How to Calculate Income Tax in India — Old vs New Regime 2026
Step-by-step guide to calculating income tax in India under old and new regimes for FY 2025-26, with formulas, slab rates, and worked examples.
Every salaried individual in India faces the same question during tax season: how much do I actually owe? And since 2023, there's a second question: old regime or new regime? This guide walks through both, with actual numbers and examples.
You can verify all calculations using the CalcHub income tax calculator, which shows a side-by-side comparison of both regimes.
Step 1: Calculate Gross Total Income
Start with your total income from all sources:
- Salary (as per Form 16 — gross salary before deductions)
- Income from house property (rental income minus municipal taxes and standard deduction)
- Capital gains (if any — STCG, LTCG)
- Other sources (interest, dividends, freelance income)
Step 2: New Regime Tax Slabs (FY 2025-26)
The new regime is the default since FY 2023-24:
| Income Slab | Tax Rate |
|---|---|
| Up to Rs 4,00,000 | Nil |
| Rs 4,00,001 — 8,00,000 | 5% |
| Rs 8,00,001 — 12,00,000 | 10% |
| Rs 12,00,001 — 16,00,000 | 15% |
| Rs 16,00,001 — 20,00,000 | 20% |
| Rs 20,00,001 — 24,00,000 | 25% |
| Above Rs 24,00,000 | 30% |
Step 3: Old Regime Tax Slabs (FY 2025-26)
| Income Slab | Tax Rate |
|---|---|
| Up to Rs 2,50,000 | Nil |
| Rs 2,50,001 — 5,00,000 | 5% |
| Rs 5,00,001 — 10,00,000 | 20% |
| Above Rs 10,00,000 | 30% |
Under the old regime, you can claim deductions under Sections 80C, 80D, 80E, HRA exemption, LTA, and others.
Worked Example: Salary of Rs 15,00,000
Mr. Sharma earns Rs 15,00,000 gross salary. He has:- Rs 1,50,000 in Section 80C investments (PPF, ELSS)
- Rs 25,000 in Section 80D (health insurance)
- Rs 2,40,000 HRA exemption eligible
New Regime Calculation:
Gross Income: Rs 15,00,000
Standard Deduction: - Rs 75,000
Taxable Income: Rs 14,25,000
Tax:
Up to 4,00,000: Rs 0
4,00,001 - 8,00,000 @ 5%: Rs 20,000
8,00,001 - 12,00,000 @ 10%: Rs 40,000
12,00,001 - 14,25,000 @ 15%: Rs 33,750
--------
Total Tax: Rs 93,750
Health & Education Cess (4%): Rs 3,750
--------
Total Tax Payable: Rs 97,500
Old Regime Calculation:
Gross Income: Rs 15,00,000
Standard Deduction: - Rs 50,000
HRA Exemption: - Rs 2,40,000
Section 80C: - Rs 1,50,000
Section 80D: - Rs 25,000
Taxable Income: Rs 10,35,000
Tax:
Up to 2,50,000: Rs 0
2,50,001 - 5,00,000 @ 5%: Rs 12,500
5,00,001 - 10,00,000 @ 20%: Rs 1,00,000
10,00,001 - 10,35,000 @ 30%: Rs 10,500
--------
Total Tax: Rs 1,23,000
Health & Education Cess (4%): Rs 4,920
--------
Total Tax Payable: Rs 1,27,920
Step 4: Add Cess and Surcharge
All taxpayers pay 4% Health and Education Cess on the total tax amount. Surcharge applies for income above Rs 50 lakhs (10-37% depending on income level).
Practical Tips
1. Don't assume one regime is always better. If your deductions are above Rs 3.75 lakhs (including HRA), the old regime often wins. Below that threshold, the new regime is usually cheaper. Calculate both every year. 2. Remember: new regime is the default. If you want the old regime, you must explicitly opt for it. Salaried individuals can switch every year; business/professional income taxpayers can switch only once. 3. Don't forget employer NPS contribution. Under the new regime, employer NPS contribution up to 14% of salary (central govt) or 10% (others) is still deductible.What deductions are available under the new regime?
Very few. Standard deduction (Rs 75,000), employer NPS contribution (Section 80CCD(2)), and family pension deduction (Rs 25,000 under 57(iia)). Most common deductions like 80C, 80D, HRA are not available.
When should I choose the old regime?
When your total deductions under 80C, 80D, HRA, LTA, home loan interest (Section 24), and other sections exceed approximately Rs 3.75 lakhs. Use a calculator to verify — the breakeven point varies by income level.
Is income up to Rs 12 lakhs really tax-free under the new regime?
Yes, through the Section 87A rebate for FY 2025-26. With the Rs 75,000 standard deduction, effective tax-free income is Rs 12,75,000 for salaried individuals. Above this threshold, tax applies on the full taxable income from the first slab.
Related Calculators
- Income Tax Calculator — old vs new regime comparison
- HRA Calculator — calculate your HRA exemption amount
- Gratuity Calculator — estimate your gratuity payout
- EPF Calculator — check your provident fund growth