How is income tax calculated?
First, your taxable income is worked out by subtracting the standard deduction and, under the old regime, other deductions from your gross income. Tax is then charged slab by slab, any eligible rebate is applied, and 4% Health and Education Cess is added. A surcharge also applies when income exceeds ₹50 lakh.
StepsTaxable income → tax on slabs → rebate (if eligible) → surcharge (above ₹50 lakh) → 4% cess = total tax
New tax regime slabs for Tax Year 2026-27
The new regime is the default. It allows very few deductions, but its slab rates are lower. Salaried taxpayers get a standard deduction of ₹75,000.
| Taxable income | Tax rate |
|---|---|
| Up to ₹4 lakh | Nil |
| ₹4 lakh – ₹8 lakh | 5% |
| ₹8 lakh – ₹12 lakh | 10% |
| ₹12 lakh – ₹16 lakh | 15% |
| ₹16 lakh – ₹20 lakh | 20% |
| ₹20 lakh – ₹24 lakh | 25% |
| Above ₹24 lakh | 30% |
No tax up to ₹12 lakh: under the new regime, a rebate of up to ₹60,000 makes the tax nil when taxable income is ₹12 lakh or less. With the ₹75,000 standard deduction, a salary of up to ₹12.75 lakh is tax-free. Just above ₹12 lakh, marginal relief ensures the tax never exceeds the income above ₹12 lakh.
Old tax regime slabs
| Taxable income | Below 60 | 60 to 79 | 80 and above |
|---|---|---|---|
| Up to ₹2.5 lakh | Nil | Nil | Nil |
| ₹2.5 lakh – ₹3 lakh | 5% | Nil | Nil |
| ₹3 lakh – ₹5 lakh | 5% | 5% | Nil |
| ₹5 lakh – ₹10 lakh | 20% | 20% | 20% |
| Above ₹10 lakh | 30% | 30% | 30% |
Under the old regime, a rebate of up to ₹12,500 applies when taxable income is ₹5 lakh or less. Deductions such as Section 80C, 80D, HRA and home loan interest are allowed.
New or old regime: which should you choose?
- If your deductions are small (you do not fully use 80C and have no HRA or home loan), the new regime is usually cheaper.
- If your 80C (₹1.5 lakh), 80D, HRA and home loan interest together are large, the old regime may work out better.
- The calculator above shows both regimes side by side — choose the one with lower tax.
Income-tax Act, 2025: the new Act applies from 1 April 2026. Section numbers have changed (for example, the rebate is now in Section 156), but Budget 2026 did not change the slab rates.
Frequently asked questions
Up to what income is there no tax in Tax Year 2026-27?
Under the new regime, there is no tax on taxable income up to ₹12 lakh because of the rebate. For salaried taxpayers, the ₹75,000 standard deduction makes a salary of up to ₹12.75 lakh tax-free.
What is the difference between the new and old tax regimes?
The new regime has lower slab rates but does not allow most deductions such as 80C, 80D and HRA. The old regime has higher rates but allows these deductions.
How much is the standard deduction?
₹75,000 under the new regime and ₹50,000 under the old regime. It is available only to salaried employees and pensioners.
What is marginal relief?
If your income under the new regime is slightly above ₹12 lakh, your tax cannot exceed the income above ₹12 lakh. For example, on ₹12.1 lakh the tax is capped at ₹10,000 plus cess.
When does surcharge apply?
Surcharge applies to income above ₹50 lakh: 10% for ₹50 lakh–₹1 crore, 15% for ₹1–2 crore, 25% for ₹2–5 crore, and above ₹5 crore 37% under the old regime or 25% under the new regime.
Do senior citizens get a higher exemption under the new regime?
No. The basic exemption is ₹4 lakh for everyone under the new regime. Under the old regime, it is ₹3 lakh for ages 60–79 and ₹5 lakh for 80 and above.
Did the Income-tax Act, 2025 change the tax slabs?
No. The new Act took effect on 1 April 2026 and renumbered the sections, but Budget 2026 did not change the slab rates, rebate or cess.
How accurate is this calculator?
It applies the slabs, rebate, marginal relief, surcharge and cess to salary and regular income. Income taxed at special rates, such as capital gains, is calculated separately — speak to a CA for that.