Income Tax Calculator 2025-26: How Much Tax Will You Pay if Your Salary Exceeds ₹12.75 Lakh?

The Union Budget 2025-26 introduces significant tax cuts, making salaries up to ₹12.75 lakh tax-free and revising slabs to reduce tax liability across income brackets. The move aims to boost disposable income and consumer spending but raises concerns about its impact on private investment and long-term economic growth. While benefiting the middle class, the budget relies on fiscal consolidation and improved tax compliance to offset revenue losses.

CONTENTS:

• Income Tax Calculator 2025-26: Tax Liability on Salaries from ₹12.75 Lakh to ₹1 Crore Under the New Regime
• Hope Amid Uncertainty: Analyzing the Union Budget 2025
• Income Tax Calculation: How Much Tax Will You Pay if Your Salary Exceeds ₹12.75 Lakh?

Income Tax Calculator 2025-26: How Much Tax Will You Pay if Your Salary Exceeds ₹12.75 Lakh?

Income Tax Calculator 2025-26: Tax Liability on Salaries from ₹12.75 Lakh to ₹1 Crore Under the New Regime

Income Tax Calculator 2025-26: How Much Tax Will You Finance Minister Nirmala Sitharaman introduced revised tax slabs and rebates in the Union Budget 2025-26, bringing significant relief to salaried taxpayers. The updated tax structure under the new regime aims to reduce tax burdens, increase disposable income, and boost household savings and investments.

Key Changes in the New Tax Regime

• Salary income up to ₹12.75 lakh is now tax-free due to an increased rebate.
• The tax rebate has been raised from ₹25,000 (for incomes between ₹3 lakh – ₹7 lakh) to ₹60,000 (for incomes between ₹4 lakh – ₹12 lakh).
• Income below ₹4 lakh is exempt from tax, while earnings above this threshold are taxed at revised rates.
• A standard deduction of ₹75,000 continues to benefit salaried employees.

The revised tax rates and slabs will apply to Financial Year (FY) 2025-26 (Assessment Year 2026-27).

Estimated Tax Savings Under the New Regime

Tax expert CA Dr. Suresh Surana analyzed the benefits of the revised structure. His calculations show that salaried individuals opting for the new regime can enjoy significant tax savings compared to the previous rates.

Tax Computation for Different Salary Levels (FY 2025-26 vs. FY 2024-25)

Individuals earning ₹12.75 lakh annually will now have zero tax liability, marking a 100% tax savings of ₹83,200.

For higher salary brackets, the revised tax structure offers notable reductions in tax liability:

• ₹18 lakh salary → Tax reduced from ₹2,15,800 to ₹1,50,800, saving ₹65,000 (30.12% savings).
• ₹25 lakh salary → Tax reduced from ₹4,34,200 to ₹3,19,800, saving ₹1,14,400 (26.35% savings).
• ₹50 lakh salary → Tax reduced from ₹12,14,200 to ₹10,99,800, saving ₹1,14,400 (9.42% savings).
• ₹1 crore salary → Tax reduced from ₹30,51,620 to ₹29,25,780, saving ₹1,25,840 (4.12% savings).

These tax reductions aim to increase disposable income, particularly benefiting the middle-income group, while offering moderate relief for higher-income earners.

Impact on Government Revenue

Income Tax Calculator 2025-26: How Much Tax Will You  While the revised tax regime benefits salaried taxpayers, the government anticipates a revenue loss of approximately ₹1 lakh crore in direct taxes due to these reductions.

The old tax regime remains unchanged, allowing taxpayers to choose between the two based on their financial situation and deductions.

Hope Amid Uncertainty: Analyzing the Union Budget 2025

Income Tax Calculator 2025-26: How Much Tax Will You  The Union Budget 2025-26 aims to tackle key economic challenges such as weak domestic demand, sluggish private investment, and slow wage growth, all of which have contributed to a muted GDP expansion. However, a deeper examination of its priorities and allocations suggests a cautious approach, with no clear assurance that the measures will effectively resolve these issues.

A key strategy employed by the government is offering significant tax cuts to boost consumer spending and stimulate growth. However, this has limited the fiscal space for increasing public investment in capital expenditure, which could have served as another major driver of economic recovery. While placing more money in the hands of the middle class seems appropriate amid persistent inflation, the budget remains focused on fiscal consolidation, targeting a fiscal deficit of 4.4% of GDP in FY26, down from 4.8% in FY25.

