Income Tax Calculator FY 2025-26

How income tax on salary is calculated

Salaried taxpayers in India choose between two regimes each year. The new regime offers wider slabs and a bigger standard deduction but almost no exemptions; the old regime keeps HRA, 80C, NPS and home loan benefits at higher slab rates. The calculation runs in four steps for either choice.

Step 1 — Compute gross salary

Add basic pay, dearness allowance, HRA, transport allowance, bonus and any perquisite value for the full financial year. For government employees this is the total of all payslip earnings.

Step 2 — Apply deductions

The new regime allows only the ₹75,000 standard deduction and the employer's NPS contribution under 80CCD(2). The old regime allows a ₹50,000 standard deduction plus HRA exemption, ₹1.5 lakh under 80C, ₹50,000 under 80CCD(1B), ₹2 lakh of home loan interest and medical insurance under 80D.

Step 3 — Apply slab rates

Tax is charged progressively — each slab rate applies only to the income falling in that band. The Section 87A rebate makes taxable income up to ₹12 lakh tax free in the new regime and up to ₹5 lakh in the old regime.

Step 4 — Add cess and surcharge

A 4% health and education cess is added to the tax. Incomes above ₹50 lakh attract surcharge from 10% to 25%, with marginal relief where the surcharge exceeds the extra income.

Calculation formula

Taxable income = gross salary − standard deduction − eligible exemptions/deductions

New regime slabs: 0 / 5 / 10 / 15 / 20 / 25 / 30%

Old regime slabs: 0 / 5 / 20 / 30%

Rebate 87A: nil tax if taxable ≤ ₹12,00,000 (new) or ≤ ₹5,00,000 (old)

Total tax = slab tax × 1.04 (health & education cess)

Frequently asked questions

What are the new regime income tax slabs for FY 2025-26?

Nil up to ₹4 lakh, 5% from ₹4–8 lakh, 10% from ₹8–12 lakh, 15% from ₹12–16 lakh, 20% from ₹16–20 lakh, 25% from ₹20–24 lakh and 30% above ₹24 lakh, with a ₹75,000 standard deduction and a rebate making income up to ₹12 lakh tax free.

Which regime is better for government employees?

If you claim large deductions — HRA, 80C, home loan interest, NPS 80CCD(1B) — the old regime often wins. With few deductions the new regime is usually cheaper. This calculator shows both side by side.

Is the standard deduction available in both regimes?

Yes, but the amount differs: ₹75,000 under the new regime and ₹50,000 under the old regime for salaried taxpayers and pensioners.

Will 8th CPC arrears be taxed in one year?

Arrears are taxed in the year of receipt, but Section 89(1) relief with Form 10E lets you spread them across the years they relate to, often reducing the tax substantially.