Salary Tax Calculator – Compare Old vs New Tax Regime

Understanding Salary Income Tax Calculation in India

Calculating the income tax on your salary can seem complex due to the co-existence of two separate tax frameworks in India: the Old Tax Regime and the New Tax Regime. Under the Indian Income Tax Act, tax on salaried individuals is calculated by assessing their total gross salary, applying standard deductions, subtracting permitted exemptions (such as House Rent Allowance or LTA) and deductions (like Section 80C, 80D, etc.), and mapping the net taxable income against progressive tax slabs.

For the Assessment Year (AY) 2026-27, which corresponds to the Financial Year (FY) 2025-26, the Indian government has positioned the New Tax Regime as the default tax structure. However, salaried employees retain the flexibility to opt for the Old Tax Regime at the time of filing their returns (under Section 115BAC(6)), provided they submit their option declaration. This makes a side-by-side comparison critical for every taxpayer. A dedicated salary tax calculator helps you evaluate both regime paths based on your investments, deductions, and salary levels, allowing you to maximize your take-home pay.

Income Tax Calculator Old vs New: The Structural Shift

The choice between the Old vs New tax regimes depends entirely on the deductions you are eligible to claim. The **Old Tax Regime** was designed to encourage individual savings. It features higher slab tax rates but offers over 70 deductions and exemptions. The **New Tax Regime**, on the other hand, was introduced to simplify tax filing by offering lower slab rates in exchange for the forfeiture of almost all traditional tax-saving deductions.

Here is a comparison of what you can claim under each regime:

Income Tax Calculator New Regime: AY 2026-27 Slabs & 87A Rebate

The Income Tax Calculator new regime operates on standard slab brackets configured by the Ministry of Finance. For FY 2025-26 / AY 2026-27, the slab rates are designed to relieve low-to-middle income earners from heavy tax burdens:

• Up to ₹4,00,000: Nil (0% tax)
• ₹4,00,001 to ₹8,00,000: 5%
• ₹8,00,001 to ₹12,00,000: 10%
• ₹12,00,001 to ₹16,00,000: 15%
• ₹16,00,001 to ₹20,00,000: 20%
• ₹20,00,001 to ₹24,00,000: 25%
• Above ₹24,00,000: 30%

Understanding the ₹12 Lakh Rebate and Marginal Relief: One of the most significant provisions under the New Regime is the Section 87A rebate. If your taxable income (after subtracting the ₹75,000 Standard Deduction) is up to ₹12,00,000, your tax payable is entirely waived. However, if your taxable income crosses ₹12,00,000 by a small margin, the rebate is not completely withdrawn at once. Instead, a marginal relief mechanism applies. It restricts your tax payable (before cess) to exactly the amount by which your taxable income exceeds ₹12,00,000.

For instance, if your net taxable income is ₹12,05,000, the slab tax is calculated as ₹60,750. However, because the income exceeding the ₹12L threshold is only ₹5,00, the marginal relief caps your tax at ₹5,000. Adding the 4% Health & Education Cess results in a final tax of ₹5,200 instead of ₹63,180.

Income Tax Calculator Old Regime: Age Limits & Slabs

Under the Old Regime, the tax-free basic exemption limit changes depending on the age of the taxpayer:

• Individuals under 60 Years (General): Basic exemption limit is ₹2,50,000.
  - ₹2.5L to ₹5L: 5% | - ₹5L to ₹10L: 20% | - Above ₹10L: 30%
• Senior Citizens (60 to 80 Years): Basic exemption limit is ₹3,00,000.
  - ₹3L to ₹5L: 5% | - ₹5L to ₹10L: 20% | - Above ₹10L: 30%
• Super Senior Citizens (80+ Years): Basic exemption limit is ₹5,00,000.
  - Up to ₹5L: Nil | - ₹5L to ₹10L: 20% | - Above ₹10L: 30%

Standard Deduction under the Old Regime is ₹50,000. In addition, Section 87A rebate is available if the net taxable income (after all exemptions and deductions) is up to ₹5,00,000. The rebate is capped at ₹12,500, making tax zero for income up to ₹5 Lakh. Unlike the New Regime, there is no marginal relief for the Section 87A rebate under the Old Regime. If your taxable income is even ₹5,00,001, you lose the entire rebate, and your tax is computed from the initial slabs.

How to Calculate Income Tax on Salary: Real-World Examples

To clarify how both regimes calculate tax liabilities, let us walk through three standard salary milestones under the tax laws for AY 2026-27:

Surcharge and Cess: High Income Tax Calculations

For individuals with taxable income exceeding ₹50 Lakhs, the government levies a surcharge in addition to the standard slab tax rates. The surcharge is computed directly on the slab tax (after Section 87A rebate, if any) and is added to the tax amount before applying the 4% Health & Education Cess.

The surcharge rate structure for AY 2026-27 is progressive:

• Taxable Income > ₹50 Lakhs to ₹1 Crore: 10% Surcharge.
• Taxable Income > ₹1 Crore to ₹2 Crores: 15% Surcharge.
• Taxable Income > ₹2 Crores to ₹5 Crores: 25% Surcharge.
• Taxable Income > ₹5 Crores: Capped at 25% under the New Tax Regime, whereas it goes up to 37% under the Old Tax Regime.

To avoid a situation where crossing a surcharge threshold by a small margin results in a tax increase that is larger than the additional income earned, surcharge marginal relief is automatically applied. The relief limits the increase in tax + surcharge to the amount of income that exceeds the threshold.