We just saw how choosing the right tax regime can make a meaningful difference. Before we dive deeper into calculations, let’s quickly understand the core differences between the new and old tax regimes.

The new tax regime, introduced in 2020 and now the default option, offers lower tax rates—but with a trade-off. Most common deductions and exemptions that taxpayers are used to claiming are not available here.

The old tax regime, on the other hand, continues to offer a wide range of deductions and exemptions that help reduce taxable income.

In simple terms:

The old regime often works better for individuals who can claim substantial deductions.

The new regime tends to suit those with fewer deductions.

This is why it’s always wise to compare your tax liability under both regimes to make the most efficient choice. An income tax calculator for the new and old regimes can help estimate this quickly.

Now, let’s look at an example.

Meet Radhika. She works at a tech company in Delhi and earns a salary of ₹18,00,000 per year. She also has a secondary income source, interest from her savings account amounting to ₹12,000 this year.

Let’s walk through how her taxable income can be calculated under both regimes, even without using an online calculator.

She Also Invested In The Following Instruments This Year

Under the old tax regime, Radhika is eligible for multiple deductions. Here’s what she claims:

• ₹2.5 lakh invested in an Equity Linked Savings Scheme (ELSS)

• ₹50,000 contributed to the National Pension System (NPS)

• ₹20,000 paid as medical insurance premiums

• ₹25,000 paid as education loan interest

• After applying these deductions, Radhika’s taxable income under the old regime comes to ₹10,95,000.

Her tax is calculated in the same manner as shown in the earlier example.

Income tax under the old regime: ₹1,41,000

Health and education cess @ 4%: 4% of ₹1,41,000 = ₹5,640

So, Radhika’s total tax liability under the old regime is ₹1,46,640.

And here is the tax calculation as per the new regime

Here’s Radhika. She works at a Delhi-based tech company and earns a salary of ₹18,00,000 per year. She also has an additional income source, ₹12,000 as savings account interest. Now let’s see how her tax is calculated under the new regime, without using a tax calculator.

Step-by-step calculation under the new regime:

• No tax on the first ₹3 lakh

• 5% on the next ₹4 lakh → ₹20,000

• 10% on the next ₹3 lakh → ₹30,000

• 15% on the next ₹2 lakh → ₹30,000

• 20% on the next ₹3 lakh → ₹60,000

• 30% on the remaining ₹2,37,000 → ₹71,100

• Adding these up gives a total tax of ₹2,11,100.

Next, a 4% health and education cess is applied:

4% of ₹2,11,100 = ₹8,444

So, Radhika’s total tax liability under the new regime is ₹2,19,544.

When compared with her tax liability under the old regime, it’s clear that the old system works far better for her, saving her over ₹70,000.

And that’s how income tax is calculated under both regimes. But as you can see, the process is detailed and time-consuming. That’s why using an online calculator is the easiest way to get quick and accurate results.

With Fincart, you don’t need two separate tools, our calculator instantly shows estimates for both the old and new tax regimes Try out our combined old and new regime tax calculator and make smarter tax decisions effortlessly!