax
Available Deductions Under Old Regime
| Section | Deduction For | Maximum Limit |
|---|---|---|
| 80C | PPF, ELSS, Life Insurance, EPF | ₹1,50,000 |
| 80D | Health Insurance Premiums | ₹25,000-₹1,00,000 |
| HRA | House Rent Allowance | Calculated |
| 24(b) | Home Loan Interest | ₹2,00,000 |
| 80E | Education Loan Interest | No limit |
| 80EE | First Time Home Buyer | ₹50,000 |
Who Should Choose Old Regime?
✅ Old Regime is Better For:
- High deduction earners (₹2 lakh+ annually)
- HRA recipients in metro cities
- Home loan borrowers
- Those with education loans
- Age 40+ with insurance investments
- Income above ₹15 lakh with multiple deductions
Example Calculation - Old Regime
Annual Income: ₹15,00,000
Less: Deductions
• Section 80C: ₹1,50,000
• Section 80D: ₹25,000
• HRA Exemption: ₹2,00,000
• Home Loan Interest: ₹2,00,000
Total Deductions: ₹5,75,000
Taxable Income: ₹9,25,000
Tax Calculation:
• ₹0 - ₹2.5L: ₹0
• ₹2.5L - ₹5L: ₹2.5L × 5% = ₹12,500
• ₹5L - ₹9.25L: ₹4.25L × 20% = ₹85,000
Tax Calculated: ₹97,500
Add: Cess (4%): ₹3,900
Total Tax Payable: ₹1,01,400
Old vs New Regime: Which is Better?
Quick Comparison Table
| Factor | New Regime | Old Regime |
|---|---|---|
| Tax Rates | Lower | Higher |
| Deductions | Not allowed | Multiple available |
| Tax-free limit | ₹3 lakh | ₹2.5 lakh |
| Rebate | ₹60,000 (up to ₹12L) | ₹25,000 (up to ₹7L) |
| Simplicity | Very simple | Complex |
| Best for | Low/no deductions | High deductions |
Income-Based Recommendations
₹3-7 lakh income:
New regime (lower rates, simpler)
₹7-12 lakh income:
New regime (₹0 tax with rebate!)
₹12-15 lakh income:
Depends on deductions: If deductions > ₹1.5L → Old regime | If deductions < ₹1.5L → New regime
₹15-25 lakh income:
Usually old regime (if high deductions like HRA + home loan)
Above ₹25 lakh income:
Calculate both - varies case-by-case
How to Use Our Tax Calculator
Step-by-Step Guide
Enter Your Annual Income
Include salary, bonuses, and other income
Select Tax Regime
Choose "Both Regimes" to compare automatically
Add Deductions (For Old Regime)
Section 80C, 80D, HRA, home loan interest, etc.
View Results
See tax breakdown, comparison, and recommendation
💡 Pro Tip:
Use the "Both Regimes" option to see a side-by-side comparison. Our calculator automatically recommends the better regime based on your inputs, helping you maximize savings.
Smart Tax Saving Tips for FY 2025-26
1. Invest in ELSS Early
Section 80C deduction + potential market returns. Start SIP from April.
2. Maximize Health Insurance
₹25K-₹1L deduction under 80D. Cover parents for additional benefits.
3. Claim HRA Correctly
If you pay rent, ensure proper documentation for HRA exemption.
4. Prepay Home Loan Strategically
Interest deduction up to ₹2L (if choosing old regime).
5. Use NPS for Extra ₹50K
Section 80CCD(1B) allows additional ₹50K deduction over 80C limit.
6. Keep Investment Proofs Ready
Submit to employer or during ITR filing. Don't miss deadlines.
7. File ITR Even if ₹0 Tax
Required for loan applications, visa processing, etc.
8. Switch Regime Yearly
Salaried employees can change between regimes every year. Reassess annually.
⚠️ Important Warning
Business owners can switch tax regime only ONCE in their lifetime! Choose carefully after thorough analysis.
Frequently Asked Questions
Which tax regime is better for ₹12 lakh income?
For ₹12 lakh income with no deductions, the new tax regime is better as you pay ₹0 tax (₹60,000 rebate applies). With the rebate, your effective tax is zero! However, if you have deductions exceeding ₹2.5 lakh (HRA + home loan + 80C), the old regime might save more. Use our calculator to compare both scenarios.
What is the tax on ₹15 lakh salary in India?
Under new regime: Approximately ₹1,72,500 (including cess). Under old regime with standard deductions (₹2-3L): Approximately ₹1,40,000. The exact amount depends on your deductions. Use our calculator with your specific deductions for accurate calculation.
How to calculate income tax in India FY 2025-26?
Steps: (1) Calculate gross income, (2) Choose tax regime, (3) Subtract applicable deductions (old regime only), (4) Apply tax slabs to taxable income, (5) Add 4% cess, (6) Subtract rebate if eligible. Our calculator automates this entire process instantly.
Can I switch between old and new tax regime?
Salaried employees: Yes, you can switch between regimes every financial year. Business owners: Can switch only ONCE in lifetime. Choose the regime that saves more tax for your current income and deductions. Reassess annually as your situation changes.
Make the Right Tax Choice in FY 2025-26
New regime is simple and good for most people up to ₹15L. Old regime is better if you have ₹2L+ deductions. Use our free calculator to compare both and find which regime saves you more money.
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Disclaimer: This calculator provides estimates based on current tax laws for FY 2025-26. Tax calculations are for informational purposes only. Please consult a qualified tax advisor for personalized advice. Tax laws are subject to change by the Government of India.