What is the Income Tax?
India's new tax regime is now the default. It offers wider slabs and lower rates but removes most deductions — no 80C, no HRA, no LTA. What it does allow is a ₹75,000 standard deduction for salaried taxpayers and the employer's NPS contribution under 80CCD(2).
The Section 87A rebate makes income up to ₹12 lakh effectively tax-free for residents (₹12.75 lakh for the salaried, once standard deduction is applied).
Formula & worked example
Tax is charged slab by slab, not on the whole income at one rate:
₹16–20L: 20% · ₹20–24L: 25% · above ₹24L: 30%
Total = (slab tax − 87A rebate) × 1.04
Worked example: ₹15,00,000 gross salary. Less ₹75,000 standard deduction = ₹14,25,000 taxable. Tax = 0 + ₹20,000 + ₹40,000 + ₹33,750 = ₹93,750. No rebate applies above ₹12 lakh, so with 4% cess the total is about ₹97,500 — an effective rate of just 6.5% on gross.
How to use this income tax calculator
- Enter your annual gross including basic, HRA, bonus and allowances.
- Keep the ₹75,000 standard deduction if you are salaried; set it to 0 if not.
- Add employer NPS (80CCD(2)) under other deductions — it is still allowed in the new regime.
- Check the slab table to see exactly where your income is being taxed.
Smart tips
- Income up to ₹12.75 lakh is effectively tax-free for salaried people under the new regime — the 87A rebate wipes out the liability.
- Only the income above each threshold is taxed at that rate. Crossing a slab never reduces your take-home.
- Employer NPS contribution up to 14% of basic is deductible even in the new regime — one of the few remaining levers.
- If you claim large HRA, home loan interest and 80C, run the old regime too before choosing.
Frequently asked questions
Is income up to ₹12 lakh really tax-free?
For residents, yes. The Section 87A rebate of up to ₹60,000 cancels the tax on taxable income up to ₹12 lakh. Salaried taxpayers get the ₹75,000 standard deduction on top, so ₹12.75 lakh gross is effectively tax-free.
Which regime should I choose?
The new regime suits most people without large deductions. If your 80C, HRA and home loan interest together exceed roughly ₹4–4.5 lakh, the old regime may still win.
Can I claim 80C in the new regime?
No. Section 80C, 80D, HRA and LTA are not available. Only the standard deduction and employer NPS under 80CCD(2) survive.
What is the 4% cess?
Health and Education Cess, charged at 4% on the tax amount after rebate. It applies in both regimes.
Want the theory behind the numbers? Read our income tax guides on the Money Blog.