How We Calculate Your Income Tax

Last updated: 10 June 2026 · Covers FY 2023-24 to FY 2025-26

We believe a tax calculator should show its working. This page explains exactly how NewRegimeTax turns your income into a tax figure — the rules we apply, the order we apply them in, and the official sources behind every rate. Nothing here is hidden in a black box.

Where the rates come from

All slab rates, the standard deduction, the Section 87A rebate, surcharge thresholds and cess are taken directly from the Finance Acts / Union Budget announcements for each financial year. We rely on official sources:

• Income Tax Department, Government of India — the official portal and tax rules.
• Union Budget of India — the Finance Act provisions that set each year's slabs.

The steps, in order

1. Gross total income. We add your salary, any other income, and business/professional income (including the presumptive schemes — 44ADA at 50% of receipts, 44AD at 8%, or 6% for digital receipts).
2. Deductions. We subtract the deductions allowed for the regime being computed (see the regime differences below).
3. Taxable income. Gross income minus allowed deductions.
4. Tax on slabs. Your taxable income is taxed progressively, band by band, at the rates for that year and regime. We show this slab-by-slab so you can see exactly which slabs you fell into.
5. Section 87A rebate. If your taxable income is within the rebate limit, the rebate reduces your tax — to zero in many cases. For the New regime we also apply marginal relief, so a rupee over the limit never costs you a disproportionate jump in tax.
6. Surcharge. At higher incomes a surcharge applies on the tax. We apply the correct rate for each threshold and the marginal relief that caps how much extra tax can arise from just crossing a threshold (₹50 lakh, ₹1 crore, ₹2 crore, ₹5 crore).
7. Health & Education cess. Finally, a 4% cess is added on (tax + surcharge).

Old regime vs New regime — what differs

The difference is entirely in the slabs and which deductions are allowed:

• New regime: lower, wider slabs, a ₹75,000 standard deduction (FY 2025-26) for salaried, and the employer's NPS contribution under 80CCD(2) — but no 80C, 80D, HRA or home-loan-interest deductions.
• Old regime: higher slab rates, but you can claim the full deduction suite — HRA (least-of-three formula), 80C (up to ₹1.5 lakh), 80D, 80CCD(1B) NPS, home-loan interest under section 24(b), and more. The basic exemption also varies by age (₹2.5L / ₹3L / ₹5L for below-60 / senior / super-senior).

The calculator computes both regimes from your inputs and tells you which one costs less — and by how much.

How we make sure it's accurate

Accuracy is the entire point of a calculator, so we treat it like engineering:

• The tax logic lives in a single, pure calculation engine — separate from the display — so the same tested code produces every number on the site, including the salary pages.
• Every release is checked against a suite of automated tests built from hand-computed, known-correct figures (zero-tax cases, rebate edges, surcharge with marginal relief, HRA, presumptive business income, and full deduction stacks). If any figure drifts, the release is blocked.
• We re-run those tests after every Budget update before publishing new slabs.

What the calculator does not do

To be honest about the limits: it is a high-quality estimator for resident salaried individuals and small professionals. It does not model every edge case — for example capital-gains-specific surcharge caps within the main calculator (we have a separate Capital Gains tool for that), clubbing of income, foreign income, or set-off of losses. Results are estimates and may differ from your final assessed liability.

Always confirm your numbers with a qualified Chartered Accountant before filing. If you find a figure you believe is wrong, email contact@newregimetax.com — we investigate every report.