Income Tax Calculation Guide: Old vs New Regime Comparison

Filing income tax requires choosing between two tax systems in India: the Old Tax Regime (which permits deductions under Section 80C, 80D, HRA, etc.) and the New Tax Regime (which offers lower tax slab rates but removes most deductions).

Selecting the optimal regime can save salaried employees and individual taxpayers tens of thousands of rupees each year. This guide explains how income tax is calculated, breaks down tax slab structures, compares Old vs. New tax regimes with a practical ₹12 Lakh salary example, and shows how to optimize your taxes using the CalculatorAll Income Tax Calculator.

Quick Answer: Old vs. New Tax Regime Comparison

For a taxable annual salary of ₹12,00,000 (₹12 Lakhs) with ₹1,50,000 in Section 80C deductions:

• New Tax Regime Tax: ₹90,000 (Lower tax slab rates + ₹75,000 Standard Deduction)
• Old Tax Regime Tax: ₹1,06,500 (Higher slab rates, offset by ₹1.5L 80C + ₹50k Standard Deduction)
• Regime Choice: New Tax Regime Saves ₹16,500.

New Tax Regime Slabs Overview

Under the default New Tax Regime, tax slabs operate as follows:

Note: Taxpayers with taxable income up to ₹7 Lakhs receive full rebate under Section 87A, making tax liability zero.

Step-by-Step Tax Calculation Example

Let's calculate tax for an individual earning ₹12,00,000 under the New Tax Regime:

1. Gross Income: ₹12,00,000
2. Less Standard Deduction: ₹75,000
3. Net Taxable Income: ₹11,25,000

Slab-by-Slab Breakdown:

• ₹0 – ₹3,00,000 @ 0% = ₹0
• ₹3,00,000 – ₹7,00,000 (₹4,00,000 @ 5%) = ₹20,000
• ₹7,00,000 – ₹10,00,000 (₹3,00,000 @ 10%) = ₹30,000
• ₹10,00,000 – ₹11,25,000 (₹1,25,000 @ 15%) = ₹18,750
• Total Basic Tax: ₹20,000 + ₹30,000 + ₹18,750 = ₹68,750
• Add 4% Health & Education Cess: ₹68,750 × 1.04 = ₹71,500

How to Calculate Income Tax Using CalculatorAll

Instead of doing manual slab math, compare both tax regimes instantly using the CalculatorAll Income Tax Calculator.

1. Enter Annual Income: Input your total gross annual salary.
2. Input Eligible Deductions: Enter Section 80C, 80D, HRA, and NPS deductions.
3. View Comparison: The tool displays tax payable under both Old and New regimes side-by-side.
4. See Recommended Regime: Instantly see which regime minimizes your tax liability.

Frequently Asked Questions

Which tax regime is better for salaried employees?

The New Tax Regime is typically better for individuals with deductions under ₹2.5 Lakhs due to lower slab rates. The Old Tax Regime is beneficial if you claim significant deductions (HRA, Home Loan interest, 80C, 80D).

What is the standard deduction in the New Tax Regime?

Salaried employees receive a standard deduction of ₹75,000 under the New Tax Regime.