Income Tax Calculation 2026: Following the Union Budget 2026, significant changes have been made to the income tax rules for salaried employees. The biggest relief has been provided in the New Tax Regime, where now no tax will be levied on income up to a certain limit.
If you are doing your tax planning, this article will explain in simple language how much tax will be levied on your salary and which regime (New vs Old) is better for you.
1. New Tax Regime (FY 2026-27) - What has changed?
The government has made the new tax regime the 'Default' regime. The tax slabs have been changed and the exemption limit has been increased.
New Tax Regime Slabs (FY 2026-27)
| Income Range | Tax Rate |
|---|---|
| ₹0 to ₹4,00,000 | Nil (0%) |
| ₹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% |
Main advantages of the New Regime:
Tax Rebate (u/s 87A): If your taxable income is up to ₹12 lakh, you will get a rebate of up to ₹60,000 under Section 87A. This means ZERO tax will be payable on income up to ₹12 lakh.
Standard Deduction: The standard deduction for salaried employees has been increased to ₹75,000. (i.e., no tax up to a salary of ₹12.75 lakh).
2. Old Tax Regime (FY 2026-27) - Is it still beneficial?
No major changes have been made to the old tax system. It may be better for those who have many deductions such as Home Loan Interest, HRA, and 80C.
Old Tax Regime Slabs
| Income Range | Tax Rate |
|---|---|
| ₹0 to ₹2,50,000 | Nil (0%) |
| ₹2,50,001 to ₹5,00,000 | 5% |
| ₹5,00,001 to ₹10,00,000 | 20% |
| Above ₹10,00,000 | 30% |
Standard Deduction: In the old regime, it remains ₹50,000.
Benefits include deductions under HRA, Section 80D (health insurance), Section 80C (₹1.5 lakh), and Section 24 (home loan interest). 3. Income Tax Calculation Example Suppose you make ₹15,000,000 a year. Let's examine the tax rates under the two systems.
Salary Gross: ₹15,000,000
Lower: ₹75,000 is the standard deduction.
Income Subject to Taxation: ₹14,25,000
Tax Calculation: Nil for 0–4 lakhs
₹20,000 for 4–8 lakhs (4L @ 5%).
₹40,000 for 8–12 lakhs (4L @ 10%).
₹33,750 for 12–14.25 lakhs (2.25L at 15%).
93,750 in total taxes plus a 4% cess
Case B: Opting for the Previous Tax System
(Presuming you have claimed ₹50,000 under HRA/80D and ₹1.5 lakhs under 80C.)
Salary Gross: ₹15,000,000
Less: ₹50,000 is the standard deduction.
Less: ₹2,00,000 & Others: 80C
Income Subject to Taxation: ₹12,50,000
Tax Calculation: Nil for 0–2.5 lakhs
₹12,500 for 2.5–5 lakhs (2.5L @ 5%).
₹1,00,000 for 5–10 lakhs (5L @ 20%).
₹75,000 for 10–12.5 lakhs (2.5L at 30%).
₹1,87,500 in total tax plus 4% cess
In conclusion, the New Tax Regime is saving you about 93,750 in this case.
4. Conclusion: Which option is best?
If your income is between ₹15 and ₹20 lakhs and you don't have any significant investments or home loans, choose the New Tax System. This is without a doubt the greatest choice for anybody making up to ₹12 lakh.
Select the Previous Tax System: You can take full use of the HRA, home loan interest (up to ₹2 lakh), and deductions under sections 80C and 80D if your income is extremely high.
For accurate income tax calculation, check your salary slip and inform your company about the correct tax regime at the beginning of the financial year so that less TDS is deducted.
