Income Tax Calculator (New Regime)

Under the revised new tax regime under Section 115BAC (applicable for Financial Year 2025-26 and Assessment Year 2026-27), income up to ₹12,00,000 attracts zero tax for resident individuals due to the expanded Section 87A rebate. For salaried employees and pensioners, the statutory ₹75,000 standard deduction lifts that zero-tax threshold to a gross annual salary of ₹12,75,000.

The new regime is the default tax structure across India. It trades itemized deductions such as Section 80C, Section 80D, and HRA for wider slabs, lower rates, and simplified filing. This calculator determines your exact tax liability, showing the step-by-step breakdown across slabs, the 87A rebate, marginal relief, surcharge, and the 4% Health and Education Cess.

How income tax is calculated under the new regime

Your taxable income is calculated by taking your gross annual income and subtracting eligible statutory deductions:

1. Standard deduction: Salaried individuals and pensioners automatically receive a standard deduction of ₹75,000 (capped at salary income) under Section 16(ia).
2. Eligible employer contributions: Employer contributions to the National Pension System (NPS) under Section 80CCD(2) remain deductible up to 14% of salary (Basic + Dearness Allowance).
3. Net taxable income: Gross income minus allowable deductions gives net taxable income, which is rounded to the nearest multiple of ₹10 in accordance with Section 288A.
4. Slab taxation: Slabs are applied progressively to net taxable income.
5. Rebate & cess: If total income does not exceed ₹12,00,000, the Section 87A rebate covers tax up to ₹60,000. Finally, a 4% Health and Education Cess is added to the net tax.

Revised tax slabs for FY 2025-26 (AY 2026-27)

The Finance Act 2025 established seven income tax brackets for the new regime under Section 115BAC:

Section 87A rebate and marginal relief explained

For resident individuals whose total taxable income does not exceed ₹12,00,000, Section 87A provides a full rebate of up to ₹60,000. At ₹12,00,000 of taxable income, the tax computed under slabs is exactly ₹60,000 (₹20,000 on ₹4L–₹8L plus ₹40,000 on ₹8L–₹12L). The rebate cancels this amount completely, resulting in zero tax payable.

Because of the ₹75,000 standard deduction, a salaried employee earning a gross salary of ₹12,75,000 arrives at a net taxable income of ₹12,00,000, paying ₹0 in tax.

Marginal relief above ₹12 Lakh: Without relief, earning ₹12,05,000 would cause tax to jump from ₹0 to over ₹60,000 on an additional ₹5,000 of income. Statutory marginal relief resolves this: the tax payable on normal income is capped at the exact amount by which taxable income exceeds ₹12,00,000. In this scenario, the tax payable before cess is capped at ₹5,000.

Second Proviso restriction on capital gains: Under the Second Proviso to Section 87A, the rebate cannot reduce tax on special-rate incomes such as Short-Term Capital Gains under Section 111A (20%) or Long-Term Capital Gains under Section 112A (12.5%). Special-rate taxes must be paid even if total income is under ₹12,00,000.

Deductions permitted vs deductions forgone

The new regime simplifies tax compliance by removing the requirement to submit investment proofs for most Chapter VI-A deductions.

Permitted deductions:

• Standard deduction of ₹75,000 for salaried employees and pensioners under Section 16(ia).
• Employer NPS contribution under Section 80CCD(2), up to 14% of Basic + DA.
• Family pension deduction under Section 57(iia) up to ₹25,000.
• Contributions to the Agnipath scheme under Section 80CCH.

Deductions not allowed under the new regime:

• Section 80C investments (EPF, PPF, ELSS, life insurance premiums, home loan principal).
• Section 80D health insurance premiums for self, family, and parents.
• House Rent Allowance (HRA) exemption under Section 10(13A).
• Leave Travel Concession (LTC) and standard professional tax deductions.
• Home loan interest deduction under Section 24(b) for self-occupied properties. In addition, house property losses cannot be offset against salary income under Section 115BAC(2)(ii).

