Good news for taxpayers. The Income Tax Department has rolled out a new user-friendly tax calculator. You can find this tool on their official website, designed to assist taxpayers in figuring out their finances. With it, you can estimate your savings under the New Tax Regime for the financial years 2024-25 and 2025-26. Just a heads up, Finance Minister Nirmala Sitharaman announced in Budget 2025 that annual income up to Rs 12 lakh will be tax-free.

 

This handy tool allows taxpayers to check their tax obligations under both the old and new tax regimes by simply entering their income and any eligible deductions.

 

It’s important to mention that the government is pushing hard to make the new tax regime the standard option. With the recent announcement of making income up to Rs 12 lakh tax-free in Budget 2025, the New Tax Regime is looking a lot more appealing compared to the Old Tax Regime. Plus, the basic exemption limit has been raised from Rs 3 lakh to Rs 4 lakh in the new regime.

 

How the Tax Calculator Works:

You can access the Income Tax Calculator on the Income Tax Department’s website to see which tax regime works better for you. Just select your residential status and input your taxable income (excluding special rate income like capital gains). The calculator will then show you a comparison of your total tax liability based on the current tax rates for FY 2024-25 and the updated rates from the Finance Bill 2025 for FY 2025-26.

 

The calculator shows how much taxpayers can save under the new tax regime starting April 1, 2025, thanks to the updated income tax slabs.

 

Default Tax Regime

The new tax regime is designed to be simpler and will be the standard choice moving forward.

New Basic Exemption Limit

From April 1, 2025, the basic exemption limit will rise from Rs 3 lakh to Rs 4 lakh.

 

Higher Tax Rebate

Right now, individuals earning up to Rs 7 lakh can get a tax rebate of Rs 25,000 under Section 87A. Starting in the financial year 2025-26, this rebate will jump to Rs 60,000, meaning no tax for those with income up to Rs 12 lakh.

 

Limited Deductions

The new tax regime has fewer deductions compared to the old one. However, salaried individuals can still take advantage of a standard deduction of up to Rs 75,000. Additionally, companies can claim a deduction of up to 14% of the basic salary for contributions to the Tier-1 NPS account under Section 80CCD (2) in the financial year 2025-26.

 

These updates are aimed at making tax filing easier and encouraging more people to switch to the new tax regime. The income tax calculator will be a handy tool for individuals to make smart financial choices before the new rules kick in on April 1, 2025.