What Changed and Why the New Regime Now Wins for Most
Budget 2025 fundamentally reshaped India\’s income tax, and Budget 2026 kept those changes in place, so for FY 2025-26 and FY 2026-27 the same structure applies. The headline change is that under the new tax regime, income up to 12 lakh rupees is now effectively tax-free, and for salaried people, thanks to the standard deduction, salary up to 12.75 lakh attracts no tax at all. This single change has made the new regime the clear choice for the large majority of taxpayers, and it is why the new regime is now the default: you have to actively opt for the old regime if you want it.
The new regime works on a seven-slab structure. There is no tax on the first 4 lakh of taxable income, then 5% on income from 4 to 8 lakh, 10% from 8 to 12 lakh, 15% from 12 to 16 lakh, 20% from 16 to 20 lakh, 25% from 20 to 24 lakh, and 30% above 24 lakh. On top of the slabs, a salaried person gets a standard deduction of 75,000, which is higher than the 50,000 allowed under the old regime. The reason income up to 12 lakh comes out tax-free despite the slabs is the enhanced Section 87A rebate: for taxable income up to 12 lakh, a rebate of up to 60,000 wipes out the tax that the slabs would otherwise produce.
To see how this works, take a salaried person earning 12.75 lakh. After the 75,000 standard deduction, their taxable income is exactly 12 lakh. The slabs produce a tax of 60,000 on that, but the 87A rebate is also up to 60,000, so it cancels the tax entirely and they pay nothing. Push the income a little higher and the rebate no longer fully applies, but a mechanism called marginal relief steps in just above the threshold to ensure that a small increase in income does not cause a disproportionate jump in tax. This calculator applies both the rebate and the marginal relief correctly, which many simpler tools get wrong.
The old regime, by contrast, keeps its familiar higher rates: no tax up to 2.5 lakh, 5% from 2.5 to 5 lakh, 20% from 5 to 10 lakh, and 30% above 10 lakh, with a smaller 87A rebate that makes income up to only 5 lakh tax-free. What the old regime offers in return is the full menu of deductions and exemptions: Section 80C investments up to 1.5 lakh, health insurance under 80D, home loan interest up to 2 lakh, the additional NPS deduction under 80CCD(1B), HRA, and many others. The whole question of which regime is better comes down to whether these deductions are large enough to overcome the new regime\’s lower rates and bigger rebate, and this calculator answers that for your exact numbers.
Which Regime Is Better for You, and Why Deductions Are the Deciding Factor
The choice between the two regimes is not a matter of opinion; it is a straightforward calculation, and it hinges entirely on how much you can deduct under the old regime. The new regime gives you lower rates and a large rebate but almost no deductions; the old regime gives you higher rates but lets you subtract a range of deductions from your income before the rates apply. So the old regime only wins if your deductions are big enough that the reduced taxable income, even at the higher old rates, produces less tax than the new regime does at its lower rates. This calculator computes both outcomes exactly and tells you the winner, but it is worth understanding the logic so you can plan.
As a rule of thumb, the old regime tends to win only when your deductions beyond the standard deduction add up to roughly 3.75 to 4.25 lakh or more. That is a substantial amount, typically requiring a full 1.5 lakh in 80C investments, the full 2 lakh of home loan interest, a meaningful HRA exemption, health insurance premiums, and perhaps the extra 50,000 NPS deduction, all together.
Someone with a home loan, a family health policy, HRA in a high-rent city, and maxed-out 80C investments may well clear this bar and be better off under the old regime. Someone renting modestly with only some 80C investment, or with no home loan, usually will not, and the new regime will win comfortably. Because the threshold is high, the new regime wins for the majority, which is the whole point of the reform.
Marginal relief deserves a closer look because it is widely misunderstood and often calculated incorrectly. When your taxable income under the new regime is just above the 12 lakh rebate threshold, a strict application of the slabs would mean you suddenly owe tax on a large chunk of income, even though you are only slightly over the line. Marginal relief prevents this cliff: it caps your tax at the amount by which your income exceeds 12 lakh. So if your taxable income is 12 lakh and 10,000, without relief your tax might be over 60,000, but marginal relief limits it to just 10,000, the amount you are over the threshold.
