Income Tax Calculator FY 2024-25

Old vs New Tax Regime — Which is Better?

India's dual income tax regime gives every taxpayer a choice. The old regimehas higher tax rates but allows a wide range of deductions (80C, HRA, home loan interest, 80D, etc.), which can significantly reduce your taxable income. The new regime (Budget 2024) offers lower tax rates and a higher standard deduction of ₹75,000, but most deductions are not available. The new regime is now the default regimefrom FY 2024-25 — if you don't declare a preference, your employer will apply it. The right choice depends entirely on your deductions: heavy investors in 80C, HRA claimants, and home loan borrowers often save more under the old regime, while those with few deductions usually benefit from the new regime's lower rates.

FY 2024-25 Income Tax Slabs at a Glance

All figures are for individuals below 60 years. Add 4% cess on final tax amount. Standard deduction: ₹50,000 (old) / ₹75,000 (new).

Income Tax in India — An Overview

Income tax in India is a direct tax levied by the central government on the income earned by individuals, Hindu Undivided Families (HUFs), companies, and other entities during a financial year. For individuals, it is progressive — the more you earn, the higher the percentage of your income that is taxed. India operates on a self-assessment basis, meaning taxpayers are responsible for correctly computing and paying their tax liability and filing an annual Income Tax Return (ITR). The financial year in India runs from April 1 to March 31, and the ITR for any financial year is filed in the subsequent Assessment Year — for example, income earned in FY 2025-26 (April 2025 to March 2026) is assessed and declared in AY 2026-27.

India's income tax structure is administered by the Central Board of Direct Taxes (CBDT) under the Ministry of Finance. The tax is governed by the Income Tax Act, 1961, and the Finance Act passed each year introduces amendments — including changes to tax slabs, deductions, and exemptions. For salaried employees, income tax is deducted at source (TDS) by the employer every month and remitted to the government. This TDS is an advance tax against the employee's annual liability. At year-end, when the employee files their ITR, the actual liability is computed — if TDS exceeded the liability, a refund is processed; if it fell short, the difference must be paid as self-assessment tax. The entire process is now paperless and managed through the Income Tax Department's online portal at incometax.gov.in.

One of the most significant aspects of Indian income tax for salaried employees is the availability of numerous deductions and exemptions that can substantially reduce taxable income. Section 80C alone — which covers investments in PPF, ELSS, EPF contribution, life insurance premiums, home loan principal repayment, NSC, and children's school fees — allows a deduction of up to ₹1.5 lakh per year. Combined with HRA exemption, home loan interest deduction under Section 24(b), health insurance under Section 80D, and NPS contribution under Section 80CCD, a disciplined investor can reduce their taxable income by ₹4–5 lakh or more. This is the core reason the old tax regime remains relevant and often beneficial for those who actively invest in these instruments.

HRA Exemption — How to Calculate

House Rent Allowance (HRA) is a component of many salaried employees' compensation packages, provided by employers to help cover rental accommodation costs. The entire HRA received is not automatically tax-free — only a portion qualifies for exemption under Section 10(13A), calculated as the minimum of three conditions: the actual HRA received from the employer, the rent paid minus 10% of basic salary, and 50% of basic salary if you live in a metro city (Delhi, Mumbai, Kolkata, or Chennai) or 40% of basic salary for non-metro cities. The exemption is the lowest of these three amounts, and the remainder is added back to your taxable income. For an employee in Mumbai paying ₹30,000/month in rent on a basic salary of ₹50,000/month and receiving ₹25,000/month HRA, the three conditions are: HRA received ₹25,000, rent minus 10% basic = ₹25,000, and 50% of basic = ₹25,000. All three are equal at ₹25,000, so the full HRA is exempt.

Two common scenarios reduce the HRA exemption significantly. First, if you live in a non-metro city, the third condition drops from 50% to 40% of basic salary, which can cap the exemption even if you pay high rent. Second, if your rent is low relative to your salary, the second condition (rent minus 10% of basic) becomes the limiting factor. Employees who pay rent to parents can legitimately claim HRA exemption, provided the rent is genuinely paid via bank transfer, the parents declare it as rental income in their ITR, and a proper rent agreement exists. This is a legal and widely-used tax planning strategy. Note that HRA exemption is available only under the old tax regime — those who opt for the new regime cannot claim HRA exemption regardless of the rent paid.