Income Tax Calculator

What Changed in FY 2025-26 (AY 2026-27) — Budget 2025 Highlights

The single most talked-about change is the ₹12 lakh zero-tax threshold under the new regime. This works through Section 87A: if your taxable income (after the ₹75,000 standard deduction) is ₹12 lakh or below, the tax liability is fully wiped out by a rebate of up to ₹60,000. It is not an exemption or a zero slab — it is a rebate that zeros out the calculated tax. For income slightly above ₹12 lakh, full tax applies on the excess, so there is a cliff effect that our calculator handles correctly through marginal relief.

For the old regime, nothing changed: same slabs, same ₹50,000 standard deduction, same 87A rebate of ₹12,500 up to ₹5 lakh taxable income.

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

Senior citizen and super senior citizen slabs (Old Regime only)

The higher basic exemption benefits apply only under the old regime. Under the new regime, all age categories use the same slabs.

Section 87A Rebate — How ₹12 Lakh Becomes Tax-Free

Section 87A provides a tax rebate — not an exemption. The distinction matters. Your tax is calculated first on the taxable income using the applicable slab rates. Then, if the taxable income falls within the threshold, the rebate wipes out the calculated tax entirely. For FY 2025-26 under the new regime:

Now notice what happens when income crosses ₹12.75 lakh (taxable income exceeds ₹12 lakh):

87A rebate — old regime

Under the old regime, 87A rebate is ₹12,500 if taxable income is ₹5 lakh or below. This makes gross incomes up to approximately ₹5.5–6.5 lakh effectively nil-tax under the old regime (depending on deductions claimed).

Old Regime vs New Regime — Which Is Better for You?

The new regime is the default from FY 2023-24 onward, and after the Budget 2025 changes, it is the better choice for most salaried individuals — particularly those with incomes up to ₹12.75 lakh who can pay zero tax. For higher incomes, the answer depends on how much you invest in eligible deductions.

The break-even point (where old regime saves more) is roughly when your total deductions under the old regime exceed approximately ₹3.75 lakh (gross income ₹15–20L). The most common deductions that make the old regime worthwhile:

Quick rule of thumb — FY 2025-26

If your gross income is ₹12.75 lakh or below: new regime is almost always better (zero tax).

If your gross income is above ₹12.75 lakh: add up all your eligible deductions (80C + 80D + HRA + home loan interest + NPS). If the total exceeds approximately ₹3.75–4 lakh, the old regime may be cheaper. Use our calculator to compare both exactly for your income level.

Surcharge and Cess — FY 2025-26

Surcharge applies only if your gross total income exceeds ₹50 lakh. All taxpayers pay a 4% Health & Education Cess on their total tax liability regardless of income.

The key difference: under the new regime, the surcharge is capped at 25% even for incomes above ₹5 crore. Under the old regime, incomes above ₹5 crore attract a 37% surcharge, making the effective peak tax rate significantly higher under the old regime for very high earners.

Marginal relief on surcharge applies — preventing scenarios where tax+surcharge exceeds the incremental income in the surcharge trigger range.

Frequently Asked Questions — Income Tax FY 2025-26

• Is income up to ₹12 lakh really tax-free in FY 2025-26? ▼
  Almost — with an important nuance. Under the new regime in FY 2025-26:
  
  • Standard deduction: ₹75,000 (for salaried/pensioners)
  • 87A rebate: up to ₹60,000 if taxable income is ₹12 lakh or below
  
  So a salaried person with gross salary of ₹12,75,000 has taxable income of ₹12,00,000 after standard deduction. The tax on ₹12L under new regime slabs is ₹60,000, which is fully offset by the 87A rebate. Net tax = ₹0.
  