This relief tapers off as income rises further, ceasing to apply once your income is high enough that the normal tax is less than the excess over 12 lakh, at around 12.7 lakh of taxable income. This calculator applies marginal relief automatically whenever it is beneficial, so your new-regime figure is correct right across the threshold.
A few other points matter for an accurate comparison. The deductions you can claim under the old regime, 80C, 80D, home loan interest, NPS 80CCD(1B), HRA and the rest, do nothing under the new regime, which allows only the standard deduction and the employer NPS contribution under 80CCD(2). If you have significant capital gains, note that the 87A rebate does not apply to them, so they are taxed at their special rates regardless of regime, which this general calculator does not model.
Age-based higher exemption limits for senior citizens apply under the old regime and can shift the comparison for them. And importantly, if you have only salary income, you can choose your regime afresh each financial year, so it pays to recompute whenever your income or your deductions change. This calculator gives you the current-year comparison; use it each year to make the right choice.
Three Worked Examples
Here are three taxpayers comparing their regimes for FY 2025-26.
Neha, a salaried professional in Mumbai
Neha earns 12.5 lakh a year in salary and has only a modest 80C investment of 80,000 and no home loan. On the tool, the new regime is a clear winner: after her 75,000 standard deduction her taxable income is 11.75 lakh, below the 12 lakh threshold, so the 87A rebate wipes her tax out entirely and she pays nothing. Under the old regime, even with her 80C and standard deduction, her taxable income stays high enough to attract substantial tax at the old rates.
The tool showed her the new regime saved her well over a lakh in tax compared with the old. Neha, like most salaried people without large deductions, is far better off in the new regime, and she opted for it, paying zero tax on a 12.5 lakh salary, something that would have been unthinkable a couple of years ago.
Rajesh, a homeowner with a big loan in Bengaluru
Rajesh earns 18 lakh and has a home loan on which he pays the full 2 lakh of deductible interest, maxes out his 1.5 lakh 80C, pays 50,000 in health insurance premiums, contributes the extra 50,000 to NPS, and claims a substantial HRA. On the tool, his deductions beyond the standard deduction add up to well over 4 lakh, and this tips the balance.
The old regime, despite its higher rates, gives him a lower tax than the new regime, because his large deductions shrink his taxable income enough to more than compensate. The tool showed the old regime saving him a meaningful amount. Rajesh is exactly the kind of taxpayer, high deductions from a home loan and full investments, for whom the old regime still wins, and he chose it, but only after the tool confirmed it with his exact numbers rather than assuming.
Anita just above the threshold in Chennai
Anita\’s salary works out to a taxable income of 12.1 lakh under the new regime, just above the 12 lakh rebate limit. She was alarmed to think that crossing 12 lakh by a whisker might cost her over 60,000 in tax. On the tool, she saw marginal relief in action: her tax was capped at just 10,000, the amount by which her income exceeded 12 lakh, plus cess, rather than the full slab tax. The tool explained that marginal relief exists precisely to prevent a small rise above the threshold from triggering a large tax jump. Anita was relieved to understand that being marginally over 12 lakh did not push her off a cliff, and she appreciated seeing the correct figure, since a cruder calculator had wrongly shown her a much higher tax by ignoring the relief.
Frequently Asked Questions on Budget 2026 Income Tax
Is income up to 12 lakh really tax-free?
