Old vs New Tax Regime — which one to pick
For FY 2025-26 (Assessment Year 2026-27), India's salaried taxpayers can choose between two regimes. The New Regime offers wider, more progressive slabs with a higher 87A rebate cap of ₹60,000 (raised from ₹25,000 in Budget 2025) and a ₹75,000 standard deduction — but disallows almost all Chapter VI-A deductions and HRA. The Old Regime keeps a narrower slab structure but permits 80C, 80D, HRA, home-loan interest and a long list of other deductions.
The break-even is roughly ₹2 lakh of total deductions. If you claim less than ₹2 lakh, the New Regime is almost always better thanks to the higher rebate. If you claim more — a fully-loaded 80C (₹1.5 L) plus 80D (₹25 K) plus HRA (₹1–2 L) plus home-loan interest (up to ₹2 L) — Old Regime usually wins. Calcly computes both side-by-side so you never have to guess.
Budget 2025 changes — what's new this year
- 87A rebate raised to ₹60,000 (from ₹25,000) — no tax liability on income up to ₹12 lakh in the New Regime.
- TDS on rent threshold raised to ₹50,000 per month for FY 2025-26.
- Senior-citizen interest deduction limit doubled from ₹50,000 to ₹1 lakh per year.
- LRS TCS threshold raised from ₹7 lakhs to ₹10 lakhs; TCS removed entirely for education-loan remittances abroad.
How taxable income is computed
Total tax under either regime follows the same broad pipeline:
- Compute Gross Income (salary + house property + other sources).
- Subtract exemptions (HRA, LTA — Old Regime only).
- Subtract Standard Deduction (₹75,000 New, ₹50,000 Old, salaried only).
- Subtract Chapter VI-A deductions (80C, 80D, etc. — Old Regime only).
- Apply the regime's slab rates to taxable income.
- Subtract 87A rebate if taxable income ≤ rebate threshold.
- Add surcharge (10/15/25/37%) if applicable, capped at 25% under New Regime.
- Add Health & Education Cess at 4% on (tax + surcharge).
87A rebate — the key threshold under the New Regime
Under the New Regime, taxable income up to ₹12 lakh attracts zero tax because the entire slab tax is rebated under Section 87A (capped at ₹60,000). At ₹12,00,001, the rebate disappears entirely — a cliff that creates a perverse incentive to claim deductions or delay income. Marginal relief partially smooths this cliff, but Calcly applies the raw 87A rule for transparency.
HRA exemption (Old Regime only)
HRA exemption is the minimum of three values:
- Actual HRA received from employer
- Rent paid minus 10% of (Basic + DA)
- 50% of (Basic + DA) for metro cities (Delhi, Mumbai, Kolkata, Chennai); 40% otherwise
Calcly's HRA Exemption section computes this automatically — see also the dedicated HRA Calculator.
Surcharge tiers
Above ₹50 lakh of taxable income, surcharge kicks in: 10% (₹50 L–1 Cr), 15% (₹1–2 Cr), 25% (₹2–5 Cr), 37% Old / 25% New (above ₹5 Cr). Surcharge is added before cess.
Why this calculator matches Groww exactly
Calcly's engine is unit-tested against Groww's published example (₹18 L salary + ₹35 K other income → ₹1,58,080 total tax) and against 13 additional boundary cases — 87A boundary at ₹12 L, ₹5 L Old Regime cliff, all three age slabs, surcharge at ₹60 L, HRA min-of-three, 80C cap, self-occupied home-loan interest cap, let-out 30% standard deduction. All 14 tests pass on every commit.