Understanding Income Tax Regimes

India offers two tax regimes: the Old regime with deductions and exemptions, and the New regime (default from FY 2023-24) with restructured slabs and fewer deductions. The New Regime under Section 115BAC is now the default — choose based on your deductions and income.

New Regime Highlights (FY 2025-26)

• Up to ₹4,00,000Nil
• ₹4L – ₹8L5%
• ₹8L – ₹12L10%
• ₹12L – ₹16L15%
• ₹16L – ₹20L20%
• ₹20L – ₹24L25%
• Above ₹24L30%

₹12L Tax-Free Rebate & Marginal Relief

Budget 2025 boosted the Section 87A rebate to ₹60,000, making income up to ₹12 lakh fully tax-free. Salaried individuals get an extra ₹75,000 standard deduction, so gross income up to ₹12.75 lakh is zero-tax. For incomes just above ₹12L (up to ~₹12.75L), marginal relief ensures you never pay more tax than the extra income earned above ₹12L.

Tax Saving Investments (Old Regime)

Under the old regime you can save tax through: 80C investments like PPF, ELSS, LIC (up to ₹1.5L), 80D medical insurance (up to ₹75K), HRA exemption if you pay rent, and home loan interest deductions. The new regime does not allow most of these deductions but offers lower base rates instead.

Which Regime is Better For You?

If your total deductions (80C + 80D + HRA + ...) exceed roughly ₹3.75 lakh, the old regime may save more tax. Otherwise, the new regime with zero-tax up to ₹12L and simpler slabs is the better choice for most salaried employees.

How to Use This Calculator

Enter your total annual income. Toggle "Apply Savings Deductions" to add 80C and 80D amounts (these only affect the Old Regime calculation). If you pay rent, enable "Rent Applicable" and enter the exempted HRA amount. The calculator instantly shows your taxable income and total tax (including cess and surcharge) under both regimes side by side.