Yes, under the new tax regime for FY 2025-26, income up to 12 lakh rupees is effectively tax-free, and for salaried people the tax-free level is even higher at 12.75 lakh. This is the headline change from Budget 2025, retained in Budget 2026. It works through a combination of two things. First, the standard deduction of 75,000 for salaried individuals reduces your taxable income, so a salary of 12.75 lakh becomes a taxable income of 12 lakh. Second, the enhanced Section 87A rebate provides a rebate of up to 60,000 for taxable income up to 12 lakh, and since the tax on 12 lakh under the new slabs is exactly 60,000, the rebate cancels it out completely. The result is that a salaried person earning up to 12.75 lakh pays no income tax at all under the new regime, and a non-salaried person with taxable income up to 12 lakh also pays nothing. It is important to understand that this is a rebate, not a change in the exemption limit; the slabs still apply and produce a tax, but the rebate then wipes it out for those under the threshold. It is also important that the rebate applies to normal income only, not to capital gains, which are taxed at their own special rates regardless. And the moment your taxable income exceeds 12 lakh, the rebate stops applying, though marginal relief cushions the transition just above the threshold. This calculator shows you exactly whether your income falls within the tax-free zone.
What are the new tax regime slabs for FY 2025-26?
The new tax regime for FY 2025-26, which is AY 2026-27, uses a seven-slab structure. There is no tax on taxable income up to 4 lakh. Income from 4 lakh to 8 lakh is taxed at 5%. Income from 8 lakh to 12 lakh is taxed at 10%. Income from 12 lakh to 16 lakh is taxed at 15%. Income from 16 lakh to 20 lakh is taxed at 20%. Income from 20 lakh to 24 lakh is taxed at 25%. And income above 24 lakh is taxed at 30%. These rates apply to your taxable income after the standard deduction of 75,000 for salaried individuals. On top of the slab tax, a health and education cess of 4% is added, and for very high incomes a surcharge applies, capped at 25% under the new regime. The key feature that makes this structure so favourable is the Section 87A rebate: for taxable income up to 12 lakh, a rebate of up to 60,000 eliminates the tax entirely, so despite the slabs showing tax from 4 lakh onwards, nobody with taxable income up to 12 lakh actually pays anything. Above 12 lakh, the slabs apply in full with marginal relief just above the threshold. This seven-slab structure is a significant improvement on the earlier version of the new regime, which taxed income above 15 lakh at a flat 30%, and it gives meaningful savings to middle and upper-middle income earners. Budget 2026 kept these slabs unchanged, so they also apply to FY 2026-27. This calculator applies these exact slabs.
Which regime is better, new or old?
For the majority of taxpayers, the new regime is better, but the honest answer is that it depends entirely on your deductions, and this calculator settles it for your exact numbers. The new regime offers lower slab rates and the large 87A rebate that makes income up to 12 lakh tax-free, but it allows almost no deductions. The old regime has higher rates and a much smaller rebate, but it lets you claim a wide range of deductions, 80C investments up to 1.5 lakh, health insurance under 80D, home loan interest up to 2 lakh, the extra NPS deduction under 80CCD(1B), HRA, and more. The old regime wins only if these deductions are large enough that your reduced taxable income, even at the higher old rates, produces less tax than the new regime does. As a rule of thumb, this happens when your deductions beyond the standard deduction exceed roughly 3.75 to 4.25 lakh, which is a substantial amount typically reached only by those with a home loan, full 80C investments, significant HRA and health insurance together. For most salaried people, especially younger ones without a home loan or large investments, the new regime wins comfortably, which is why it is now the default. But for a homeowner with a big loan and maxed-out deductions, the old regime can still be better. The only way to know for certain is to compute both, which is exactly what this calculator does, so rather than guessing or following general advice, you get the answer for your specific income and deductions.
What is marginal relief in the new regime?
