What is the Income Tax Calculator?
India's income tax system operates under two parallel regimes — the Old Tax Regime with its web of deductions and exemptions, and the New Tax Regime introduced under Section 115BAC, which offers lower slab rates but fewer deductions. For FY 2025-26 and FY 2026-27, the New Tax Regime is the default, but taxpayers can opt for the Old Regime if it results in lower liability. Navigating this choice manually requires calculating tax under both regimes, accounting for HRA exemptions, Section 80C investments, NPS contributions, and standard deductions — a task that is error-prone without a reliable tool.
The Income Tax Calculator on Niyamfin simplifies this entire process. Enter your gross salary, applicable deductions (PPF, ELSS, LIC premiums, home loan interest under Section 24, etc.), and the calculator instantly computes your taxable income, applicable slab-wise tax, surcharge, Health and Education Cess at 4%, and your net tax payable under both regimes. It helps you make an informed decision about which regime suits your financial profile.
For salaried employees, the standard deduction of ₹75,000 under the New Regime (revised in Budget 2024) and ₹50,000 under the Old Regime is automatically factored in. Self-employed professionals and business owners can also use the calculator to estimate advance tax obligations due on 15 June, 15 September, 15 December, and 15 March of each financial year.
How does it work?
Income tax in India is calculated on a progressive slab system. Under the New Tax Regime for FY 2025-26, income up to ₹3 lakh is nil; ₹3–7 lakh is taxed at 5%; ₹7–10 lakh at 10%; ₹10–12 lakh at 15%; ₹12–15 lakh at 20%; and above ₹15 lakh at 30%. The rebate under Section 87A provides full tax relief for taxpayers with net taxable income up to ₹7 lakh under the New Regime (up to ₹5 lakh under the Old Regime), effectively making tax liability zero for a large portion of salaried Indians. The formula is: Tax Payable = Slab-wise Tax on Taxable Income − Section 87A Rebate (if applicable) + Surcharge (if applicable) + 4% Health and Education Cess.
To arrive at taxable income under the Old Regime, the calculator subtracts eligible deductions from gross income. Key deductions include: Section 80C (up to ₹1.5 lakh for EPF, PPF, ELSS, LIC, principal repayment of home loan, tuition fees), Section 80D (health insurance premiums up to ₹25,000 for self/family, ₹50,000 for senior citizen parents), Section 24(b) (home loan interest up to ₹2 lakh for self-occupied property), HRA exemption computed as the least of actual HRA received, 50%/40% of basic salary (metro/non-metro), or actual rent paid minus 10% of basic salary, and NPS contribution under Section 80CCD(1B) up to ₹50,000.
Surcharge applies at 10% on tax if income exceeds ₹50 lakh, 15% above ₹1 crore, 25% above ₹2 crore, and 37% (only Old Regime) above ₹5 crore. The Marginal Relief provision ensures the incremental tax never exceeds the incremental income crossing the threshold. After computing total tax under both regimes, the calculator highlights the regime that results in lower outgo, enabling a data-driven decision before you submit your investment declarations to your employer.
Worked example
Consider Priya, 34, a software engineer in Bengaluru earning a gross salary of ₹18 LPA (₹1.5 lakh per month). Her CTC includes a basic salary of ₹7.2 lakh, HRA of ₹3.6 lakh, and special allowance of ₹7.2 lakh. She pays rent of ₹22,000 per month (₹2.64 lakh annually). Under the Old Regime: HRA exemption is the least of ₹3.6 lakh (HRA received), ₹3.6 lakh (50% of basic for metro), or ₹1.92 lakh (rent paid minus 10% of basic) — so ₹1.92 lakh is exempt. She invests ₹1.5 lakh in ELSS and EPF (80C), pays ₹25,000 in health insurance premiums (80D), and contributes ₹50,000 to NPS (80CCD(1B)). Her taxable income under Old Regime = ₹18 lakh − ₹50,000 (standard deduction) − ₹1.92 lakh (HRA) − ₹1.5 lakh (80C) − ₹25,000 (80D) − ₹50,000 (NPS) = ₹13.33 lakh. Tax under Old Regime slabs = approximately ₹2.18 lakh + 4% cess = ₹2.27 lakh.
