Income Tax in India — New vs Old Regime Explained
India has two income tax regimes as of FY 2025-26: the New Tax Regime (default) with lower slab rates but fewer deductions, and the Old Tax Regime with higher rates but comprehensive deductions. Choosing the right one can save you lakhs.
Union Budget 2025 — Key Tax Changes
- New Regime is now the default regime for all taxpayers.
- Zero tax up to ₹12 lakh income under the New Regime (after rebate u/s 87A).
- Standard deduction increased to ₹75,000 under the New Regime.
- New tax slabs introduced: 5% (₹4–8L), 10% (₹8–12L), 15% (₹12–16L), 20% (₹16–20L), 25% (₹20–24L), 30% (above ₹24L).
- Surcharge capped at 25% for all income levels under New Regime.
New Tax Regime Slabs — FY 2025-26
| Income Range | Tax Rate (New Regime) |
|---|---|
| Up to ₹4,00,000 | Nil |
| ₹4,00,001 – ₹8,00,000 | 5% |
| ₹8,00,001 – ₹12,00,000 | 10% |
| ₹12,00,001 – ₹16,00,000 | 15% |
| ₹16,00,001 – ₹20,00,000 | 20% |
| ₹20,00,001 – ₹24,00,000 | 25% |
| Above ₹24,00,000 | 30% |
How to Use This Calculator
- Enter your annual salary/CTC and any other income sources.
- Switch between New and Old regime using the toggle at the top.
- For Old Regime: enter your eligible deductions (80C, 80D, NPS, etc.).
- The calculator instantly shows your total tax, effective rate, and breakdown.
- Compare both regimes to decide which saves you more tax.
How Tax is Calculated
- Gross Income = Salary + Other Income + Interest + Rental Income
- Net Taxable Income = Gross Income – Standard Deduction – Eligible Deductions
- Base Tax is computed as per the applicable slab rates.
- Surcharge is added if income exceeds ₹50 lakh.
- Health & Education Cess of 4% is added on (Base Tax + Surcharge).
- Total Tax Payable = Base Tax + Surcharge + Cess
Example: Salary of ₹18 Lakh — New Regime
Here's how tax is calculated for a salaried individual with ₹18 lakh CTC under the New Tax Regime for FY 2025-26:
Tax Breakdown
New Regime vs Old Regime — When to Choose What
- Choose New Regime: if your deductions are less than ₹3.75 lakh — the new regime will save you more tax.
- Choose Old Regime: if you have high 80C investments, HRA, home loan interest, and NPS contributions totalling ₹3.75L+.
- Salaried employees: can switch regime every year at the time of filing ITR.
- Business owners: can switch only once from Old to New Regime.
- Senior Citizens: Old Regime may be better due to higher exemption limit (₹3L for 60+, ₹5L for 80+).
- Zero Tax up to ₹12L: New Regime offers full rebate u/s 87A for income up to ₹12 lakh.
Frequently Asked Questions
Which tax regime is better — New or Old?
It depends on your deductions. If your total deductions (80C + HRA + 80D + NPS etc.) exceed ₹3.75 lakh, Old Regime saves more. Otherwise, New Regime is better. Use this calculator to compare both.
Is income up to ₹12 lakh really tax-free in New Regime?
Yes, under Section 87A rebate for FY 2025-26, if your net taxable income is up to ₹12 lakh, the full tax is rebated. However, if income exceeds ₹12 lakh even by ₹1, the full slab tax applies — so plan carefully.
What is the standard deduction for salaried employees?
For FY 2025-26, the standard deduction is ₹75,000 under the New Regime and ₹50,000 under the Old Regime. It is automatically deducted from your salary income.
Can I claim HRA under the New Tax Regime?
No. HRA exemption is not available under the New Tax Regime. If you pay high rent and claim HRA, the Old Regime may be more beneficial for you.
What is Section 87A rebate?
Section 87A provides a tax rebate up to ₹60,000 for individuals whose net taxable income does not exceed ₹12 lakh (New Regime) or ₹5 lakh (Old Regime), effectively making their tax liability zero.
Is this calculator updated for Budget 2025?
Yes, this calculator reflects the latest Union Budget 2025 changes including new slab rates, ₹75,000 standard deduction, and zero tax up to ₹12 lakh under the New Tax Regime.