Marginal relief is a provision that prevents a small increase in income above the 12 lakh rebate threshold from causing a disproportionately large jump in tax. Here is the problem it solves: under the new regime, taxable income up to 12 lakh is tax-free because of the 87A rebate, but the moment you cross 12 lakh, the rebate no longer applies, and the slabs would produce a tax of over 60,000 on the whole income. Without any relief, this would mean that earning one rupee over 12 lakh could suddenly cost you more than 60,000 in tax, which is absurd and unfair. Marginal relief fixes this by capping your tax at the amount by which your income exceeds 12 lakh. So if your taxable income is 12 lakh and 10,000, your tax is limited to 10,000 rather than the full slab tax, plus the 4% cess. As your income rises further above 12 lakh, the relief gradually reduces, because the cap, being the excess over 12 lakh, grows, and it ceases to apply once the normal slab tax becomes less than that excess, which happens at around 12.7 lakh of taxable income. Beyond that point, you simply pay the normal slab tax. Marginal relief is genuinely important for anyone whose income lands just above 12 lakh, and many simpler tax calculators either ignore it or apply it incorrectly, showing an inflated tax figure. This calculator applies marginal relief automatically whenever it benefits you, so your new-regime tax is accurate right across the threshold, avoiding the false cliff that a naive calculation would show.
What deductions can I claim in the new regime?
The new tax regime allows very few deductions, which is the trade-off for its lower rates and large rebate. The deductions you can claim under the new regime are limited to: the standard deduction of 75,000 for salaried individuals and pensioners, which is applied automatically; the employer\’s contribution to your NPS under Section 80CCD(2), up to the applicable limit; the deduction for family pension; the Agniveer Corpus Fund deduction under 80CCH; and interest on a loan for a let-out property. That is essentially the complete list. Crucially, the popular deductions that most taxpayers are used to claiming are not available under the new regime: you cannot claim Section 80C investments like PPF, ELSS, life insurance premiums or EPF; you cannot claim health insurance premiums under 80D; you cannot claim home loan interest on a self-occupied property; you cannot claim the additional NPS deduction under 80CCD(1B); you cannot claim HRA exemption; and you cannot claim the various other deductions like 80E for education loan interest or 80G for donations. This is why, if you have significant such deductions, you need to compare carefully, because losing them under the new regime may outweigh its lower rates. The new regime is designed to be simple: lower rates in exchange for giving up the deductions and the associated record-keeping and tax-planning. This calculator lets you enter your old-regime deductions and shows they have no effect under the new regime, so you can see clearly what you would be giving up by choosing the new regime, and whether the lower rates still make it worthwhile for you.
How much standard deduction can I claim?
The standard deduction for FY 2025-26 depends on which regime you choose. Under the new tax regime, salaried individuals and pensioners can claim a standard deduction of 75,000, which was increased from 50,000 in Budget 2024. Under the old tax regime, the standard deduction remains at 50,000. In both cases, the standard deduction is applied automatically against your salary income without any need for investment or proof; it is a flat reduction of your taxable salary. The higher 75,000 standard deduction under the new regime is one of the reasons the new regime is attractive, and it is what lifts the effective tax-free salary to 12.75 lakh: with taxable income up to 12 lakh being tax-free due to the rebate, and the 75,000 standard deduction sitting on top, a salary of 12.75 lakh reduces to a taxable 12 lakh and thus pays no tax. The standard deduction is available only against salary or pension income, so if you are self-employed or have only business income, you do not get it, which is why this calculator asks whether you are salaried. For a pensioner, the standard deduction applies to pension income as well. Note that family pension has its own separate deduction. The standard deduction is one of the few deductions available under the new regime, making it valuable there, while under the old regime it is one of many deductions you can stack. This calculator applies the correct standard deduction, 75,000 or 50,000, to each regime automatically based on whether you indicate you are salaried.
Can I switch between regimes each year?
If you have only salary income, or income that is not from a business or profession, you can choose between the new and old tax regimes afresh every financial year, which gives you valuable flexibility. This means you are not locked into a choice; you can compute your tax under both regimes each year and pick whichever is lower for that year, and switch the following year if your circumstances change. This is important because the better regime can flip from year to year: if you take out a home loan, start paying large HRA, or ramp up your investments, your deductions may grow enough to make the old regime better; conversely, if you pay off your loan or your deductions shrink, the new regime may become better. So it pays to recompute the comparison every year rather than sticking with a past choice out of habit. The situation is different if you have income from a business or profession: such taxpayers who opt out of the new regime to use the old one can generally switch back to the new regime only once, and then are restricted, so they have less flexibility and should choose more carefully. For the salaried majority, though, the annual choice is free, and you simply indicate your chosen regime to your employer for TDS purposes at the start of the year and can also change it when filing your return if that turns out better. This calculator gives you the current-year comparison; make a habit of running it each year with your updated income and deductions so you always take the regime that costs you less.