Under the New Regime, her taxable income = ₹18 lakh − ₹75,000 (standard deduction) = ₹17.25 lakh. Tax = ₹33,750 (at 5% on ₹4 lakh) + ₹30,000 (at 10% on ₹3 lakh) + ₹45,000 (at 15% on ₹3 lakh) + ₹1.05 lakh (at 20% on ₹3 lakh) + ₹67,500 (at 30% on ₹2.25 lakh) = ₹2.81 lakh + 4% cess = ₹2.92 lakh. In this case, the Old Regime saves Priya approximately ₹65,000 in taxes — a significant amount worth optimising for.
When to use this calculator
- 1At the start of the financial year (April) when your employer asks for investment declarations under Form 12BB — this is when regime choice locks in for TDS purposes.
- 2When you receive a salary hike or increment and want to check if you have crossed a tax slab or surcharge threshold that changes your take-home significantly.
- 3Before making Section 80C investments to determine whether the Old Regime deductions will actually reduce your tax bill enough to justify locking money in ELSS or PPF.
- 4When filing your ITR between July and December, to cross-check the TDS already deducted by your employer against your actual tax liability and identify refunds or additional dues.
- 5If you are a freelancer or self-employed professional estimating advance tax liability to avoid the 1% monthly interest penalty under Sections 234B and 234C.
Common mistakes to avoid
- ✕Defaulting to the New Regime without calculating: Many salaried employees simply accept the default New Regime without checking if their deductions (HRA, 80C, home loan) would make the Old Regime cheaper. This passive choice can cost ₹50,000–₹1,00,000 annually for those with significant deductions.
- ✕Missing the HRA exemption calculation: Employees in rented accommodation often forget to claim HRA or miscalculate it by using CTC instead of basic salary as the base, leading to higher taxable income than necessary.
- ✕Treating Section 80C as a savings strategy rather than a tax tool: Investing ₹1.5 lakh purely to save tax under the Old Regime without checking regime suitability can result in locking funds in low-return instruments like NSC or 5-year FDs when the New Regime would yield the same or lower tax.
- ✕Ignoring advance tax obligations: Self-employed individuals and those with significant non-salary income (rental, capital gains, interest) often skip advance tax payments and face interest penalties of 1% per month under Sections 234B and 234C when filing their ITR.
- ✕Not accounting for capital gains in tax estimates: Short-term capital gains (STCG) from equity mutual funds or stocks are taxed at a flat 20% (revised from 15% in Budget 2024), and long-term capital gains (LTCG) above ₹1.25 lakh are taxed at 12.5% — these are outside standard slab calculations and often caught taxpayers off guard.
Frequently asked questions
- Which tax regime is better for me — Old or New?
- It depends on your deductions. As a rule of thumb: if your total eligible deductions (HRA + 80C + 80D + home loan interest + NPS) exceed ₹3.75 lakh for incomes around ₹15 lakh, the Old Regime is likely better. Below ₹7 lakh income, the New Regime's Section 87A rebate makes you tax-free regardless. Use the calculator to compute both and compare your actual liability with your specific numbers.
- What is the income tax slab for FY 2025-26 under the New Regime?
- Under the New Tax Regime for FY 2025-26: income up to ₹3 lakh — nil; ₹3–7 lakh — 5%; ₹7–10 lakh — 10%; ₹10–12 lakh — 15%; ₹12–15 lakh — 20%; above ₹15 lakh — 30%. A standard deduction of ₹75,000 applies for salaried individuals. Taxpayers with net taxable income up to ₹7 lakh get full rebate under Section 87A, paying zero tax.
- Can I switch between Old and New tax regime every year?
- Salaried employees with no business income can switch regimes every year at the time of filing their ITR. However, if you have business or professional income, you can switch out of the New Regime only once in a lifetime. For the purpose of TDS, you declare your regime choice to your employer at the start of the year, but you can change it while filing your actual ITR.
- Is EPF deduction available under the New Tax Regime?
- No. Employee contributions to EPF are deductible under Section 80C, which is only available under the Old Tax Regime. Under the New Regime, no deduction for EPF contribution is allowed. However, employer contributions to EPF (up to 12% of basic salary) and interest accrued (up to 9.5% per annum) remain tax-free under both regimes.
- How is TDS calculated on salary and can I get a refund?
- Your employer calculates TDS by projecting your annual salary, applying the chosen tax regime, subtracting declared deductions (Old Regime) or standard deduction (New Regime), computing annual tax, and deducting one-twelfth each month. If excess TDS is deducted — due to regime mismatch, late investment declarations, or unclaimed deductions — you can claim a refund when filing your ITR. Refunds are typically processed within 20–45 days of ITR verification, credited directly to your bank account linked with PAN.