What is the New Tax Regime and how is it different from the Old Regime?

The New Tax Regime (introduced in Budget 2020, made default from FY 2023-24, and significantly enhanced in Budget 2025) offers lower tax rates with fewer deductions compared to the Old Regime. Key differences: New Regime (default from FY 2023-24): ✓ Lower slab rates — 0% up to ₹4L, then 5%-30% ✓ Zero tax for salaried up to ₹12.75L gross (after ₹75K std deduction + 87A rebate) ✓ Standard deduction of ₹75,000 for salaried/pensioners ✓ Surcharge capped at 25% (vs 37% in old regime) ✗ No deductions under 80C, 80D, HRA, LTA etc. ✗ No home loan interest deduction under 80EEA Old Regime: ✓ Full suite of deductions: 80C (₹1.5L), 80D (health insurance), HRA, LTA, NPS (80CCD) ✓ Home loan interest deduction (₹2L under Sec 24) ✓ Can be beneficial for those with significant deductions totalling ₹3.75L+ ✗ Higher base tax rates ✗ More complex compliance ✗ Surcharge can go up to 37% for highest incomes Who benefits from New Regime: - Those with deductions below ₹3-4L per year - Salaried employees earning up to ₹12.75L (zero tax) - High earners above ₹2Cr (25% surcharge cap) - Those who prefer simplicity Who may benefit from Old Regime: - Those with HRA, 80C, 80D, home loan interest totalling ₹4L+ in deductions - Those with NPS contributions under 80CCD(1B) (extra ₹50,000) Break-even analysis: Generally, if your total deductions (excluding standard deduction) exceed ₹3.75L, the old regime may give lower tax. Always calculate both before deciding.

What is Section 87A rebate and who gets it?

Section 87A provides a full rebate (100% offset) on income tax if your taxable income does not exceed ₹12,00,000 under the New Regime for FY 2025-26. Key points: - Rebate limit: ₹12,00,000 taxable income (enhanced from ₹7L in FY 2023-24 by Budget 2025) - Effect: If taxable income ≤ ₹12L, your entire income tax liability = ₹0 - For salaried employees: with ₹75,000 standard deduction, gross income up to ₹12,75,000 results in zero tax - For non-salaried: gross income up to ₹12,00,000 results in zero tax How the rebate works: 1. Calculate income tax on taxable income using the slab rates 2. If taxable income ≤ ₹12L: rebate = full tax amount (tax becomes zero) 3. If taxable income > ₹12L: NO rebate — you pay tax on the full taxable income The cliff effect: - ₹12,75,000 gross (salaried): Zero tax - ₹12,75,001 gross (salaried): Tax = ₹66,300 (approximately) This 'cliff' means earning ₹1 more can trigger ₹66,000+ in tax. This is why ₹12.75L is such a critical threshold. Note: The 87A rebate is applied BEFORE the 4% cess. If the rebate eliminates the tax, cess is also zero. Not available for: Special income taxed at special rates (e.g. LTCG above ₹1L, STCG under 111A, etc.).

What is standard deduction and who can claim it in New Regime?

Standard deduction is a flat deduction from gross salary income, available without any proof or investment requirement. FY 2025-26 (Budget 2025): - Amount: ₹75,000 (increased from ₹50,000 in FY 2023-24) - Available in: New Regime (was previously only in Old Regime) - Who can claim: Salaried employees and pensioners - Self-employed/business income: NOT eligible Effect: - Salaried earning ₹12,75,000 gross: Taxable income = ₹12,75,000 − ₹75,000 = ₹12,00,000 - At ₹12,00,000 taxable: 87A rebate applies → Zero tax - This is why ₹12.75L is the 'zero tax threshold' for salaried employees How it's applied: - Employer deducts this automatically in TDS calculation - Reflected in Form 16 under 'Standard Deduction' - No paperwork or investment required — purely automatic Family pension: If you receive family pension, standard deduction is ₹15,000 or one-third of pension, whichever is lower (not ₹75,000). Multiple employers: Standard deduction applies once per year regardless of number of employers.

What are surcharges and when do they apply?

Surcharge is an additional tax levied on the income tax amount (not on income) for high earners. It is charged before the 4% cess is added. New Regime surcharge rates FY 2025-26: - Taxable income ₹50L – ₹1Cr: 10% surcharge on tax - Taxable income ₹1Cr – ₹2Cr: 15% surcharge on tax - Taxable income ₹2Cr – ₹5Cr: 25% surcharge on tax - Taxable income above ₹5Cr: 25% surcharge on tax (CAPPED) Key point for New Regime: Surcharge is CAPPED at 25%. In the Old Regime, surcharge could go up to 37% for income above ₹5Cr. The 25% cap is a major benefit of the New Regime for very high earners (income above ₹2Cr). Marginal relief: If surcharge causes your tax to increase by more than the income increase, marginal relief is provided so that net tax does not exceed the income above the threshold. Example: If income crosses ₹50L by ₹1,00,000, the additional surcharge cannot exceed ₹1,00,000. Calculation example (₹1Cr income, salaried): Taxable: ₹99,25,000 Income tax (slabs): ₹25,57,500 Surcharge @15%: ₹3,83,625 Cess @4% on (tax+surcharge): ₹1,17,645 Total: ₹30,58,770 Effective rate: ~30.6%

Can I switch between New and Old Regime? When and how?

