Income Tax Calculator

What is Income Tax in India?

Income tax is a direct tax levied by the Government of India on the income earned by individuals, Hindu Undivided Families (HUFs), firms, and other entities during a financial year. The Income Tax Department under the Ministry of Finance administers the collection and enforcement of income tax across the country. Every person whose total income exceeds the basic exemption limit is required to file an income tax return and pay tax at the prescribed rates.

For FY 2025-26 (Assessment Year 2026-27), India operates under two parallel tax systems: the old tax regime and the new tax regime. The new regime is the default under the new Income Tax Act 2025, offering lower slab rates but limited deductions. The old regime allows a wider range of deductions including Section 80C, 80D, HRA exemption, and home loan interest. Choosing the right regime depends on your income level and how many deductions you can claim.

• Income tax applies to salary, business profits, capital gains, rental income, interest income, and income from other sources
• Tax is calculated on a slab basis where higher income is taxed at progressively higher rates
• The financial year runs from 1 April to 31 March, and the corresponding assessment year is the following year
• Employers deduct TDS (Tax Deducted at Source) from salary based on the employee's tax regime choice. Use our TDS calculator to check your monthly deductions

How is Income Tax Calculated?

Income tax calculation follows a step-by-step process. You start with your gross total income, subtract eligible deductions to arrive at taxable income, then apply the slab rates of your chosen regime. Here is the complete formula:

The calculation involves these components:

• Gross Total Income: Sum of income from all five heads: salary, house property, business/profession, capital gains, and other sources
• Standard Deduction: Rs 75,000 under the new regime, Rs 50,000 under the old regime (for salaried individuals only)
• Chapter VI-A Deductions: Under the old regime, deductions under Sections 80C, 80D, 80CCD(1B), 80E, 80G, etc. reduce your taxable salary
• Section 87A Rebate: Up to Rs 60,000 for taxable income up to Rs 12 lakh (new regime) or Rs 12,500 for up to Rs 5 lakh (old regime)
• Surcharge: Additional 10% to 37% on tax amount for income above Rs 50 lakh
• Cess: 4% Health and Education Cess on tax plus surcharge

Income Tax Slabs for FY 2025-26 (AY 2026-27)

The tax slab structure differs between the new and old regime. Under the new Income Tax Act 2025, the slabs are uniform across all age groups. Under the old regime, senior citizens (60+) and super senior citizens (80+) get higher basic exemption limits.

New Tax Regime Slabs (Default):

Old Tax Regime Slabs (Below 60 years):

Income Tax Calculation with Example

Let us calculate income tax for a salaried individual earning Rs 15 LPA under both regimes to see how the computation works.

New Regime Calculation:

Old Regime Calculation (with deductions of Rs 2.75 lakh):

In this example, the new regime saves Rs 89,700 even though the old regime allows Rs 2.75 lakh in deductions. The lower slab rates and higher standard deduction in the new regime make it the better choice for this income level. You can compare both regimes side by side using our old vs new tax regime calculator.

Why is Income Tax Important?

Understanding your income tax liability is essential for effective financial planning and compliance. Here is why income tax matters for every earning individual:

• Legal compliance: Filing income tax returns is mandatory if your gross total income exceeds the basic exemption limit. Non-filing can attract penalties of up to Rs 10,000 under Section 234F and prosecution under Section 276CC
• Salary planning: Knowing your tax liability helps you plan your CTC breakup and negotiate salary effectively, ensuring maximum take-home pay
• Investment decisions: Tax-saving investments under Section 80C (ELSS, PPF, NPS) offer dual benefits of wealth creation and tax deduction. Use our NPS calculator to estimate retirement corpus with tax benefits
• Advance tax planning: If your tax liability exceeds Rs 10,000, you must pay advance tax in quarterly installments (15 June, 15 September, 15 December, 15 March) to avoid interest under Sections 234B and 234C
• Loan and visa applications: Income tax returns serve as proof of income for home loans, business loans, and visa applications. Most banks require 2 to 3 years of ITR for loan approvals

How to Use This Income Tax Calculator

This free calculator helps you compute your income tax liability for FY 2025-26 under either the old or new tax regime. Follow these steps:

• Step 1: Enter your annual gross income (total salary before deductions, or net business income after business expenses)
• Step 2: Select your tax regime. The new regime is selected by default as it is the default under the new Income Tax Act 2025
• Step 3: Choose your age group. This affects slab rates under the old regime (senior and super senior citizens get higher exemption limits)
• Step 4: Select income type. Salaried employees automatically get the standard deduction (Rs 75,000 new regime, Rs 50,000 old regime)
• Step 5: If using the old regime, click "Show Deductions" to enter your Section 80C, 80D, NPS, home loan interest, and other deductions
• Step 6: Click "Calculate Income Tax" to see your total tax payable, slab-wise breakup, effective rate, and monthly tax outgo

Section 87A Tax Rebate Explained

Section 87A provides a tax rebate for resident individuals with lower taxable income. This rebate is applied after computing the income tax but before adding cess and surcharge, effectively reducing or eliminating the tax liability for eligible taxpayers.

The Section 87A rebate is available only to resident individuals. It does not apply to HUFs, firms, companies, or non-resident Indians (NRIs). The rebate applies to normal income tax only, not on special rate income such as long-term capital gains. Understanding your PF contributions alongside 87A can help you plan deductions that bring your taxable income within the rebate threshold.