Income Tax Calculator

What is an Income Tax Calculator?

An Income Tax Calculator is an online tool that calculates your total tax payable based on:

• Your annual income
• Eligible deductions and exemptions
• Applicable tax slabs
• Chosen new vs old tax regime

It gives you a clear picture of how much tax you need to pay or how much you can save with better planning. An income tax calculator is a must-use financial tool for salaried employees, freelancers, business owners, and investors alike.

Union Budget 2026 Highlights on Tax Rules in India

• The Income Tax Slabs remain unchanged from the previous year.
• A new Income Tax Act is set to take effect from April 1, 2026, promising simplified rules.
• The government continues to support both the Old Tax Regime and the New Tax Regime, with taxpayers free to choose whichever benefits them.
• Around 88% of taxpayers have moved to the new tax regime, showing its growing popularity.

How to Use Policybazaar's Income Tax Calculator?

You can use Policybazaar’s Income Tax Calculator to quickly check your tax under both the old and new tax regimes, as per the Union Budget 2026. Follow these simple steps:

• Enter your total annual income: Enter your total yearly income in Indian Rupees (₹). Include income from salary, interest, rental income, dividends, and any other sources.
• Enter your deductions and exemptions: Add the deductions and exemptions you are eligible for, excluding the standard deduction. These may include benefits under Sections 80C, 80CCD, 80D, 80TTA, 10(10D), 80G, and 80E.
• Apply the standard deduction: If you are a salaried individual, the calculator applies the standard deduction under Section 16 of the Income Tax Act, 1961, as applicable under Budget 2026 provisions.
• Calculate your tax: Click the “CALCULATE” button. The calculator shows your tax liability under both the old and new tax regimes, helping you compare them easily.
• Unlock the detailed tax summary: Enter your basic contact details and click “Unlock.” You will see a detailed tax breakup for both tax regimes, calculated as per the latest rules announced in the Union Budget 2026.

Why to Use an Income Tax Calculator Online?

Key benefits of using an online income tax calculator include:

• Estimate Your Tax Quickly: Instead of manually applying slab rates and deductions, calculators do it in seconds.
• Compare Tax Regimes: See which regime, among old or new tax regimes, gives you the best outcome.
• Plan Deductions Smartly: Know how much more saving you can achieve with additional investment.
• Avoid Errors: Human errors in manual calculation can lead to under-estimation or penalties.

How to Use an Income Tax Calculator Effectively?

• Always compare the results of both regimes before choosing.
• If your total deductions are high, the old regime can save more.
• If you prefer simplicity and fewer exemptions, the new regime may be better.
• Update input data yearly along with tax laws and slabs change.

Smart Tips to Save More Tax

The use of an income tax calculator helps you know your tax liability, but choosing the right tax-saving strategy can save you thousands more. Here are some expert-level tips:

1. Combine the calculator with investment planning (like NPS, ELSS)
2. Run scenario planning for different deduction inputs
3. Compare how changing jobs or salary components affects taxes
4. Use the calculator early in the year and not just before filing.

Income Tax Slabs for FY 2025-26 and FY 2026–27

The tax slabs for the Financial Year (FY) 2026-27 (Assessment Year 2027-28) remain unchanged after Budget 2026. Individuals can continue to choose between the Old Tax Regime and the New Tax Regime.

*The tax slab rates vary for senior citizens (60-80 age) and super-senior (≥80 age) in the old tax regime.

Income Tax Surcharge Rates for FY 2025-26 and FY 2026-27

*Key Difference: The maximum surcharge under the new tax regime is capped at 25%, whereas it goes up to 37% in the old tax regime.

Health and Education Cess (FY 2025-26 & FY 2026-27)

Rebate under Section 87A (FY 2026–27)

*Important Conditions for New Regime Rebate:

• From FY 2026–27, rebate under Section 87A is not available on income taxed at special rates.
• Rebate is not applicable on Long-Term Capital Gains taxable under Section 112A in any financial year.

Deductions and Exemptions Available under Old and New Tax Regime in 2026

*You can check the detailed deductions under the new tax regime & old tax regimes here- Deductions in New Tax Regime under Union Budget 2026.

Different Income Sources Considered in Income Tax Calculator

The following income sources contribute to your gross taxable income for ITR filing:

1. Salary Income:

   • Includes basic salary, allowances, bonuses, and commissions.
   • Employer-provided benefits like leave encashment or gratuity may also be taxable.
   • The old regime permits exemptions like HRA, while the new regime offers lower rates but no exemptions.

