Income Tax Calculator

What is Income Tax

Income tax is a direct tax imposed by the Government of India on the income earned by individuals, Hindu Undivided Families (HUFs), firms, and companies during a financial year. It serves as a crucial source of revenue for the government, funding infrastructure, healthcare, education, and national development. The tax is calculated based on an individual’s total income from various sources such as salary, business profits, capital gains, and other earnings. The amount payable depends on the applicable tax slab, deductions, and exemptions defined under the Income Tax Act, 1961. Every taxpayer must file an Income Tax Return (ITR) annually to report their income and taxes paid.

What is an Income Tax Calculator?

An Income Tax Calculator is an online financial tool designed to help taxpayers estimate their income tax liability quickly and accurately. By entering details such as annual income, deductions, exemptions, and applicable tax regime (old or new), users can instantly know how much tax they owe or the refund they are eligible for. The calculator applies current-year tax slabs, standard deductions, and cess rates to generate results. It’s particularly useful for salaried employees and freelancers who want to plan their finances, avoid tax shortfalls, and make informed investment decisions before filing their return.

Budget 2025 Updates on Income Tax

The Union Budget 2025 introduced several changes to simplify the income tax system and enhance taxpayer convenience. The government reaffirmed its commitment to promoting the new tax regime as the default structure, offering lower tax rates with fewer exemptions. Key updates include an increased standard deduction for salaried employees, rationalization of surcharge rates, and continued benefits under Section 87A for individuals earning up to ₹7 lakh annually. Additionally, the Budget reinforced digital compliance measures, faster refund processing, and improved taxpayer services through the Income Tax portal. These updates aim to make tax filing more transparent, efficient, and citizen-friendly for FY 2025–26 (AY 2026–27).

Revised Income Tax Slabs Under New Regime for FY 2025–2026 (AY 2026–2027)

The Union Budget 2025 introduced a simplified and progressive income tax slab structure under the new tax regime, aimed at benefiting middle-income taxpayers and making the filing process more transparent.

The revised slabs for Financial Year 2025–26 (Assessment Year 2026–27) are as follows:

Rebate under Section 87A (New Regime):
The rebate threshold has been enhanced from ₹7 lakh to ₹12 lakh, meaning individuals with taxable income up to ₹12 lakh effectively pay zero tax after applying the rebate.

Standard Deduction:
A standard deduction of ₹50,000 continues to be available for salaried and pensioned taxpayers under the new regime.

Health and Education Cess:
A 4% cess is applicable on the total income tax payable after the rebate and surcharge.

This restructured slab system broadens tax relief for the middle class, rewards formal income, and promotes adoption of the simplified new regime by replacing multiple exemptions with lower rates.

How can an Income Tax Calculator Help You?

An income tax calculator is a powerful tool for personal financial management. It helps you:

• Understand your tax liability in seconds without manual calculations.
• Compare your tax payable under both the old and new tax regimes.
• Plan investments efficiently to reduce taxable income using Section 80C, 80D, and other deductions.
• Avoid last-minute surprises during tax filing and ensure compliance.
• Estimate take-home salary or post-tax income accurately.

By using a tax calculator regularly, individuals can make data-driven financial decisions and align their savings with long-term goals.

How to Calculate Income Tax on Salary?

To calculate income tax on salary, follow these simple steps:

• Compute Gross Income: Add up your total annual salary including basic pay, allowances, bonuses, and perquisites.
• Subtract Exemptions: Deduct exemptions such as HRA, LTA, and special allowances (if applicable).
• Apply Standard Deduction: Salaried taxpayers can claim a standard deduction of ₹50,000 under both regimes.
• Apply Deductions: Under the old regime, you can claim deductions under Sections 80C, 80D, 80TTA, etc.
• Determine Taxable Income: Subtract all deductions and exemptions from gross income.
• Apply Slab Rates: Calculate tax using the applicable income slab rates under the chosen regime.
• Add Cess and Surcharge: Finally, add 4% health and education cess and any applicable surcharge.

This step-by-step process gives you your total tax payable for the financial year.

Benefits of Income Tax Calculator

• Provides instant, error-free calculations of income tax payable.
• Offers comparative analysis between the old and new tax regimes.
• Enables better financial planning by identifying optimal investment strategies.
• Helps in cash flow management by forecasting post-tax salary.
• Encourages timely tax compliance and prevents penalties.
• Saves time during ITR filing by providing an accurate estimate in advance.

A reliable income tax calculator simplifies complex tax computations and gives taxpayers confidence and clarity.

Applicable Income Tax Rate as per the New Regime

The new income tax regime (Section 115BAC), now positioned as the default system from FY 2025–26 onward, offers reduced tax rates with limited exemptions.
Taxpayers can still opt for the old regime if they wish to continue claiming deductions such as Section 80C or 80D; however, the new regime is designed for those preferring simplicity and higher in-hand income.

Below is a summary of the applicable tax rates for individuals under the new regime (FY 2025–26 / AY 2026–27):

• Income up to ₹4,00,000 — No tax
• ₹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%

Rebate & Relief:
Under Section 87A, taxpayers with income up to ₹12 lakh receive a full rebate, bringing their effective tax liability to zero.

Cess:
A 4% Health and Education Cess continues to apply on the total tax computed.

Surcharge (Simplified):
High-income earners are subject to a graded surcharge starting from income above ₹50 lakh, capped at 25% for the highest slab.

This revised framework aligns with the government’s goal of a cleaner, incentive-neutral tax system, reducing complexity while enhancing compliance and take-home pay.