Exact tax calculation under both regimes. Real numbers, no guesswork. Find out what you actually pay — and why ₹5 lakh is a sweet spot.
If your gross salary is ₹5 lakh per year, your income tax is ₹0 under both the old and new tax regimes for FY 2025-26. The Section 87A rebate wipes out any tax that would otherwise apply. You don't need to invest in any tax-saving instruments to achieve this.
The new regime is the default from FY 2024-25. Here's exactly how the math works for ₹5 lakh salary:
| Step | Amount |
|---|---|
| Gross Salary | ₹5,00,000 |
| Standard Deduction (New Regime) | − ₹75,000 |
| Taxable Income | ₹4,25,000 |
| Tax on ₹0–₹4,00,000 (0% slab) | ₹0 |
| Tax on ₹4,00,001–₹4,25,000 (5% slab) | ₹1,250 |
| Total Tax Before Rebate | ₹1,250 |
| Section 87A Rebate (max ₹60,000) | − ₹1,250 |
| Final Tax Payable | ₹0 |
| Cess (4% on tax) | ₹0 |
| Total Tax + Cess | ₹0 |
Note: From FY 2025-26, the standard deduction under the new regime is ₹75,000. The 87A rebate covers up to ₹60,000 for taxable income up to ₹12 lakh.
Under the old regime, you get more deductions — but the result is the same at ₹5 lakh.
| Step | Amount |
|---|---|
| Gross Salary | ₹5,00,000 |
| Standard Deduction | − ₹50,000 |
| Taxable Income (no other investments assumed) | ₹4,50,000 |
| Tax on ₹0–₹2,50,000 (0% slab) | ₹0 |
| Tax on ₹2,50,001–₹4,50,000 (5% slab) | ₹10,000 |
| Total Tax Before Rebate | ₹10,000 |
| Section 87A Rebate (max ₹12,500 for income ≤ ₹5L) | − ₹10,000 |
| Final Tax Payable | ₹0 |
New Tax Regime wins. Both give you zero tax, but the new regime requires no investment proofs, no Form 12BB submission, and no tracking of 80C/80D investments. It's simpler, faster, and the result is identical.
The only reason to pick the old regime at ₹5 lakh is if you're already making eligible investments (like ELSS, PPF, NPS) and want to build those habits early. But purely from a tax-saving standpoint, the new regime is the smarter pick here.
Since your tax is already ₹0, spending money on ELSS or LIC just to "save tax" doesn't make sense at this salary. Invest only if the product makes financial sense — not for tax benefits you don't need.
If you receive any bonus, freelance income, or rental income that pushes your total income above ₹7 lakh (new regime) or ₹5 lakh (old regime), you may start paying tax. Calculate your total income before assuming ₹0 tax.
Even though you owe ₹0 tax, file your ITR. It's mandatory if TDS has been deducted from your salary. It also helps you claim a refund if excess TDS was cut, and builds a clean income record for loans and visas.
Enter your salary, HRA, investments, and deductions to get a precise breakdown in seconds.
Calculate My Tax Free →Planning a raise or comparing regimes for a different income? See how tax changes as your salary grows: