How the income tax calculator works
Enter your gross salary, any other income taxed at slab rates (bank interest, rental income after the standard 30% deduction, freelance income) and, for the old regime, the deductions you can claim — Section 80C investments, health insurance premium under 80D, home-loan interest under 24(b), NPS contribution under 80CCD(1B), HRA exemption and so on.
The calculator subtracts the standard deduction that applies to each regime, applies the slab rates, checks whether the Section 87A rebate (with marginal relief) makes your tax nil, adds surcharge if your income is high enough, and finally adds the 4% health and education cess. It then puts the two regimes side by side.
The new regime is the default. You can still opt for the old regime when you file if it works out cheaper — typically when you have a home loan, pay high rent and claim HRA, and fully use 80C, 80D and 80CCD(1B).
Tax slabs for FY 2026-27
New regime (default) — same for all ages, no deductions except the standard deduction and a few others such as employer NPS contribution under 80CCD(2):
| Taxable income | Rate |
|---|---|
| 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% |
Standard deduction for salaried and pensioners: ₹75,000 under the new regime, ₹50,000 under the old regime.
Section 87A rebate (new regime): if your taxable income is up to ₹12 lakh, your tax is nil. For a salaried person this means a gross salary up to ₹12.75 lakh (₹12 lakh + ₹75,000 standard deduction) attracts no tax. Just above the threshold, marginal relief ensures you never pay more tax than the amount by which your income exceeds ₹12 lakh.
Old regime slabs for individuals below 60: nil up to ₹2.5 lakh, 5% from ₹2.5 lakh to ₹5 lakh, 20% from ₹5 lakh to ₹10 lakh, and 30% above ₹10 lakh, with higher basic exemption limits for senior and super-senior citizens and the usual Chapter VI-A deductions.
Formula with variable key
Formula
Tax = [Slab tax(TI) − Rebate 87A] × (1 + Surcharge) × 1.04
- Where:
- TI
- = taxable income = gross income − standard deduction − eligible deductions (old regime)
- Slab tax
- = sum of (income in each slab × that slab's rate)
- Rebate 87A
- = new regime: full tax if TI ≤ ₹12 lakh, with marginal relief just above it
- Surcharge
- = applies only above ₹50 lakh taxable income; nil for most salaried taxpayers
- 1.04
- = 4% health and education cess on tax plus surcharge
Worked example: ₹15 lakh salary, new vs old regime
Suppose your gross salary is ₹15,00,000 and, under the old regime, you can claim ₹1,50,000 under 80C, ₹50,000 under 80CCD(1B), ₹25,000 under 80D and ₹2,00,000 home-loan interest.
- New regime: TI = ₹15,00,000 − ₹75,000 = ₹14,25,000. Slab tax = ₹20,000 (5% of 4L) + ₹40,000 (10% of 4L) + ₹33,750 (15% of 2.25L) = ₹93,750. No rebate (TI > ₹12 lakh). Cess 4% → total ≈ ₹97,500.
- Old regime: TI = ₹15,00,000 − ₹50,000 − ₹4,25,000 = ₹10,25,000. Slab tax = ₹12,500 + ₹1,00,000 + ₹7,500 = ₹1,20,000. Cess 4% → total ≈ ₹1,24,800.
- Result: the new regime is cheaper by about ₹27,300 even with ₹4.25 lakh of deductions. With the same salary but only 80C and 80CCD(1B) claimed, the old regime tax rises to ≈ ₹1,95,000.
The old regime usually wins only when deductions are very large — for example, a home loan, HRA on high rent and full 80C/80D together. Enter your own figures above rather than relying on rules of thumb.
Comparison: new-regime tax at different salaries
| Gross salary | Taxable income | Tax (new regime) |
|---|---|---|
| ₹10,00,000 | ₹9,25,000 | Nil (87A rebate) |
| ₹12,75,000 | ₹12,00,000 | Nil (87A rebate) |
| ₹15,00,000 | ₹14,25,000 | ₹97,500 |
| ₹18,00,000 | ₹17,25,000 | ₹1,50,800 |
| ₹20,00,000 | ₹19,25,000 | ₹1,92,400 |
| ₹25,00,000 | ₹24,25,000 | ₹3,19,800 |
Common mistakes and tax implications
- Confusing gross salary with taxable income: the ₹12 lakh nil-tax limit applies after the ₹75,000 standard deduction, so ₹12.75 lakh gross is the practical threshold for salaried taxpayers.
- Assuming 80C still saves tax: under the new regime, Section 80C, 80D, 80CCD(1B) and HRA give no benefit. Invest in ELSS, PPF or NPS for the product's own merits.
- Missing 80CCD(2): your employer's NPS contribution is deductible in both regimes — one of the few deductions the new regime keeps.
- Ignoring capital gains: mutual fund and share gains are taxed at special rates and are not part of slab income. Equity LTCG above ₹1.25 lakh is taxed at 12.5%.
- Forgetting other income: bank interest, FD interest and RD interest are taxed at slab rates and must be added.
- Not switching regimes when you can: salaried taxpayers may choose the regime each year while filing; those with business income face restrictions — check the current rule.
Frequently asked questions
Did Budget 2026 change the income tax slabs?
No. Budget 2026 made no change to slab rates, the standard deduction, the Section 87A rebate, surcharge or cess. The structure introduced for FY 2025-26 continues for FY 2026-27.
Is income up to ₹12 lakh really tax-free?
Under the new regime, taxable income up to ₹12 lakh attracts a Section 87A rebate equal to the full tax, so the liability is nil. For salaried people the ₹75,000 standard deduction pushes the gross-salary threshold to ₹12.75 lakh. Capital gains taxed at special rates are excluded from this rebate.
What is the standard deduction for FY 2026-27?
₹75,000 under the new regime and ₹50,000 under the old regime, available to salaried employees and pensioners without any proof.
Which regime is better for me?
It depends on your deductions. With few deductions the new regime is almost always cheaper. The old regime can win if you claim a large HRA exemption, home-loan interest and full 80C/80D/80CCD(1B). Enter your figures in the calculator to compare.
What is marginal relief under Section 87A?
If your taxable income is slightly above ₹12 lakh, the tax you pay is capped at the amount by which your income exceeds ₹12 lakh. For example, at a taxable income of ₹12,10,000 the tax before cess is ₹10,000, not the ₹61,500 the slabs would produce.
Can I claim HRA in the new regime?
No. HRA exemption, LTA, 80C, 80D and 80CCD(1B) are available only under the old regime. The employer's NPS contribution under 80CCD(2) and the standard deduction are allowed in both.
How is cess calculated?
A 4% health and education cess is charged on the income tax (plus surcharge, if any). It is applied after the 87A rebate, so if your tax is nil the cess is also nil.
When does surcharge apply?
Surcharge applies when taxable income exceeds ₹50 lakh, starting at 10% of the tax, with higher rates at higher incomes and marginal relief at each threshold. Most salaried taxpayers are not affected.
Are mutual fund gains taxed at slab rates?
No. Capital gains on mutual funds are taxed at special rates — for equity funds, long-term gains above ₹1.25 lakh a year at 12.5%. They are excluded from the 87A rebate. Debt fund rules differ; check the current treatment.
Can I switch between regimes every year?
Salaried taxpayers without business income can choose the regime each year when filing. Taxpayers with business or professional income have restrictions on switching back; check the current rule with your tax return preparer.
Does this calculator file my return?
No. It is an estimate for planning. Your return must be filed on the Income Tax portal with your Form 16, AIS and other documents.
Is this tax advice?
No. Two Plus Two Nine is an AMFI-registered Mutual Fund Distributor, not a tax practitioner. The figures here are illustrative; consult a qualified tax professional for your specific situation.