How Income Tax Is Calculated in India — FY 2025-26

India operates a slab-based income tax system under the Income Tax Act, 1961. For FY 2025-26, there are two parallel tax regimes: the New Tax Regime (default) with lower slab rates but no major deductions, and the Old Tax Regime with higher slab rates but access to exemptions under Section 80C, HRA, 80D, and others. Taxpayers can choose the regime more beneficial to them when filing returns.

New Regime Tax Slabs — FY 2025-26 (Finance Act 2025-26)

Salaried employees get a standard deduction of ₹75,000 under the new regime. Section 87A provides a full tax rebate for net taxable income up to ₹12,00,000 (₹12,75,000 for salaried after standard deduction).

Worked Example — New Regime

Gross salary ₹15,00,000 for a salaried individual with no special deductions:

Under the Old Regime with ₹1.5L 80C + ₹25,000 80D + ₹50,000 standard deduction, total deductions can reach ₹2.25 lakh, reducing taxable income and potentially saving ₹20,000–₹40,000 in tax. Use the calculator to compare both regimes for your exact situation.