  For non-salaried individuals (business income, rental income) who don't get the standard deduction, the zero-tax threshold is ₹12,00,000 gross (not ₹12.75L). Beyond ₹12L taxable income, the 87A rebate is not available and full tax applies on the entire taxable income (not just the excess). Marginal relief prevents the tax from exceeding the incremental income above ₹12L.
• What are the new income tax slabs for FY 2025-26 under the new regime? ▼
  The new regime slabs for FY 2025-26 (AY 2026-27) are: 0% up to ₹4 lakh, 5% on ₹4L–₹8L, 10% on ₹8L–₹12L, 15% on ₹12L–₹16L, 20% on ₹16L–₹20L, 25% on ₹20L–₹24L, and 30% above ₹24L. Additionally, a standard deduction of ₹75,000 is available for salaried employees, and Section 87A rebate of up to ₹60,000 makes taxable incomes up to ₹12L tax-free. These same slabs apply for FY 2026-27 — no changes were made in Budget 2026.
• Which tax regime is better — old or new in FY 2025-26? ▼
  For most salaried individuals with gross income up to ₹12.75 lakh, the new regime results in zero tax — making it clearly better. Beyond that, it depends on your eligible deductions:
  
  The old regime is worth it if your total deductions (80C + HRA + 80D + home loan interest + NPS + others) are approximately ₹3.75–4.5 lakh or more, depending on your income level. The more you invest in eligible instruments, the more likely the old regime saves you money.
  
  The new regime is better if: you don't have a home loan, you rent cheaply or live in your own house, you invest in instruments that don't give deductions (stocks, real estate), or your total eligible deductions are below ₹3 lakh. Our calculator computes both and shows you the exact difference.
• Can I switch between old and new regime every year? ▼
  Salaried employees: Yes, you can switch between old and new regime every financial year. Simply inform your employer which regime to apply for TDS calculation at the start of the year. If you don't inform, the new regime (default) is applied. You can also switch when filing your ITR, even if a different regime was used for TDS.
  
  Business income earners (self-employed, professionals, partners): No — once you opt out of the new regime, you can switch back only once in your lifetime. If you have business income, the decision is largely irreversible. File carefully and consult a CA before choosing.
• What deductions are available in the new tax regime FY 2025-26? ▼
  The new regime disallows most deductions to offer lower slab rates. Deductions still available under the new regime include:
  
  ✅ Standard deduction: ₹75,000 (salaried and pensioners)
  ✅ Employer's NPS contribution (Section 80CCD(2)) — no upper limit if employer contributes to NPS
  ✅ Section 80E: Education loan interest (full interest for 8 years)
  ✅ Section 80CCH: Agniveer corpus fund contributions
  ✅ House rent paid with no HRA: standard deduction covers part, but no separate deduction
  ✅ Section 24(a): 30% of rent for let-out property (not self-occupied)
  
  Deductions NOT available in new regime: 80C (PF, ELSS, PPF, insurance), 80D (health insurance), HRA, 80TTA/TTB, 24(b) on home loan for self-occupied, 80G, 80CCD(1B) NPS.
• How is HRA exemption calculated? ▼
  HRA exemption is the minimum of three conditions — the lowest of all three applies:
  
  1. Actual HRA received from employer
  2. 50% of basic salary (metro cities: Delhi, Mumbai, Chennai, Kolkata) OR 40% of basic salary (all other cities)
  3. Actual rent paid minus 10% of basic salary
  
  Example: Basic salary ₹6L/yr, HRA received ₹2.4L, annual rent ₹3L, metro city.
  Condition 1: ₹2,40,000 · Condition 2: ₹3,00,000 (50% of 6L) · Condition 3: ₹3L − ₹60K = ₹2,40,000
  Minimum = ₹2,40,000 → This is the HRA exempt from tax.
• What is the surcharge on income above ₹5 crore in FY 2025-26? ▼
  For income above ₹5 crore in FY 2025-26:
  
  • New regime: 25% surcharge (capped, same as the ₹2Cr–₹5Cr bracket)
  • Old regime: 37% surcharge (the highest surcharge tier)
  
  This is a significant difference for very high earners. Under the new regime, the maximum marginal tax rate (including 25% surcharge + 4% cess) is approximately 39%. Under the old regime at 37% surcharge, the maximum marginal rate is approximately 42.7%. The cap on new regime surcharge was introduced precisely to make the new regime more attractive at higher income levels.