Income Tax Calculator India — Old vs New Regime

Understanding Income Tax Regimes in India

India currently offers two tax regimes for individual taxpayers. The Old Tax Regime has been in place for decades and allows taxpayers to claim a wide range of deductions and exemptions under Sections 80C, 80D, 80E, 24(b), HRA exemption, LTA, and many others. These deductions can significantly reduce your taxable income, especially if you have home loans, health insurance, children in school, or make investments in PPF, ELSS, or NPS. The trade-off is higher tax slab rates starting at 5 percent on income above 2.5 lakh and going up to 30 percent on income above 10 lakh.

The New Tax Regime, introduced in Budget 2020 and made the default regime from FY 2023-24, offers significantly lower slab rates with a wider range of brackets. However, it removes most deductions and exemptions. From FY 2026-27, the new regime offers a standard deduction of 75,000 rupees and tax slabs ranging from 5 percent (3-7 lakh) to 30 percent (above 15 lakh). The Section 87A rebate under the new regime makes income up to 7 lakh effectively tax-free. The key decision every taxpayer must make each year is which regime results in a lower tax liability given their specific financial situation.

Section 87A Rebate Explained

Section 87A provides a tax rebate for resident individuals with lower incomes. Under the Old Tax Regime, if your total taxable income does not exceed 5 lakh rupees, you are eligible for a rebate of up to 12,500 rupees, effectively making your tax zero. Under the New Tax Regime for FY 2026-27, the rebate threshold has been increased to 7 lakh rupees. If your taxable income under the new regime is 7 lakh or less, the rebate eliminates your entire tax liability. This makes the new regime particularly attractive for individuals earning up to 7 lakh per year, as they pay zero income tax with just the standard deduction.

Which Tax Regime Should You Choose?

The choice depends entirely on the total deductions you can claim. If your combined deductions under the old regime (80C, 80D, HRA exemption, home loan interest under 24b, NPS under 80CCD, and others) are significant, the old regime may save you more tax despite the higher slab rates. As a general guideline, if your total deductions exceed approximately 3.75 lakh rupees for incomes around 10-15 lakh, the old regime is often more beneficial. For higher incomes above 15-20 lakh, the breakeven point for deductions is even higher. Salaried employees should factor in the standard deduction difference (50,000 in old vs 75,000 in new) and the HRA exemption, which can be substantial for those paying high rent in metro cities. This calculator does the comparison for you, so you can see the exact tax difference without manual computation.

Example Calculation