Despite introducing tax rebates that benefit a large segment of salaried taxpayers, the government expects higher direct tax revenue, driven by improved tax compliance through technological advancements. This approach has already led to an increase in direct tax revenue from a budgeted ₹11.87 lakh crore to a revised estimate of ₹12.57 lakh crore in FY25.

Key Highlights of the Budget

• Tax Relief for Salaried Class: The most notable change is ensuring that individuals earning up to ₹12 lakh (excluding special-rate income like capital gains) pay no income tax due to expanded rebates. This move aims to boost demand among middle and lower-middle-class salary earners, who are expected to channel their tax savings into consumption.
• Urban vs. Rural Demand Trends: The Economic Survey highlighted mixed demand trends in urban areas, contrasting with steady growth in rural consumption. The government’s tax cuts are specifically designed to address urban demand concerns.
• Response to Inflation & Indirect Taxes: Middle-class taxpayers, who have struggled with inflation and rising GST costs, have been vocal about needing relief. The budget provides significant tax incentives in response to these concerns, which may also help mitigate any political discontent within the government’s support base.

Will Tax Cuts Alone Drive Growth?

Income Tax Calculator 2025-26: How Much Tax Will You  Although the salaried middle class will benefit, it remains uncertain whether these tax reductions alone will be enough to trigger a strong cycle of economic growth. One major concern is stagnant private investment, with the corporate sector showing limited enthusiasm for increasing capital expenditure.

• Corporate Investment & Taxation: The government continues to incentivize corporate investment, with corporate tax revenue as a share of total gross tax collections projected to decline slightly from 25.4% in FY25 to 25.3% in FY26.
• Effectiveness of Corporate Incentives: Despite previous corporate tax cuts and rising profitability, businesses have remained reluctant to increase investment. Given this trend, the government may have been better off phasing out corporate tax incentives in favor of alternative growth strategies.

Final Thoughts

Income Tax Calculator 2025-26: How Much Tax Will You  While the tax cuts offer immediate relief to the middle class and may provide a short-term boost to consumption, whether this will be enough to revive private investment and sustain economic growth remains uncertain. The budget, while balancing fiscal discipline and economic stimulus, relies heavily on consumer spending as a growth engine, leaving unresolved questions about long-term investment and corporate participation in economic expansion.

Income Tax Calculation: How Much Tax Will You Pay if Your Salary Exceeds ₹12.75 Lakh?

Income Tax Calculator 2025-26: How Much Tax Will You  Finance Minister Nirmala Sitharaman, while presenting the Union Budget 2025, announced significant tax relief for the middle class. Under the revised tax structure, individuals earning up to ₹12.75 lakh annually will have no tax liability. This move aims to provide financial relief and boost disposable income.

How Much Tax Will You Pay on a ₹13 Lakh Salary?

For those earning ₹13 lakh per year, the government estimates a tax saving of ₹25,000 under the new tax regime. The revised slabs offer various levels of savings for different income groups:

• ₹14 lakh salary: ₹30,000 saved
• ₹15 lakh salary: ₹35,000 saved
• ₹16 lakh salary: ₹50,000 saved
• ₹17 lakh salary: ₹60,000 saved
• ₹18 lakh salary: ₹70,000 saved
• ₹19 lakh salary: ₹80,000 saved
• ₹20 lakh salary: ₹90,000 saved
• ₹21 lakh salary: ₹95,000 saved
• ₹22 lakh salary: ₹1 lakh saved
• ₹23 lakh salary: ₹1.05 lakh saved
• ₹24 lakh salary and above: Savings of approximately ₹1.10 lakh

New Income Tax Slabs for FY 2025-26

The new tax structure under the latest budget follows these revised slabs for individuals filing under the new tax regime:

• Income up to ₹4 lakh: No tax
• ₹4 lakh to ₹8 lakh: 5% tax
• ₹8 lakh to ₹12 lakh: 10% tax
• ₹12 lakh to ₹16 lakh: 15% tax
• ₹16 lakh to ₹20 lakh: 20% tax
• ₹20 lakh to ₹24 lakh: 25% tax
• Above ₹24 lakh: 30% tax

These revisions aim to reduce tax burdens and increase disposable income, thereby encouraging higher consumer spending and economic growth.