Income Tax Calculator FY 2025–26: Why Global Employers Should Pay Attention (Especially If You’re Hiring in India via EOR/PEO service provider)

Income Tax Calculator FY 2025–26: Why Global Employers Should Pay Attention (Especially If You’re Hiring in India via EOR/PEO service provider)

The Union Budget 2025 didn’t just tweak India’s tax slabs — it effectively reshaped the cost-benefit equation for global companies building teams in India by EOR/ PEO service providers.

Thanks to the revised tax regime, salaried employees earning up to ₹12,75,000 will now pay zero tax. Consequently, global business leaders exploring India as a remote hiring destination can view this not just as employee-friendly reform, but also as a direct retention and cost optimization opportunity.

✅ At a Glance – What’s Changed

Source: EY India

Why does this matter to decision-makers abroad? Because India’s EOR/PEO talent strategies just got even more competitive — and more affordable — compared to hiring in traditional markets.

In other words, employees keep more money in their pockets while companies gain an automatic advantage in India’s competitive talent market.

New Income Tax Slabs for FY 2025–26 (New Regime)

Standard Deduction remains at ₹75,000
Section 87A Rebate raised to ₹60,000
NPS Employer Contribution still deductible (up to 14%)

Moreover, the Standard Deduction remains at ₹75,000, the Section 87A Rebate has been raised to ₹60,000, and the NPS Employer Contribution deduction (up to 14%) continues unchanged.

Why Global Employers Should Care

1️⃣ Lower Cost-to-Company = Higher Margin Per Hire
Employees now save up to ₹1.14L annually. Therefore, their take-home rises without increasing payroll expenses. As a result, international companies can secure mid-senior technical talent in India more cost-effectively.

2️⃣ Plug-and-Play Hiring via PEO/EOR Models
Under the new regime, TDS defaults to the new slabs. This means payroll compliance becomes smoother for businesses working with EOR/PEO providers — especially since fewer declarations are required during onboarding.

3️⃣ Easy-to-Use Tax Calculator = Better Candidate Experience
Leading Indian PEO/EOR partners in Delhi, Bangalore, and Pune have already integrated FY 2025–26 slabs into salary calculators. Consequently, HR teams abroad can instantly compare pre- and post-budget payroll costs, making planning far quicker.

4️⃣ More Predictable Cash Flow (Especially for Startups)
Because the new structure standardizes deductions, finance teams gain more accurate forecasts of payroll liabilities. For international startups, this predictability is invaluable while scaling global operations.

⚖️ What About the Old Tax Regime?

Employees who still want to continue under the old regime must claim at least ₹8.5L in exemptions/deductions — otherwise they end up paying more tax than under the new structure.

Otherwise, they will pay more tax than under the new structure.

Most remote employees don’t have that level of deductions — which means the new regime becomes the default choice for PEO/EOR-led hires in 2025–26. 

the old tax regime now requires employees to claim very high deductions (₹8.5L+) in order to remain competitive, most remote employees will naturally opt for the new tax regime. For example, a mid-senior engineer earning ₹20L will save ₹85,800 under the new tax regime.

That creates three practical advantages for companies using PEO/EOR models in India:

✅ Onboarding becomes simplified
PEO/EOR partners no longer need to collect a long list of exemption proofs or declaration documents from remote employees (which used to delay onboarding and payroll setup).

✅ Payroll processing is faster
With the new regime becoming the default option, TDS calculations are standardised. This allows PEO/EOR providers to run payroll faster — and reduces back-and-forth between employee, client and payroll teams.

✅ The candidate experience improves
Remote candidates get higher take-home pay without needing to manage complex deduction planning. That makes job offers via PEO/EOR channels more attractive — especially at the mid-senior level. Moreover, India’s new regime makes payroll processing faster. 

In short, the shift toward the new tax regime removes friction from the entire PEO/EOR workflow — from onboarding to payroll to candidate conversion — and makes India an even more compelling market for compliant remote hiring.

Impact on Overseas Remote Employees

1. Higher Take-Home Pay Without Salary Hike

• Under the new slabs, employees earning up to ₹12.75 lakh pay zero tax.

• Therefore, even overseas remote employees working for US, UK, EU, or GCC companies through PEO/EOR setups in India see their net income rise.

• In other words, they retain more money without depending on complex exemptions.

2. Simplified Payroll & Onboarding Experience

• Previously, employees had to submit investment proofs (rent receipts, LIC, HRA, etc.) to reduce taxable income.

• Now, with the new regime becoming default, there’s no need for long paperwork.

• Consequently, onboarding is faster, TDS is auto-applied, and payroll feels smoother for overseas remote hires.

3. Reduced Dependence on Tax Planning

• Overseas remote employees often struggled with navigating India’s complex exemptions while working for foreign firms.

• With standardised deductions and slab rates, they no longer need aggressive tax planning.

• Thus, employees can focus on their jobs while employers handle compliance via PEO/EOR.

4. Improved Job Offer Attractiveness

• Because take-home pay is higher, overseas employees working remotely for foreign companies see greater value in such offers.

• Consequently, companies using PEO/EOR models in India can attract and retain stronger talent pools.

✅ Bottom line: Overseas remote employees benefit from higher net salaries, smoother onboarding, and less compliance stress. For global employers, this translates into faster hiring, stronger retention, and a more competitive talent proposition.

Final Takeaway for International Decision-Makers

If your expansion plans include remote Indian teams, offshoring hubs, or EOR-based employment. In short, the FY 2025–26 tax reforms are reducing barriers — both financial and operational.

In other words, India just became even more competitive as a global talent source — without you increasing salary budgets.