How to Calculate Income Tax Under the New Tax Regime (AY 2026–27 / FY 2025–26)

Why this Income tax calculation guide matters

FY 2025–26 brings practical changes that make the New Income tax Regime genuinely simpler for many salaried taxpayers. Salary and pension now enjoy a ₹75,000 standard deduction; residents can get nil slab tax up to ₹12,00,000 taxable income (which translates to nil tax up to ₹12.75 lakh salary for salaried, after the standard deduction); and the seven-slab grid starts at a clean ₹4 lakh basic exemption. Meanwhile, capital gains sit outside slab math and are taxed at special rates (this year, STCG 111A @ 20% and 112A LTCG @ 12.5% after a ₹1.25 lakh exemption). Follow the steps below, and you can compute your own tax confidently—no app needed.

In this Income tax calculation guide, you’ll learn:

• A clear 7-step method to compute New Regime tax
• A fill‑in worksheet you can reuse each year
• Worked examples (₹12.75L nil‑tax; ₹18L; a capital‑gains mix; a marginal‑relief case)
• A snapshot table to sanity‑check your result
• A quick Old‑vs‑New sense check
• A single, schema‑ready FAQ set (for Rank Math)

Key Highlights:

• Standard deduction (salary/pension): ₹75,000
• Section 87A (residents only): when taxable income for slabs ≤ ₹12,00,000, slab tax (up to ₹60,000) becomes ₹0 — for salaried, this enables nil tax up to ₹12.75 lakh salary
• Marginal relief (just over ₹12L): caps pre‑cess slab tax to the excess over ₹12,00,000
• Capital gains (special rates): STCG 111A @ 20%; 112A LTCG @ 12.5% after ₹1,25,000 exemption on eligible equity/equity MF/REITs; other LTCG @ 20% (as applicable)

Quick Start guide

• Salary/Pension − ₹75,000 = Net Salary
• Add ordinary income (interest + house‑property result + business) = Income for slab tax
• Apply the 7 slabs to that amount
• If resident and ≤ ₹12,00,000 → apply 87A (cap ₹60k). If just over ₹12L → apply marginal relief
• Add capital‑gains tax separately: STCG(111A) @ 20%; 112A LTCG @ 12.5% after ₹1.25L exemption; other LTCG @ 20%
• Add 4% cess (and surcharge if applicable)

Visual flow: Gross Salary → (− ₹75,000) → Net Salary → + Ordinary Income → Income for Slab Tax → Slab Tax → 87A / Marginal Relief → + Special‑Rate Tax (STCG/LTCG) → + 4% Cess → Final Tax

The 7‑Step Method (Detailed Walkthrough of Income tax calculation)

Step 1 — Gather your income inputs

Collect salary/pension (Form 16), interest, house‑property result, business/other income. Keep capital gains aside for now (STCG 111A, 112A LTCG, other LTCG).

Step 2 — Apply the standard deduction

Subtract ₹75,000 from gross salary/pension to get Net Salary. This is a flat deduction available under the New Regime for salary/pension.

Step 3 — Build “Income for slab tax”

Add Net Salary (Step 2) + interest + house‑property result + business/other. Do not include capital gains here.

Step 4 — Compute slab income tax using the 7 bands

Apply the New Regime slabs to the ‘Income for slab tax’. Calculate band-by-band; the result is your pre‑relief slab tax.

Step 5 — Apply reliefs: 87A or marginal relief (as applicable)

If you are a Resident and ‘Income for slab tax’ ≤ ₹12,00,000, Section 87A reduces slab tax (up to ₹60,000) to ₹0. If your taxable (for slabs) is just over ₹12L, cap the pre‑cess slab tax to (taxable − ₹12L).

Step 6 — Add special‑rate taxes (compute separately)

Now add capital‑gains taxes computed on their own: STCG 111A @ 20%; 112A LTCG @ 12.5% after a ₹1,25,000 exemption on eligible equity/equity MF/REITs; other LTCG typically @ 20%.

Step 7 — Add cess (and surcharge) to reach final income tax

Add 4% health & education cess on income tax slab after reliefs + total special‑rate tax]. Apply surcharge if thresholds trigger.

Download here Income tax computation excel utility

Computation of Income tax – Master Table (AY 2026–27 / FY 2025–26)

Worked examples (step‑by‑step)

Example 1: Salaried ₹12.75 lakh (resident; no gains) → Nil tax

Example 2: Salaried ₹18.00 lakh (resident; no gains)

Example 3: Salary ₹10.50L + STCG(111A) ₹1.00L (resident)

Example 4: Taxable for slabs ₹12,10,000 (resident) → Marginal relief

Snapshot table

Marginal relief: the “just over ₹12L” safeguard

If your taxable income for slabs is only slightly above ₹12,00,000, marginal relief ensures your pre‑cess slab tax does not exceed the excess over ₹12,00,000.

House property & capital gains (what to remember)

• Self‑occupied interest isn’t available like in the old regime. For let‑out, compute rental income as per rules; interest/set‑off is more restricted than in Old Regime. Include only the resulting figure in slab income.
• Special‑rate of income tax is separate: STCG(111A) @ 20%; 112A LTCG @ 12.5% after ₹1.25L exemption on eligible equity/equity MF/REITs; other LTCG @ 20% (as applicable). These amounts generally don’t get 87A.

Old vs New (Selection Guide)

• Choose New Regime of income tax if you’re salaried with modest exemptions/deductions and no large HRA/home‑loan interest.
• Check Old Regime if you have high HRA, substantial housing interest, and full80C/80D/NPS — run one side‑by‑side before filing.

Conclusion

Start with salary, subtract ₹75,000, compute slab income tax on ordinary income, apply 87A (or marginal relief if just over ₹12L), then add special‑rate taxes (STCG 20%, 112A LTCG 12.5% after ₹1.25L, other LTCG 20%) and 4% cess. If you claim large HRA/home‑loan interest, compare Old vs New once. Otherwise, for many salaried taxpayers near ₹12–13L, the New Regime is cleaner—and often cheaper.

Disclaimer

This article is for general information and does not constitute professional advice. Tax rules change via Finance Acts, CBDT notifications, and judicial decisions. Verify the latest provisions or consult a qualified professional for your specific case. TaxBizMantra is not responsible for decisions made solely on this content.

Further Reading

• Income Tax Slabs for AY 2026–27 (FY 2025–26)

Sources & References

• Income Tax Department – FAQs on Computation of Tax (official)
• Income Tax Department – Tax Rates and Marginal Relief (official)

FAQ