2. House Property Income:

   • This includes rental income from owned properties.
   • A standard deduction of 30% is permitted on rental income, with adjustments for municipal taxes.
   • The old regime provides a home loan interest deduction under Section 24, which is not available in the new regime.

3. Business or Professional Income:

   • This includes profits earned by self-employed professionals, freelancers, or business owners.
   • Also, business expenses such as rent, office supplies, or transportation can be deducted from revenue to calculate net income.
   • The old tax regime offers more deductions, while the new regime simplifies with fewer claims.

4. Capital Gains:

   • This category includes earnings from selling capital assets like gold or property. It is classified as Short-Term Capital Gains (STCG) or Long-Term Capital Gains (LTCG), with taxation varying based on the asset's holding period.
   • Both regimes adhere to the same capital gains tax rules.

5. Other Investment Income:

   • Other income sources include interest from savings accounts, Fixed Deposit (FDs), dividends, and gifts.
   • Lottery winnings or income from freelance work may also fall under this category.
   • The old regime provides tax benefits for investments, whereas the new regime offers none.

How Income Tax Calculator Work?

• An Income Tax Calculator works by taking your income details and applying the latest income tax rules to estimate how much tax you need to pay.
• It automatically considers tax slabs, deductions, rebates, and cess, so you don’t have to calculate anything manually.

Illustration of Tax Calculation for a Salaried Employee:

Let us understand how income tax is calculated using a simple example of a salaried employee below 60 years with an annual income of ₹15,00,000.

Step 1: Gross Salary- This includes your basic salary, HRA, special allowance, and other salary components before any deductions.

• Gross Salary: ₹15,00,000

Step 2: HRA Exemption (Only if You Live in a Rented House)- HRA exemption is available under Section 10(13A) and is calculated as the lowest of:

• Actual HRA received
• 50% of basic salary (metro cities) or 40% (non-metro)
• Rent paid minus 10% of basic salary
• HRA claimed under different regimes:
  • Old Regime (with savings): ₹3,50,000
  • Old Regime (without savings): ₹0
  • New Regime: ₹0

Step 3: Gross Total Income from Salary- After reducing HRA and allowances from the gross salary:

• Old Regime (with savings): ₹11,50,000
• Old Regime (without savings): ₹15,00,000
• New Regime: ₹15,00,000

Step 4: Standard Deduction- A flat deduction allowed to all salaried individuals under Section 16(ia).

• Old Regime (with or without savings): ₹50,000
• New Regime: ₹75,000

Step 5: Home Loan Interest (Old Regime Only)- Interest paid on a home loan for a self-occupied house can be claimed under Section 80EE.

• Old Regime (with savings): ₹2,00,000
• Old Regime (without savings): ₹0
• New Regime: ₹0

Step 6: Gross Total Income (After Key Deductions)-

• Old Regime (with savings): ₹9,00,000
• Old Regime (without savings): ₹14,50,000
• New Regime: ₹14,25,000

Step 7: Investment-Linked Deductions (Old Regime Only)- You can further reduce your taxable income through the following:

• Section 80C: ₹1,50,000 (PPF, EPF, ULIP, SSY, home loan principal, etc.)
• Section 80D: ₹25,000 (Health insurance for self and family)
• Section 80CCD(1B): ₹50,000 (Additional NPS contribution)

Step 8: Final Taxable Income- After all eligible deductions:

• Old Regime (with savings): ₹6,75,000
• Old Regime (without savings): ₹14,50,000
• New Regime: ₹14,25,000

Step 9: Tax Calculation for FY 2025-26 (AY 2026-27)

Step 10: Tax Rebate (Section 87A)-

• Old Regime: Available only if income is up to ₹5,00,000 (rebate up to ₹12,500)
• New Regime: Available if income is up to ₹7,00,000 (rebate up to ₹25,000)

*In this example, rebate is not applicable under any regime.

Step 11: TDS and Form 16- Your employer deducts tax at source (TDS) and provides Form 16, which summarises your salary and tax deductions.

Step 12: Filing Your Income Tax Return- To complete the process, you must file your Income Tax Return (ITR) accurately before the due date, usually 31st July.

Summing Up

An Income Tax Calculator is a quick and easy tool to estimate your tax liability. It helps you compare tax savings under different regimes, plan finances better, and make informed decisions. With just a few inputs, you can avoid complex calculations and efficiently manage your tax obligations.