Understanding India's Dual Tax Regime
India currently operates under a dual tax system where individual taxpayers have the choice between two distinct tax structures: the traditional Old Tax Regime and the simplified New Tax Regime (introduced under Section 115BAC).
Under the Old Tax Regime, taxpayers can claim various exemptions and deductions (such as Section 80C, HRA, and home loan interest) to reduce their taxable income, but pay tax at higher slab rates. The New Tax Regime offers lower progressive slab rates but requires taxpayers to forego almost all tax exemptions and deductions, except for the Standard Deduction.
Income Tax Slabs (FY 2026-27 & FY 2026-27)
The Union Budget restructured the New Tax Regime to make it highly attractive for middle-income groups. Below is a detailed comparison of the slab structures:
New Tax Regime Slabs (Default)
Salaried individuals receive a flat ₹75,000 Standard Deduction. Slabs are structured as follows:
| Net Taxable Income Bracket (₹) | Tax Rate |
|---|---|
| Up 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% |
Old Tax Regime Slabs
Salaried individuals receive a ₹50,000 Standard Deduction and can deduct investments under Section 80C (up to ₹1.5L), health insurance under 80D, and HRA. Slabs remain static:
| Net Taxable Income Bracket (₹) | Tax Rate (Below 60 Years) |
|---|---|
| Up 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% |
Section 87A Rebate & Marginal Relief
Section 87A provides a tax rebate that effectively eliminates tax liability for lower and middle-income individuals:
- New Regime: A tax rebate up to ₹60,000 is available for net taxable income up to ₹12,00,000. This means anyone with a gross salary up to ₹12.75L (after standard deduction) pays zero tax.
- Old Regime: A tax rebate up to ₹12,500 is available for net taxable income up to ₹5,00,000.
- Marginal Relief: Introduced to protect taxpayers whose income exceeds the rebate limit by a small margin. It ensures that the increase in tax liability does not exceed the increase in income over the threshold (e.g., ₹12 Lakh under the New Regime).
Professional Tax, Cess, and Surcharges
In addition to basic income tax, taxpayers are subject to other statutory deductions and charges:
- Health & Education Cess: A mandatory 4% cess is calculated on the net income tax payable (after rebate, if any) under both regimes.
- Professional Tax (PT): A state-specific employment tax levied on salaried employees, capped at a maximum of ₹2,500 per year. It is fully deductible from gross income before calculating taxable tax.
- Surcharges: For high-income earners (incomes exceeding ₹50L), a progressive surcharge (ranging from 10% up to 25% or 37% depending on the regime and income tier) is added to the tax liability.
Related Tools & Guides: Choose the tax regime that maximizes your take home pay with the Old vs New Tax Regime Calculator, analyze your monthly deductions with the Salary Breakup Calculator, or read our blog post on Old vs New Tax Regime: Slab Comparison.
Disclaimer: CTC Calculator provides calculations based on standard Indian payroll and tax slabs (Budget FY 2026-27) for educational purposes. Actual structures and deductions may vary based on company policy. Please consult a Chartered Accountant or tax professional for financial decisions.
Calculation Methodology: Calculations run client-side in your browser using pure JavaScript. No personal salary data is transmitted to our servers or stored. EPF calculations default to 12% of basic salary, gratuity is projected at 4.81% of basic, and Professional Tax is based on selected state boundaries.