How Income Tax Is Calculated (Step-by-Step Example)
Let’s understand tax calculation with a simple example:
- Annual Salary: ₹12,00,000
- Standard Deduction (New Regime): ₹75,000
- Taxable Income: ₹11,25,000
Tax is calculated slab-wise and then a 4% Health & Education Cess is added. This is exactly what the calculator above does — accurately and instantly.
New vs Old Tax Regime: Which is Better?
The Income Tax Calculator helps you estimate your tax liability for the Assessment Year (AY) 2025-26 and 2024-25. It automatically compares the Old Tax Regime (with deductions like 80C, HRA) and the New Tax Regime (lower rates, fewer deductions) to recommend the best option for you.
If you are planning tax-saving investments, explore our detailed guide on Section 80C investments to understand where deductions actually make sense.
Which Tax Regime Is Better for You?
| Your Situation | Recommended Regime |
|---|---|
| Deductions below ₹3.75 lakhs | New Regime |
| Home Loan + 80C + 80D deductions | Old Regime |
| Salary up to ₹7 lakhs | New Regime (Zero Tax) |
| Unsure or mixed income sources | Use Calculator |
How to Save Tax in 2025?
Standard Deduction
Flat deduction of ₹75,000 under New Regime without any proof.
Section 80C (Old Regime)
Investments like ELSS mutual funds allow tax deduction up to ₹1.5 lakhs.
Post-Tax Investing
Compare where to invest your surplus using our SIP vs FD comparison.