Income Tax Calculator for FY 2025–26 (AY 2026–27) — Old vs New Regime With Home Loan Benefits

Introduction — Why an Income Tax Calculator Is Essential in 2025–26

Income tax rules in India keep evolving every year. With the introduction of the New Tax Regime, taxpayers often get confused about:

• Which regime is better?

• How much tax will I actually pay?

• Will home loan interest reduce my taxable income?

• Do deductions still apply?

• What tax-saving opportunities do I have?

A modern and accurate Income Tax Calculator gives you instant clarity.
It helps you compare:

• Tax payable WITHOUT any home loan deductions, and

• Tax payable WITH home loan deductions (interest + principal),

• Under both Old and New Tax Regimes.

This makes it easier to choose the right regime and plan your finances smartly.

This guide gives you:

✔ Updated slabs for FY 2025–26
✔ Deductions explained
✔ Formulas
✔ Worked examples
✔ A ready-made online calculator
✔ 18+ FAQs for complete clarity

What Is an Income Tax Calculator?

An Income Tax Calculator is a tool that helps you quickly estimate your tax liability for a financial year. It considers parameters like:

• Your annual income

• Home loan interest paid

• Home loan principal repaid

• Gender (for certain legacy benefits in old regime)

• Old vs New regime slab selection

With the correct data, it shows:

• Tax payable without claiming home loan deductions

• Tax payable after claiming home loan deductions

• Effective tax benefit due to home loan

• Total taxable income in each case

The calculator is helpful for both salaried and self-employed individuals.

Income Tax Slabs for FY 2025–26 (AY 2026–27)

1. New Tax Regime Slabs (Default Regime)

✔ Rebate under Section 87A available up to certain taxable limits
✔ Fewer deductions allowed here
✔ Ideal for people with fewer investments

2. Old Tax Regime Slabs

✔ All deductions apply:

• Section 24(b): Home Loan Interest Deduction (Up to ₹2,00,000)

• Section 80C: Principal Repayment (Up to ₹1,50,000)

• Section 80D, 80E, 80G, HRA, LTA etc.

✔ Ideal for people with high home loan + investments.

Home Loan Tax Benefits

Buying a home through a loan offers two major tax benefits:

1. Section 24(b): Home Loan Interest Deduction

• Maximum deductible = ₹2,00,000 per year (self-occupied property)

• Deduction reduces taxable income

Example:
If interest paid is ₹2,40,000 → allowable deduction = ₹2,00,000

2. Section 80C: Principal Repayment Deduction

• Maximum deductible = ₹1,50,000

• Part of the overall ₹1.5 lakh 80C limit

• Includes: PPF, ELSS, LIC premiums, home loan principal repayment

How the Income Tax Calculator Works

The calculator takes your:

• Annual income

• Home loan interest

• Home loan principal repaid

• Regime choice (Old or New)

Then it calculates:

1️⃣ Tax WITHOUT Home Loan

Taxable income = Annual Income

Tax is computed using selected regime’s slab.

2️⃣ Tax WITH Home Loan

For Old Regime:

• Interest deduction = up to ₹2,00,000

• Principal deduction = up to ₹1,50,000

• Total deduction decreases taxable income

For New Regime:
Home loan deductions not allowed, so tax remains same.

3️⃣ Total Tax Benefit

Tax Benefit = Tax (without home loan) – Tax (with home loan)

Formula Used

Old Regime

Tax computed slab-wise →
Add 4% Health & Education Cess.

New Regime

Example Calculation

Let’s assume:

• Annual Income = ₹12,00,000

• Interest Paid = ₹2,50,000

• Principal Repaid = ₹1,80,000

• Gender = Male

• Regime = Old

Step 1: Apply deductions

Interest allowed = ₹2,00,000
Principal allowed = ₹1,50,000

Total deduction = ₹3,50,000

Taxable Income (Old) =
₹12,00,000 – ₹3,50,000 = ₹8,50,000

Step 2: Compute Old Regime Tax

Up to 2.5L → 0%
2.5L–5L → 5% = ₹12,500
5L–8.5L → 20% = ₹70,000

Subtotal = ₹82,500
Cess 4% = ₹3,300
Total Tax = ₹85,800

Tax WITHOUT Home Loan (Old Regime)

Taxable = ₹12,00,000 → Slab tax = ₹1,82,000 (approx)

Tax Benefit

₹1,82,000 – ₹85,800 = ₹96,200 saved

Comparison Table — Old vs New Regime

Why This Calculator Is Useful

• Instantly compares Old vs New Regime

• Shows home loan tax benefit

• Helps decide whether to switch regimes

• Accurate slab-wise computation

• Ideal for finance blogs, home loan websites, tax planning portals

18+ Frequently Asked Questions

Q1: Which tax regime is better for salaried employees?

If you have large deductions (80C, HRA, interest), Old Regime is usually better. Otherwise, New Regime may offer lower tax.

Q2: Does New Regime allow home loan deductions?

Generally no, except very limited exceptions. For standard individuals, deductions under Section 24(b) and 80C do not apply.

Q3: What is the maximum home loan interest deduction?

Under Section 24(b): ₹2,00,000 (self-occupied property).

Q4: What is the deduction for principal repayment?

Under Section 80C: up to ₹1,50,000 including other investments.

Q5: Is 87A rebate available?

Yes, taxpayers with taxable income up to the threshold get full rebate (varies by regime).

Q6: Is cess applied on tax?

Yes, 4% Health & Education Cess applies after computing slab tax.

Q7: Can I switch between regimes every year?

Yes, salaried individuals can choose each year.

Q8: Does gender affect tax?

Not usually under new rules; legacy benefits existed earlier for women in some states.

Q9: Are HRA and LTA allowed in New Regime?

No, they are removed.

Q10: Are home loan benefits available for let-out property?

Yes, interest deduction rules differ; consult a CA.

Q11: Which income is taxable?

Salary, business income, rental income, capital gains, interest income.

Q12: Does this calculator include surcharge?

You can add surcharge if your income crosses thresholds (50L, 1Cr etc.).

Q13: Can NRIs use this calculator?

Yes, slabs apply similarly but deductions may differ.

Q14: What if taxable income is ₹0 after deductions?

Tax becomes zero.

Q15: Is principal prepayment allowed in 80C?

Yes, principal repaid counts toward 80C.

Q16: Is joint home loan interest shared?

Yes, proportionate to ownership.

Q17: Does EMI insurance count as deduction?

Only interest/principal portions count; insurance premiums do not.

Q18: Should I consult a CA?

Yes, especially for multiple properties or high income.

Conclusion

Choosing the right tax regime is one of the most important financial decisions every year. With changing income-tax rules and the impact of home loan deductions, manual calculations can easily lead to mistakes.

This Income Tax Calculator (Old + New Regime) gives you accurate:

• Tax with home loan

• Tax without home loan

• Net tax benefit

• Taxable income breakdown

It’s ideal for planning, filing and deciding the better regime for FY 2025–26.