Does the 87A rebate apply to capital gains?
No, the Section 87A rebate does not apply to income that is taxed at special rates, and this notably includes capital gains, as well as income from lottery, betting, gambling, and the sale of crypto assets. This is an important limitation to understand. The 12 lakh tax-free benefit under the new regime applies to your normal income, that taxed at the slab rates, such as salary, business income, interest and rental income. But long-term and short-term capital gains on shares and equity mutual funds, and other specially-taxed income, are taxed at their own fixed rates, for example 12.5% on long-term equity gains above the exemption and 20% on short-term equity gains, and the 87A rebate cannot be used to wipe out the tax on these. So if your total income of, say, 11 lakh includes 3 lakh of capital gains, the rebate would apply only to the 8 lakh of normal income, and the capital gains portion would still be taxed at its special rate. This means someone whose income is largely capital gains cannot achieve the full 12 lakh tax-free benefit on that portion. It is a common misunderstanding that the entire 12 lakh, whatever its source, is tax-free; in fact, it is 12 lakh of normal slab-rate income. This general calculator computes tax on slab-rate income and does not separately model capital gains at their special rates, so if a significant part of your income is capital gains, you should account for them separately, and the true picture will be less favourable than a simple slab calculation suggests. For a mix of income types, consult a chartered accountant to get the capital gains treatment right alongside your slab income.
Do senior citizens get a different treatment?
Yes, senior citizens and super senior citizens get some different treatment, mainly under the old regime. Under the old tax regime, the basic exemption limit is higher for older taxpayers: it is 3 lakh for senior citizens aged 60 to 80, and 5 lakh for super senior citizens above 80, compared with 2.5 lakh for those below 60. This higher exemption reduces their tax under the old regime. Under the new tax regime, however, the slabs apply uniformly across all age groups, so there is no age-based higher exemption; everyone, regardless of age, gets the same 4 lakh nil-rate slab and the same rebate. This means that for a senior citizen deciding between regimes, the old regime\’s age benefit is one factor that can tilt the balance towards it, on top of the usual deductions. Senior citizens also have some specific deductions under the old regime, such as a higher limit for health insurance under 80D and the 80TTB deduction for interest income up to 50,000, which further favour the old regime for them. That said, given the new regime\’s very generous 12 lakh tax-free threshold, many senior citizens with moderate incomes and without large deductions may still find the new regime better or equivalent, so it remains worth comparing. This calculator uses the standard below-60 exemption limits and does not separately model the higher senior-citizen exemptions, so if you are a senior citizen, particularly one leaning towards the old regime, treat the old-regime figure here as slightly conservative and consult the age-specific limits or a chartered accountant for a precise number. The new-regime figure applies to you as shown, since it is age-neutral.
What is surcharge and when does it apply?
Surcharge is an additional charge on your income tax that applies to high-income individuals, on top of the basic tax and before the cess. It is levied as a percentage of your tax, not your income, and the rate rises in steps as income increases. For taxable income above 50 lakh, a surcharge of 10% applies; above 1 crore, 15%; above 2 crore, 25%; and above 5 crore, it was 37% under the old regime, but the new regime caps the top surcharge at 25%, which is one of the new regime\’s advantages for the very wealthy. So a person with income over 5 crore pays a lower surcharge under the new regime than under the old. Surcharge also has its own marginal relief provisions at each threshold, to prevent the surcharge from causing a disproportionate jump in tax when income just crosses a surcharge boundary. For the large majority of taxpayers, with income below 50 lakh, surcharge does not apply at all, so it is only relevant for high earners. When it does apply, it can add significantly to the tax bill, which is why the new regime\’s 25% cap matters for the wealthiest. After the surcharge is added, the 4% health and education cess is calculated on the tax plus surcharge. This calculator applies the surcharge at the correct rates for your income, with the new regime\’s 25% cap, and adds the cess, so if your income is high enough to attract surcharge, the figure shown includes it. For most users below 50 lakh, no surcharge applies and the tax is simply the slab tax after rebate plus cess.
