Calculating income tax can be complex, especially when considering deductions, exempt allowances, and income from various sources. For those unfamiliar with the Income Tax Act, it can be challenging to calculate tax liabilities based on applicable slab rates. That’s where the AHALTS IncomeTax Calculator comes in. It simplifies manual calculations without the need for in-depth knowledge of tax laws.

Income Tax Calculator — A complete guide (how to use it + latest slabs for 2025–26 and status for 2026–27)

An Income Tax Calculator is one of the simplest — and most powerful — tools for taxpayers. It converts your annual gross income, deductions, exemptions and other tax-related inputs into an estimate of your tax liability (and refund or tax payable). This article explains how an income tax calculator works, gives a step-by-step walkthrough on how to use one, provides worked examples, and lists the official tax slabs for FY 2025–26 (Assessment Year 2026–27). It also explains the current status for FY 2026–27 (Assessment Year 2027–28) and how to keep yourself updated.

1. What is an Income Tax Calculator?

An Income Tax Calculator is a software tool — often web-based or mobile — that computes income tax payable (or refundable) after taking into account:

• Gross salary or business income,
• House rent allowance, perquisites, other allowances,
• Investments and deductions (80C, 80D, etc.) if you choose the old tax regime,
• Standard deduction and other specific exemptions,
• Surcharges, cess and rebates (such as Section 87A),
• TDS already deducted and advance tax paid.

A good calculator will let you switch between the new (concessional) and old (with deductions) tax regimes so you can compare which one is better for you.

2. Why use an Income Tax Calculator?

• Quick estimate of tax liability without manual formulas.
• Compare regimes (old vs new) to choose the cheaper route.
• Plan investments — see how 80C / 80D or NPS investments reduce tax.
• Plan take-home salary and negotiate better during hiring.
• Avoid surprises at year-end by checking whether you’ll owe tax and need to pay advance tax.

3. Step-by-step: How to use an Income Tax Calculator

Below is a stepwise guide that works for most credible calculators (government or private):

Step 1 — Gather your inputs

Collect annual figures for:

• Gross salary (basic + allowances + bonuses + commissions),
• Other income (interest, rental income, capital gains, freelance income),
• Employer contributions to PF, NPS (if applicable),
• Investments/Deductions: amounts under 80C (PF, ELSS, PPF, life insurance), 80D (medical insurance), 80E (education loan interest), standard deduction, home loan interest (section 24), etc.,
• TDS already deducted / advance tax paid,
• Any exempt allowances (HRA partially exempt, LTA, etc.) — values or estimates.

Step 2 — Choose the tax regime

Most calculators allow selecting:

• New regime (section 115BAC / concessional rates) — fewer/no deductions but lower slab rates; or
• Old regime — higher basic exemption and full set of deductions/allowances.

Pick both if you want a comparison.

Step 3 — Enter the details, item by item

• Enter salary breakup (if calculator asks) or just gross salary.
• Add other income sources.
• Enter deduction amounts you actually claim or expect to claim.
• Add TDS / advance tax paid.

Step 4 — Apply exemptions and rebates

• If you’re claiming HRA, input rent paid and city type (metros vs non-metros) if the tool calculates HRA exemption. (Use Ahalts HRMS)
• For standard deduction, many calculators auto-apply (salaried employees get a standard deduction where applicable).
• Rebate under Section 87A (if applicable) will be applied automatically by modern calculators when your taxable income falls in the rebate band.

Step 5 — Review taxes, cess and surcharge

The calculator will compute tax on each slab, add applicable surcharge (if your income crosses specified thresholds) and add health & education cess (currently 4%) on income tax + surcharge.

Step 6 — Compare results and interpret

• You’ll see tax payable (or refund if TDS > tax liability).
• Most calculators provide a regime comparison (old vs new) showing which saves more tax.
• They often show a breakdown: tax per slab, surcharge, cess, and net take-home.

Step 7 — Use the output for planning

• If old regime is better, make sure to complete and document investments/expenses that support deductions (PF, ELSS, tuition fees, medical insurance receipts, rent receipts, etc.).
• If new regime is better, you may avoid locking money into tax-saving instruments you don’t otherwise want.

4. Worked example (step-by-step demonstration)

Assume FY 2025–26 (using the new regime slabs described later):

• Annual salary (gross): ₹14,00,000
• Other income (interest etc.): ₹20,000
• No section 80C investments claimed (choosing new regime)
• TDS already deducted: ₹60,000

How a calculator computes (simplified):

1. Total income = ₹14,20,000
2. Under new regime, apply slab rates (example slab ranges shown later); compute tax on each portion:
   1. Up to ₹4,00,000 → Nil
   2. ₹4,00,001–₹8,00,000 → 5% on ₹4,00,000 = ₹20,000
   3. ₹8,00,001–₹12,00,000 → 10% on ₹4,00,000 = ₹40,000
   4. ₹12,00,001–₹14,20,000 → 15% on ₹2,20,000 = ₹33,000
   5. Total tax before cess = ₹93,000
3. Add cess (4%) = ₹3,720 → Tax + cess = ₹96,720
4. Subtract TDS ₹60,000 → Tax payable = ₹36,720

A calculator will show these line items and the net tax payable; this helps you decide whether to pay additional advance tax or plan investments.

