Income Tax Calculator

How the two regimes differ

The new regime offers lower slab rates and a much higher Section 87A rebate threshold, but strips out nearly every deduction — no HRA, no Section 80C, no home loan interest under Section 24(b). The old regime keeps the full suite of deductions but taxes at higher rates with a much lower ₹5,00,000 rebate ceiling. Neither is universally better: the answer depends entirely on how much a specific taxpayer can legitimately claim under the old regime's deductions.

Both regimes retain the standard deduction for salaried employees and pensioners (₹75,000 new, ₹50,000 old) and employer NPS contributions under Section 80CCD(2) — these two are the rare exceptions available either way.

The new regime has also been the default choice since it was introduced — a taxpayer who doesn't actively elect the old regime at filing time is assessed under the new one automatically. For salaried employees without business income, switching between the two each year is allowed; those with business income face a more restricted, largely one-time election, which is worth confirming with a CA before assuming annual flexibility applies.

The ₹12 lakh rebate, and why most salaried taxpayers below it pay nil

Under the new regime, Section 87A rebates away the entire computed tax for taxable income up to ₹12,00,000 — up to a rebate of ₹60,000. For a salaried employee, that means gross salary up to ₹12,75,000 (after the ₹75,000 standard deduction) results in zero tax payable, a threshold that covers a large share of the salaried workforce.

This is a rebate, not an exemption — the slab tax is still computed first, then wiped out. The distinction matters because it's exactly what marginal relief, discussed next, has to work around at the boundary.

Marginal relief explained, with a worked example

Cross ₹12,00,000 taxable income by even a small amount and, without a special provision, the entire rebate would disappear at once — the exact cliff-edge outcome Section 87A's marginal relief prevents. At ₹12,50,000 taxable income, for instance, plain slab tax works out to ₹57,500. Marginal relief caps the actual tax payable at the amount income exceeds ₹12,00,000 — ₹0 here — whenever that's the smaller figure.

The formula: tax payable = min(slab tax, taxable income − ₹12,00,000). This holds until roughly ₹12,70,588 taxable income, beyond which plain slab tax is already the lower number and the relief becomes redundant on its own — no separate rule needed to switch it off.

Surcharge, and the new regime's 25% cap

Surcharge applies once taxable income crosses ₹50,00,000, in slabs of 10%, 15% and 25% (and, for the old regime only, a further 37% band above ₹5 crore — the new regime caps out at 25% regardless of income). Surcharge is computed on the tax amount, then 4% Health & Education Cess is applied on tax plus surcharge combined.

A detail most free calculators skip: surcharge marginal relief. Without it, crossing a surcharge threshold by a small amount could increase total tax by far more than the extra income — the relief provision caps the increase at exactly the excess income, at every threshold. This calculator applies that relief automatically; verify the exact figures with a CA near any of the four thresholds.

What old-regime deductions actually require

Section 80C's ₹1,50,000 ceiling covers PF, ELSS, life insurance premiums and home loan principal repayment combined, not each separately. Section 80D covers health insurance — ₹25,000 for self and family, plus ₹50,000 more for senior-citizen parents. Section 80CCD(1B) adds ₹50,000 exclusively for NPS, on top of the 80C limit. HRA exemption and Section 24(b) home loan interest (capped at ₹2,00,000 for a self-occupied property) are the two most likely to swing the comparison for salaried taxpayers in metro cities — and neither is available under the new regime.

None of these deductions apply automatically — each requires the underlying investment, premium payment or loan to genuinely exist and be documented, which is exactly why the old regime suits taxpayers who already have these commitments in place rather than someone starting from zero purely to chase a lower tax bill. Retrofitting a home loan or a large insurance premium purely for the deduction rarely makes financial sense once the actual cost of the commitment is weighed against the tax saved.

The break-even deduction level

Rather than comparing regimes by income level alone, the more useful number is the break-even: the total old-regime deduction (standard deduction plus everything itemized) at which the two regimes produce identical tax. Below that figure, the new regime wins; above it, the old regime does. This calculator computes that break-even dynamically for the income entered, rather than relying on a generic rule of thumb that doesn't hold across every income level.

Common mistakes

The most common error is treating the ₹12,00,000 threshold as a hard cliff rather than the gradual, capped ramp marginal relief actually specifies — this alone causes many calculators to overstate tax just above the threshold. The second is assuming HRA or 80C still apply under the new regime; they don't. The third, for higher earners, is ignoring surcharge marginal relief near the ₹50 lakh, ₹1 crore and ₹2 crore boundaries, which can meaningfully change the final figure.

Frequently asked questions