Yes — but the rules differ for salaried and non-salaried individuals: Salaried employees: - Can choose between New and Old Regime every year at the time of filing their Income Tax Return (ITR) - Can inform their employer of their choice at the beginning of the year for TDS purposes - Even if employer deducts TDS under one regime, you can choose the other at ITR filing - No restriction on switching — can change every year - Declare choice to employer using Form 10-IEA if opting for old regime Self-employed / Business income earners: - More restrictive rules apply - Can switch from New to Old Regime only ONCE in a lifetime - Once switched back to Old Regime with business income, can only return to New Regime once (and if they do, they cannot go back to Old Regime again) - Must file Form 10-IEA before the due date of ITR filing Default: From FY 2023-24, New Regime is the DEFAULT. If you do not exercise a choice, New Regime applies automatically. Practical advice: 1. Calculate tax under both regimes every year 2. Especially recalculate if your deductions or income change significantly 3. For most salaried employees earning up to ₹12.75L, New Regime is clearly better 4. For those with HRA in high-rent cities + 80C + 80D + home loan interest, Old Regime may save more 5. Consult a CA if your total deductions (ex-standard deduction) exceed ₹3.5-4L

India Income Tax Calculator — New Regime FY 2025-26 (AY 2026-27)

🇮🇳 FY 2025-26 · Budget 2025 rates · Section 87A rebate · 4% Health & Education Cess · Surcharge included

Calculate your exact Income Tax under the New Tax Regime for FY 2025-26 (AY 2026-27) with Budget 2025 rates. Enter your gross annual income and employment type to instantly see: taxable income after standard deduction (₹75,000 for salaried), Section 87A rebate (zero tax up to ₹12L taxable / ₹12.75L ..

ENTER YOUR INCOME

EMPLOYMENT TYPE

✓ Standard deduction of ₹75,000 applied automatically

GROSS ANNUAL INCOME

₹₹15.00 L

QUICK SELECT

💡 KEY THRESHOLDS — NEW REGIME FY 2025-26

≤ ₹12,75,000Zero tax (salaried) — 87A rebate covers full liability

≤ ₹12,00,000Zero tax (non-salaried) — 87A rebate applies

₹12,75,001+Tax payable on full taxable income (no partial rebate)

₹50L+ taxableSurcharge 10% on tax

₹1Cr+ taxableSurcharge 15% on tax

₹2Cr+ taxableSurcharge 25% on tax (capped, new regime)

NEW REGIME TAX — FY 2025-26 · SALARIED

TOTAL TAX PAYABLE

₹97.5K

EFFECTIVE TAX RATE

6.50%

of gross income

MONTHLY TAKE-HOME

₹1,16,875

ANNUAL TAKE-HOME

₹14.03 L

FULL TAX BREAKDOWN

Gross annual income	₹15,00,000
Less: Standard deduction	− ₹75,000
Taxable income	₹14,25,000
Up to ₹4L @ 0%	Nil
₹4L – ₹8L @ 5%	₹20,000
₹8L – ₹12L @ 10%	₹40,000
₹12L – ₹16L @ 15%	₹33,750
Tax before rebate	₹93,750
Health & Education Cess (4%)	₹3,750
TOTAL TAX PAYABLE	₹97,500

INCOME SPLIT

94% take-home

6.5% tax

NEW REGIME INCOME TAX SLABS — FY 2025-26 (AY 2026-27)

Income Range	Tax Rate	Tax on Slab	Cumulative Tax
₹0 – ₹4,00,000	NIL	₹0	₹0
₹4,00,001 – ₹8,00,000	5%	₹20,000	₹20,000
₹8,00,001 – ₹12,00,000	10%	₹40,000	₹60,000
₹12,00,001 – ₹16,00,000	15%	₹60,000	₹1,20,000
₹16,00,001 – ₹20,00,000	20%	₹80,000	₹2,00,000
₹20,00,001 – ₹24,00,000	25%	₹1,00,000	₹3,00,000
Above ₹24,00,000	30%	30% of excess	₹3,00,000+

Section 87A Rebate: If taxable income ≤ ₹12,00,000 — full rebate (tax = ₹0). Salaried employees earning up to ₹12,75,000 gross pay zero tax after ₹75,000 standard deduction.
Plus: 4% Health & Education Cess on all tax + surcharge.

QUICK REFERENCE — TAX AT COMMON INCOME LEVELS (SALARIED, NEW REGIME FY 2025-26)

Gross Income	Taxable	Tax + Cess	Effective Rate	Monthly Take-Home
₹5.00 L	₹4.25 L	NIL 🎉	0.00%	₹41,667
₹7.00 L	₹6.25 L	NIL 🎉	0.00%	₹58,333
₹10.00 L	₹9.25 L	NIL 🎉	0.00%	₹83,333
₹12.75 L	₹12.00 L	NIL 🎉	0.00%	₹1,06,250
₹13.00 L	₹12.25 L	₹66.3K	5.10%	₹1,02,808
₹15.00 L	₹14.25 L	₹97.5K	6.50%	₹1,16,875
₹20.00 L	₹19.25 L	₹1.92 L	9.62%	₹1,50,633
₹30.00 L	₹29.25 L	₹4.76 L	15.86%	₹2,10,350
₹50.00 L	₹49.25 L	₹11.00 L	22.00%	₹3,25,017
₹1.00 Cr	₹99.25 L	₹29.26 L	29.26%	₹5,89,518

Click any row to calculate. All figures include 4% cess. No surcharge applicable below ₹50L taxable income.

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India Income Tax — New Regime · FY 2025-26 (AY 2026-27) · Budget 2025 · Section 87A rebate up to ₹12L taxable · 4% H&E Cess · Surcharge capped at 25% · Standard deduction ₹75,000 for salaried · For informational purposes only — consult a CA for tax filing.