5. Official tax slabs — FY 2025–26 (Assessment Year 2026–27)

New tax regime (concessional rates) — FY 2025–26

As notified / explained in Budget 2025 materials and Income Tax Department FAQs, the new tax regime slabs for FY 2025–26 are:

• Income up to ₹4,00,000 — Nil
• ₹4,00,001 to ₹8,00,000 — 5%
• ₹8,00,001 to ₹12,00,000 — 10%
• ₹12,00,001 to ₹16,00,000 — 15%
• ₹16,00,001 to ₹20,00,000 — 20%
• ₹20,00,001 to ₹24,00,000 — 25%
• Above ₹24,00,000 — 30%

(Under this new regime, most deductions under Chapter VI-A are not available except a few specified items; also the standard deduction and certain reliefs may be handled as per rules).

Old tax regime (if applicable) — for completeness:

• The old regime slabs and rates (and special slabs for senior/super senior citizens) continue to exist and are selectable by taxpayers who want to claim deductions such as 80C, 80D, home loan interest, etc. For example, many old-regime structures still use the classic bands such as up to ₹2.5 lakh / ₹3 lakh exemption for seniors, then 5%, 20%, 30% bands — refer to the Income Tax Department’s tax-rates page for exact category-wise figures.

6. What about tax slabs for FY 2026–27 (Assessment Year 2027–28)?

As of January 2, 2026, the official notified slabs for FY 2026–27 (AY 2027–28) were not yet finalized/officially notified by the Central Government. Tax rates and slabs for a future financial year are set in the Union Budget (usually presented in February each year) and become law through the Finance Act. Because the Budget for 2026 (which would cover FY 2026–27) is typically presented in February 2026, definitive slabs for FY 2026–27 will only be available after that announcement and subsequent notification.

What this means for you:

• If you need planning now (for FY 2026–27), use the FY 2025–26 slabs as the working assumption — but plan conservatively and stay ready to adapt after the Budget.
• Check official sources (Income Tax Department’s website or Finance Bill / Budget documents) immediately after the Budget for confirmed slabs. The Income Tax Department maintains pages and calculators that are updated after each Budget.

7. Choosing between old vs new regime — how calculators help

Because the new regime generally offers lower nominal slab rates but restricts deductions, and the old regime allows a wide set of deductions (80C, 80D, home loan interest, HRA etc.), calculators provide a side-by-side comparison:

• Enter your deductions (80C, 80D, etc.) and check tax under old regime.
• Enter the same income but zero deductions (or minimal) and check tax under new regime.
• The calculator will show which regime results in lower net tax.

Tip: If your total deductible investments & claims are small relative to your income, the new regime is often better; if you have substantial 80C/80D/home loan interest and other exemptions, the old regime may still be beneficial.

8. Common features in trustworthy calculators

Choose calculators that:

• Are updated to the current financial year (FY 2025–26 in our case),
• Support both new and old regimes,
• Apply Section 87A rebate and marginal relief correctly,
• Add surcharge and cess accurately,
• Allow entry of multiple income sources,
• Provide a detailed breakdown (tax per slab, cess, surcharge, net payable),
• Offer downloadable summary (for records) or printable report.

Official Income Tax Department calculators and reputed financial portals (ClearTax, Bank/NBFC calculators) are generally reliable; always cross-check results for high incomes or complex cases.

9. Practical tips and traps to avoid

• Don’t forget cess (4%) — calculators might display tax before cess; confirm the final number.
• Surcharge thresholds can change — for very high incomes surcharge becomes material.
• Rebate under Section 87A: ensure the calculator applies it only when you qualify.
• HRA and home-loan interest: calculators that compute HRA exemption usually ask for city, actual rent paid and basic salary — give accurate inputs.
• Investment documentation: if you opt for old regime to claim deductions, ensure you actually hold the proofs (policy receipts, bank statements, rent receipts) before filing.
• Advance tax: if estimated tax liability (after TDS) exceeds ₹10,000 in a year, you may be required to pay advance tax — calculators help estimate this liability ahead of time.

10. Where to find official, up-to-date calculators and references

• Income Tax Department (Government of India): official tax-rates pages, FAQs and old-vs-new regime calculator. Use this for authoritative figures and legal text.
• Finance Bill / Budget documents: these set the rates each year; the Finance Bill PDF and Budget FAQs explain changes.
• Reputable financial portals (ClearTax, Bajaj Finserv, major banks) maintain updated calculators and explanatory pages. Use them for quick comparisons but cross-check critical figures with the official site.

11. Summary / Action checklist

• Use an Income Tax Calculator to estimate tax, compare regimes, and plan investments.
• For FY 2025–26 (AY 2026–27), the new regime slabs are: nil up to ₹4L; 5% (4–8L); 10% (8–12L); 15% (12–16L); 20% (16–20L); 25% (20–24L); 30% (>24L).
• FY 2026–27 (AY 2027–28) slabs will be finalized in the Budget 2026 and published by the Government — check the Income Tax Department site after the Budget for official notification.
• Keep records for deductions if you plan to use the old regime, and review your tax plan annually.