How to enter your numbers in this calculator

Use the calculator by following these straightforward steps:

• Gross annual income: Enter your total CTC or gross annual earnings before any deductions.
• Salaried toggle: Keep this set to "Yes" if you are an employee or pensioner. The calculator will automatically subtract the ₹75,000 standard deduction.
• Other deductions: Enter allowable deductions such as employer NPS contributions under Section 80CCD(2). Do not enter 80C or 80D amounts here, as they do not apply under Section 115BAC.
• Advanced drawer: If you have capital gains, interest, or rental income, open the advanced drawer to view unexhausted basic exemption shortfall allocation and mixed-income surcharge calculations.

Worked tax calculations

These examples illustrate how the statutory calculations work in practice for two common income levels.

Example 1: Salaried employee earning ₹12,00,000 gross

Example 2: Salaried employee earning ₹15,00,000 gross

Choosing between the new and old tax regimes

To determine whether the new regime is better than the old regime, compare your total eligible deductions under the old regime (Section 80C, Section 80D, HRA exemption, and Section 24(b) home loan interest) against the breakeven deduction threshold for your income bracket.

For an individual earning ₹15,00,000, you typically need total deductions exceeding ₹3,75,000 to ₹4,00,000 under the old regime to beat the ₹97,500 tax payable under the new regime. If your eligible deductions fall below this threshold, the new regime provides lower tax and eliminates the hassle of tracking investment receipts. You can calculate your liability under both systems using the Income Tax Calculator (Old Regime).

Statutory rules and compliance notes

• Surcharge rates: For high-income earners, surcharge under the new regime is 10% for income between ₹50 Lakh and ₹1 Crore, 15% for income between ₹1 Crore and ₹2 Crore, and 25% for income exceeding ₹2 Crore. The maximum surcharge rate under the new regime is 25%, compared to 37% under the old regime.
• Capital gains surcharge cap: Surcharge on equity capital gains (Section 111A, Section 112A) and dividend income is strictly capped at 15%.
• Statutory rounding: Taxable income is rounded to the nearest ₹10 under Section 288A. The final tax liability or refund amount is rounded to the nearest ₹10 under Section 288B.

Frequently asked questions

Is the new tax regime compulsory for FY 2025-26?

The new tax regime under Section 115BAC is the default regime for all individual taxpayers. However, salaried taxpayers without business income can opt for the old tax regime when filing their annual income tax return.

What is the highest gross salary that pays zero tax under the new regime?

A salaried individual earning up to ₹12,75,000 pays zero income tax. Subtracting the ₹75,000 standard deduction brings taxable income to ₹12,00,000, where the Section 87A rebate completely offsets the ₹60,000 slab tax.

Can I claim HRA or home loan interest under the new tax regime?

No. House Rent Allowance (HRA) exemption and home loan interest deductions on self-occupied properties (Section 24(b)) cannot be claimed under the new regime. If these deductions represent a large portion of your income, compare your numbers with the old tax regime.

Does the Section 87A rebate apply to mutual fund capital gains?

Under the Second Proviso to Section 87A, the rebate is restricted to tax calculated on normal slab income. It cannot be used to reduce tax on special-rate capital gains, such as Short-Term Capital Gains under Section 111A or Long-Term Capital Gains under Section 112A.

What is marginal relief under Section 87A?

Marginal relief prevents a sharp tax spike when taxable income marginally exceeds ₹12,00,000. It caps the tax on normal slab income at the exact amount of income earned above the ₹12,00,000 threshold.

Can salaried individuals switch between regimes every year?

Yes. Salaried individuals who do not have business or professional income can switch between the new and old tax regimes every financial year at the time of filing their ITR.

Related calculators

• Income Tax Calculator (Old Regime) — compare your liability if you claim large deductions under Section 80C, Section 80D, or HRA.
• In-Hand Salary Calculator — view your expected monthly take-home salary after taxes and provident fund deductions.
• HRA Exemption Calculator — calculate the exempt portion of your house rent allowance under old regime rules.
• NPS Calculator — see how retirement contributions under Section 80CCD(2) help reduce your tax liability.
• Capital Gains Tax Calculator — estimate taxes on property, mutual funds, and equity shares.