Income Tax Calculator

How This Is Calculated

Your taxable income is your gross annual income minus the ₹75,000 standard deduction, available to salaried taxpayers under the new regime, and any other deductions you specify, like an employer's NPS contribution. That taxable income then runs through the new regime's slab rates. Each portion of your income is taxed at the rate for its own slab, not your entire income at your highest rate, which is what slab-wise or progressive taxation means in practice. A 4% health and education cess is added on top of the calculated tax to arrive at your final liability.

Understanding the Section 87A Rebate

Under the new regime, if your taxable income is ₹12,00,000 or below, a rebate effectively brings your tax liability down to zero, even though the slab calculation would otherwise show some tax owed. This calculator applies that rebate automatically. Just above that threshold, tax applies based on the full slab calculation, with no partial rebate or gradual phase-out, which creates an unusual jump described in more detail below.

The "Tax Cliff" Just Above ₹12 Lakh Taxable Income

Because the Section 87A rebate is an all-or-nothing threshold rather than a gradual phase-out, crossing it by even a small amount can dramatically increase your tax bill. Someone with taxable income of exactly ₹12,00,000 pays zero tax. Someone with taxable income of ₹12,01,000, just ₹1,000 more, loses the rebate entirely and owes tax on the full slab calculation instead, which in this case works out to roughly ₹62,556 including cess.

In terms of gross income before the ₹75,000 standard deduction, this means someone earning ₹12,75,000 a year pays zero income tax, while someone earning ₹12,76,000, just ₹10,000 more annually, owes over ₹62,000 in tax. This is a real and often surprising feature of the current rebate structure, worth being aware of if your income sits near this threshold, since a small raise or bonus that pushes you just over the line can have an outsized effect on your take-home pay.

A Worked Example

At the default ₹15,00,000 gross income with no additional deductions, taxable income comes to ₹14,25,000 after the standard deduction. Since that's above the ₹12,00,000 rebate threshold, tax is calculated slab by slab: nothing on the first ₹4,00,000, 5% on the next ₹4,00,000 (₹20,000), 10% on the next ₹4,00,000 (₹40,000), and 15% on the remaining ₹2,25,000 (₹33,750), for a pre-cess total of ₹93,750. Adding the 4% cess of ₹3,750 brings the total tax payable to ₹97,500, an effective tax rate of about 6.5% of gross income, well below the 15% top slab rate that technically applied to the last portion of income.

How Tax Scales as Income Rises

Because the system is progressive, your effective tax rate, total tax as a share of gross income, rises gradually as income increases rather than jumping straight to your highest slab rate. At ₹20,00,000 gross, total tax comes to roughly ₹1,92,400, an effective rate of about 9.6%. At ₹25,00,000 gross, tax rises to roughly ₹3,19,800, about 12.8% effective. At ₹50,00,000 gross, tax reaches roughly ₹10,99,800, about 22% effective, still noticeably below the 30% top slab rate, since only the income above ₹24,00,000 is taxed at that highest rate.

Why Your Effective Tax Rate Is Lower Than Your Highest Slab

A common misconception is that if your income falls into, say, the 20% slab, all of your income is taxed at 20%. In reality, only the portion of income that falls within that specific slab is taxed at that rate; everything below it is taxed at the lower rates for those respective slabs. This is why the effective tax rate, total tax divided by total income, is always lower than the highest slab rate that technically applies to your income, sometimes substantially lower, especially for income levels just above a slab boundary.

What Counts as Taxable Income

Your gross income for tax purposes typically includes your salary, covering basic pay, HRA, special allowance, and other taxable components, plus any bonus or variable pay received during the year, income from other sources like bank interest if applicable, and capital gains from investments, though capital gains are often taxed separately under their own rules rather than added to your regular income slabs. This calculator assumes the number you enter is your total taxable salary income. If you have significant income from other sources, your actual total tax liability could be higher than what's shown here, so treat this calculator's output as an estimate specifically for salary income rather than a complete picture of your total tax situation.

