Income Tax in India — The Complete Guide (FY 2025-26)

Direct Answer: Indian residents pay income tax on their annual taxable income (gross income minus deductions) based on progressive slab rates. For the financial year 2025-26, taxpayers can choose between the New Tax Regime (default, lower rates, no deductions) and the Old Tax Regime(higher rates, allows deductions like HRA and 80C). Tax is calculated by applying the rates to each income slab, and a 4% Health & Education Cess is added to the final tax amount. Salaried individuals can switch between regimes every year.

Calculate your tax in both regimes: Use our side-by-side Income Tax Regime Calculator to compare your liabilities based on verified slabs.

The Two Regimes — A Quick Comparison

The two regimes offer a fundamental trade-off: a simple structure with lower rates vs. an exemption-heavy structure with higher slabs. To learn more about selecting the right path, read our comprehensive Old vs New Tax Regime Guide.

New Regime Slab Rates (FY 2025-26)

Under the default New Regime (FY 2025-26 / AY 2026-27), the slabs are structured as follows:

Note: Salaried individuals receive a ₹75,000 standard deduction under the New Regime. Income up to ₹12 Lakhs is completely tax-free via the Section 87A rebate.

Old Regime Slab Rates (FY 2025-26)

Under the Old Regime, the slabs are:

Key Deductions and Exemptions

Under the Old Regime, you can claim a series of tax-relief deductions:

• Section 80C: Invest up to ₹1.5 Lakhs in EPF, PPF, ELSS, or pay home-loan principal. For details, read our Section 80C Tax Saving Guide.
• HRA Exemption: Save tax on rent paid in metro or non-metro cities. Learn HRA rules in the HRA Exemption Guide.
• Section 24(b): Deduct up to ₹2 Lakhs interest on self-occupied house loans.
• Section 80D: Deduct medical insurance premiums (up to ₹25,000/₹50,000).

How Tax Is Calculated — Step by Step

Income tax is calculated through the following sequential audit trail:

1. Sum your gross earnings from all five heads of income.
2. Subtract any eligible tax exemptions (like HRA) and deductions (like Section 80C) to find your Net Taxable Income.
3. Apply progressive slab rates to the taxable income.
4. Subtract rebates (such as Section 87A) if eligible.
5. Add surcharge (if income exceeds ₹50 Lakhs) and a flat 4% Health & Education Cess on the total tax amount.

Worked Example: ₹12 Lakh Salary (Old Regime)

Let's compute the tax payable under the Old Regime for a salaried individual earning a gross salary of ₹12,00,000, claiming a standard deduction of ₹50,000 and maximizing Section 80C at ₹1,50,000 (total deductions ₹2,00,000):

Surcharge & Marginal Relief

Surcharges apply if your taxable income exceeds specific limits:

• ₹50 Lakhs to ₹1 Crore: 10% surcharge.
• ₹1 Crore to ₹2 Crores: 15% surcharge.
• ₹2 Crores to ₹5 Crores: 25% surcharge (capped at 25% under the New Regime).

Marginal relief is applied to prevent the increase in tax from exceeding the increase in income just above a surcharge threshold.

Key Tax Dates (FY 2025-26)

• June 15, September 15, December 15, March 15: Advance tax cumulative installment deadlines (15%, 45%, 75%, and 100% respectively) for taxpayers with net tax liability exceeding ₹10,000.
• July 31, 2026: Deadline to file your Income Tax Return (ITR) for FY 2025-26.
• December 31, 2026: Last date to file belated or revised returns (subject to penalties).

How to File Your ITR

Taxpayers file returns online via the Income Tax e-filing portal. Prepare your Form 16, Form 26AS, and AIS. Most salaried earners file Form ITR-1 (Sahaj) or ITR-2 depending on investment income or capital gains.

All Tax Calculators

Ganakam provides a suite of high-performance calculators to model individual scenarios:

• Income Tax Regime Comparison Calculator
• Old Tax Regime Standalone Calculator
• New Tax Regime Standalone Calculator
• Section 80C Headroom Optimizer
• HRA Exemption Calculator
• Rent Receipt Generator
• Advance Tax Scheduler
• TDS on Salary Calculator
• Section 87A Rebate Calculator
• Equity Capital Gains Calculator
• Property Capital Gains Calculator
• Gratuity Calculator
• Take-home Salary Calculator
• CTC to In-Hand Salary Calculator

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Frequently Asked Questions

What are the income tax slabs for FY 2025-26?

Under the New Tax Regime, slabs are: 0% up to ₹4L; 5% ₹4-8L; 10% ₹8-12L; 15% ₹12-16L; 20% ₹16-20L; 25% ₹20-24L; and 30% above ₹24L. Under the Old Tax Regime, slabs are: 0% up to ₹2.5L; 5% ₹2.5-5L; 20% ₹5-10L; and 30% above ₹10L.

Is income up to ₹12 lakh tax-free in India?

Yes, under the default New Tax Regime, taxable income up to ₹12 Lakhs (equivalent to ₹12.75 Lakhs of salary for employees after the ₹75,000 standard deduction) qualifies for a full Section 87A rebate of up to ₹60,000, reducing the net tax to zero.

What is the last date to file ITR for FY 2025-26?

For individual taxpayers without audit requirements, the standard deadline to file their Income Tax Return (ITR) is July 31, 2026.

Which tax regime is better?

The better regime depends entirely on the size of your eligible deductions (such as HRA, Section 80C, home loan interest). Compare your specific numbers using our side-by-side calculators.

Official references: Section parameters and rules are verified from the Income Tax Department of India database.