How is the cess calculated on income tax?
The health and education cess is a 4% charge added on top of your income tax, and it applies under both the new and old regimes. It is calculated as 4% of your income tax after any rebate and including any surcharge. So the order is: first the slab tax is computed, then the 87A rebate and any marginal relief are applied to get the tax payable, then any surcharge for high incomes is added, and finally the 4% cess is calculated on that total and added to give your final tax liability. For example, if your tax after rebate is 97,500 and no surcharge applies, the cess is 4% of 97,500, which is 3,900, though in practice the tax figures often already fold this in. The cess funds health and education initiatives of the government and is not optional; it applies to everyone who has a positive tax liability. Note that if your tax is zero, because the rebate has wiped it out for income up to 12 lakh under the new regime, then there is no cess either, since 4% of zero is zero. So the cess only adds to your bill if you actually owe tax. The cess is the same 4% under both regimes, so it does not affect which regime is better; it applies proportionally to whatever tax each regime produces. This calculator adds the 4% cess to the tax under each regime, so the totals shown are your final tax liability, inclusive of cess, not just the pre-cess slab tax, giving you the true amount you would pay.
What income should I enter in the calculator?
You should enter your gross annual income before any deductions, and the tool will apply the standard deduction and, for the old regime, your other deductions itself. For a salaried person, gross income means your total salary for the year, that is your cost-to-company minus the parts that are not salary, or more precisely your gross salary as it would appear before the standard deduction and before any exemptions like HRA. If you have other income, such as interest from deposits or rental income, you should include that in the figure too, since it is all taxable. Do not subtract the standard deduction yourself, because the calculator applies it automatically, 75,000 under the new regime and 50,000 under the old, based on your indicating that you are salaried; subtracting it yourself would double-count it. Similarly, do not subtract your 80C, home loan or other deductions from the income figure; instead enter your gross income and put those deductions in their separate fields, so the tool can correctly apply them to the old regime only and ignore them for the new regime. For the HRA field, enter your calculated HRA exemption amount, the portion of your HRA that is exempt under the rules, not your total HRA received, since only the exempt portion is a deduction. If you are self-employed, enter your total taxable income and select the non-salaried option, in which case the standard deduction will not be applied. Entering the figures this way, gross income in the income field and deductions in their own fields, lets the calculator compute both regimes correctly and compare them properly.
Why does the new regime not use my deductions?
The new tax regime deliberately does not allow most deductions, and this is the fundamental design choice behind it, not an error in the calculator. When the government introduced and then enhanced the new regime, the idea was to offer a simpler system: lower tax rates and a large rebate in exchange for giving up the complex web of deductions and exemptions that characterise the old regime. So under the new regime, you cannot reduce your taxable income with 80C investments, health insurance, home loan interest, HRA, the extra NPS deduction, or most other deductions; you get only the standard deduction and a couple of others. The trade-off is that the rates are lower and, most importantly, income up to 12 lakh is tax-free, so many people end up paying less overall even without the deductions. This is why, when you enter your deductions in the calculator, they reduce your tax only under the old regime, where they are allowed, and have no effect on the new-regime figure. It is not that the calculator is ignoring your inputs; it is correctly reflecting that those deductions simply do not apply in the new regime. The whole point of comparing the two regimes is to see whether your deductions, which only help in the old regime, are valuable enough to make the old regime\’s higher rates worthwhile, or whether you are better off in the new regime\’s lower-rate, deduction-free structure. For most people the deductions are not large enough to beat the new regime, which is why it wins for the majority, but for those with big deductions the old regime still comes out ahead. The calculator shows you which applies to you.
Is this calculator accurate for my tax filing?
This calculator provides an accurate estimate of your income tax under both regimes for FY 2025-26, using the correct slabs, standard deductions, the enhanced 87A rebate, marginal relief, surcharge and cess, and it is a reliable guide for comparing the regimes and understanding your likely tax. For a typical salaried individual below 60 with slab-rate income and standard deductions, the figures will closely match your actual tax. However, there are situations it does not fully model, and for those you should treat the result as indicative and consult a chartered accountant or use the official tax portal. It does not separately compute capital gains, which are taxed at special rates that the 87A rebate does not cover, so if a significant part of your income is capital gains, your actual tax will differ. It uses the standard below-60 exemption limits, so it does not apply the higher exemptions available to senior and super senior citizens under the old regime. It applies the common deduction caps but cannot capture every nuance of every deduction, such as the specific conditions on HRA, the interaction of multiple 80C items, or less common deductions. It also does not handle special cases like clubbing of income, income from multiple house properties, or business income intricacies. For the great majority of salaried taxpayers, though, it gives a correct comparison and the right regime recommendation, which is its main purpose. Use it to understand your position and choose your regime, and for the final, exact figure in your return, especially if your situation is complex, rely on the official income tax portal or a qualified professional. It is a planning and comparison tool, not a substitute for filing.
Does the new regime allow the NPS deduction?
The new regime allows only the employer\’s NPS contribution under Section 80CCD(2), not your own contribution under 80CCD(1) or the additional 50,000 under 80CCD(1B). This is an important distinction. Under the old regime, you can claim your own NPS contributions: the amount within the overall 1.5 lakh 80C limit under 80CCD(1), plus an additional 50,000 exclusively for NPS under 80CCD(1B), which is a popular way to save extra tax. Under the new regime, these self-contribution deductions are not available; the only NPS-related deduction is the contribution your employer makes to your NPS account under 80CCD(2), which is allowed in both regimes up to the applicable limit, typically 14% of basic salary for government employees and 14% for private-sector employees under the new regime. So if you personally contribute to NPS to save tax, that benefit works only under the old regime, and if you are choosing the new regime, your own NPS contributions will not reduce your tax, though they still build your retirement corpus. This is one of the deductions to weigh when comparing regimes: if you rely heavily on the 80CCD(1B) NPS deduction, it counts towards the old regime\’s advantage. In this calculator, the NPS 80CCD(1B) field you enter is applied only to the old regime, reflecting that it does not help under the new regime. The employer NPS contribution, being allowed in both, is not something you deduct manually here as it is part of the salary structure. So when deciding, remember that your voluntary NPS tax break is an old-regime-only benefit.
Will the tax slabs change again in future budgets?
Tax slabs and rates can change in any budget, as they are set annually by the government, so the current structure is not permanent, though it has shown some stability recently. Budget 2025 introduced the major overhaul of the new regime, with the seven slabs and the 12 lakh tax-free threshold, and Budget 2026 chose to retain these unchanged, so the same slabs apply to both FY 2025-26 and FY 2026-27. This suggests the government is, for now, content with the current structure and focused on encouraging adoption of the new regime rather than making further big changes. However, future budgets could adjust the slabs, the rebate threshold, the standard deduction, or the surcharge rates, whether to provide further relief, to respond to inflation, or for revenue reasons. The general direction of policy has been to make the new regime progressively more attractive and to phase down reliance on the old regime\’s deductions, so it would not be surprising to see the new regime enhanced further or the old regime eventually curtailed, though nothing of the sort has been announced. For practical purposes, you should use the slabs applicable to the financial year you are calculating for, which for FY 2025-26 and FY 2026-27 are the ones this calculator uses, and recheck each year around budget time in case of changes. Because you can choose your regime afresh each year with salary income, any future change simply becomes part of your annual comparison. This calculator reflects the current, post-Budget-2026 position; if a later budget revises the slabs, the figures would need updating for that year, so always confirm you are using the rates for the correct year, and treat projections for future years as based on today\’s rules, which may change.