Advance Tax, TDS, and What This Calculator Doesn't Cover

If you're a salaried employee, your employer typically deducts tax at source, TDS, from your monthly salary throughout the year, based on your declared income and investments, so that by the time you file your annual return, most or all of your tax liability is already paid. This calculator estimates your total annual tax liability, not what's already been deducted, so use it to sanity-check your Form 16 or payslip TDS figures rather than as a replacement for them. If you have income outside of salary that isn't subject to TDS, like freelance income or rental income, you may need to pay advance tax in installments during the year to avoid interest penalties, a topic worth discussing with a tax professional if it applies to you.

Comparing Salaries Near the Rebate Threshold

The tax cliff described above means two people with very similar salaries can have dramatically different take-home pay if one falls just below the ₹12,75,000 gross income mark and the other falls just above it. A person earning ₹12,70,000 pays no income tax. A person earning ₹12,80,000, only ₹10,000 more annually, owes roughly ₹63,180 in tax. If your income sits near this boundary, even small decisions, like the timing of a bonus payout or a voluntary NPS contribution that reduces taxable income, can have an outsized effect on your actual tax bill, making it worth running your specific numbers through this calculator rather than assuming a small raise is purely a net positive.

Common Mistakes When Estimating Income Tax

Forgetting to apply the standard deduction before checking the rebate threshold. The ₹12,00,000 rebate threshold applies to taxable income, after the standard deduction, not to gross salary directly. Comparing gross salary directly against ₹12,00,000 without subtracting the standard deduction first gets the threshold comparison wrong.

Assuming the effective tax rate applies to next year's raise. Because the system is progressive, a raise is taxed at your marginal rate, the rate for the next slab your additional income falls into, not your current effective rate. A raise can be taxed at a noticeably higher rate than your average rate on existing income, especially if it pushes income into a new slab or across the rebate threshold.

Not accounting for cess when comparing take-home figures. The 4% health and education cess is easy to overlook when doing quick mental math, but it applies on top of the slab-calculated tax and does add up, especially at higher income levels where total tax is already substantial.

Old vs New Regime: When the Old Regime Might Still Win

The new regime offers lower slab rates and a straightforward standard deduction, but it doesn't allow most of the deductions and exemptions available under the old regime, like Section 80C investments up to ₹1,50,000, HRA exemption, or home loan interest deduction under Section 24. For taxpayers with substantial eligible deductions, particularly those with a home loan, significant 80C investments, and HRA claims, the old regime can sometimes result in lower overall tax despite its higher slab rates. There's no universal answer here; the only reliable way to know which regime is better for your specific situation is to calculate your tax liability both ways using your actual eligible deductions and compare.

Estimating the Tax Impact of a Raise or Bonus

Because raises and bonuses are taxed at your marginal rate rather than your average effective rate, a useful way to estimate the actual take-home impact of a raise is to run this calculator twice: once with your current income, and once with your income plus the raise or bonus amount. The difference in total tax between the two runs is the actual tax cost of that additional income, usually more accurate than assuming it's taxed at your current effective rate.

This is especially important near slab boundaries and the rebate threshold, where a raise can push a meaningful chunk of new income into a higher bracket, or eliminate the Section 87A rebate entirely, making the after-tax value of a raise noticeably smaller than the headline number suggests. Employers and employees negotiating a raise around these boundaries sometimes structure it as a slightly larger increase specifically to offset the additional tax burden, though this requires knowing where the relevant thresholds sit.

Does Section 80D Health Insurance Still Apply Under the New Regime?

No. Most Chapter VI-A deductions, including Section 80D for health insurance premiums, Section 80C for investments like ELSS, PPF, or life insurance, and Section 24 for home loan interest, are not available under the new regime. The new regime's appeal is its simplicity and lower slab rates in exchange for giving up these deductions, rather than stacking the standard deduction on top of them. If you rely heavily on 80D, 80C, or similar deductions to reduce your taxable income, it's worth calculating your tax liability under the old regime as well before assuming the new regime is automatically better for you.

Standard Deduction and Other Adjustments

The ₹75,000 standard deduction is a flat reduction available to salaried and pensioner taxpayers under the new regime, applied automatically without needing to submit any proof or receipts. The "Other Deductions" field in this calculator lets you account for a few new-regime-compatible reductions, like an employer's NPS contribution under Section 80CCD(2), which remains available even under the new regime, unlike most other Chapter VI-A deductions.

Frequently Asked Questions