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Let’s say Mr. Sharma is a 35-year-old working in Mumbai. He earns:
That’s a gross salary of ₹12,00,000. Here’s how his tax is calculated—step-by-step, friendly and easy!
Isn’t it interesting how simple tax calculation can be once broken down? Let’s dive deeper!
Let’s say Rina works as a software engineer and earns ₹10,00,000 annually. In India, the income tax system uses tax slabs. For simplicity, let’s assume the tax slabs are: 0% for income up to ₹2,50,000, 5% for income between ₹2,50,001 and ₹5,00,000, 20% for income between ₹5,00,001 and ₹10,00,000, and 30% for income above ₹10,00,000.
Since Rina's income is ₹10,00,000, she falls into the third slab, and here’s how her tax is calculated:
Read More – Smart Tax-Saving Strategies for Salaried Individuals
Total Tax: ₹1,12,500
Summary in pointers:
Let’s take the example of Amit, who works as a marketing manager in a company. His gross annual salary is ₹12,00,000. To calculate his income tax, he first needs to determine his taxable income, considering deductions and applicable tax rates.
Step 1: Gross Salary and Deductions
Amit’s gross salary is ₹12,00,000. He is eligible for deductions under sections like 80C (for investments in PPF, life insurance, etc.) of ₹1,50,000, and other deductions like 80D for medical insurance worth ₹25,000. So, his taxable income is:
Gross Salary = ₹12,00,000
Deductions = ₹1,50,000 (80C) + ₹25,000 (80D)
Taxable Income = ₹12,00,000 - ₹1,75,000 = ₹10,25,000
Step 2: Tax Calculation
Next, we apply the tax slabs:
Since Amit’s taxable income is ₹10,25,000, it falls into the third bracket.
Total Tax = ₹12,500 + ₹1,00,000 + ₹7,500 = ₹1,20,000
There’s also a tax rebate (if applicable), but Amit doesn’t qualify for any in this case.
Summary in Pointers:
Income Bracket | Tax Rate | Taxable Amount | Tax |
₹0 - ₹2,50,000 | 0% | ₹0 |
Here’s a comparative table of the Old Tax Regime vs New Tax Regime Slab Rates for FY 2024–25 for Individuals, HUFs, AOPs, BOIs, or Artificial Juridical Persons:
Net Taxable Income (₹) | Old Tax Regime (FY 2024–25) | Surcharge | New Tax Regime (FY 2024–25) | Surcharge |
Up to ₹2,50,000 | Nil |
₹50,00,001 – ₹1,00,00,000: ₹1,40,000 + 30% above ₹15,00,000
10%
₹1,00,00,001 – ₹2,00,00,000
₹1,12,500 + 30% above ₹10,00,000
15%
₹1,00,00,001 – ₹2,00,00,000: ₹1,40,000 + 30% above ₹15,00,000
15%
₹0 |
₹2,50,001 - ₹5,00,000 | 5% | ₹2,50,000 | ₹12,500 |
₹5,00,001 - ₹10,00,000 | 20% | ₹5,00,000 | ₹1,00,000 |
₹10,00,001 and above | 30% | ₹25,000 | ₹7,500 |
Total Tax | ₹1,20,000 |
Nil |
Up to ₹3,00,000 |
Nil |
₹2,50,001 – ₹5,00,000 | 5% above ₹2,50,000 | Nil | ₹3,00,001 – ₹7,00,000: 5% above ₹3,00,000 | Nil |
₹5,00,001 – ₹10,00,000 | ₹12,500 + 20% above ₹5,00,000 | Nil | ₹7,00,001 – ₹10,00,000: ₹20,000 + 10% above ₹7,00,000 | Nil |
₹10,00,001 – ₹12,00,000 | ₹1,12,500 + 30% above ₹10,00,000 | Nil | ₹10,00,001 – ₹12,00,000: ₹50,000 + 15% above ₹10,00,000 | Nil |
— | — | — | ₹12,00,001 – ₹15,00,000: ₹80,000 + 20% above ₹12,00,000 | Nil |
— | — | — | ₹15,00,001 – ₹50,00,000: ₹1,40,000 + 30% above ₹15,00,000 | Nil |
₹10,00,001 – ₹50,00,000 | ₹1,12,500 + 30% above ₹10,00,000 | Nil | — | — |
₹50,00,001 – ₹1,00,00,000 | ₹1,12,500 + 30% above ₹10,00,000 | 10% |
*T&C Apply
₹2,00,00,001 – ₹5,00,00,000
₹1,12,500 + 30% above ₹10,00,000
25%
Above ₹2,00,00,000: ₹1,87,500 + 30% above ₹15,00,000
25%
Above ₹5,00,00,000
₹1,12,500 + 30% above ₹10,00,000
37%
—
—
Let’s say Mr. Sharma, a 35-year-old marketing professional working in Mumbai. He earns a basic salary of ₹7,00,000 annually, along with House Rent Allowance (HRA) of ₹3,00,000 and special allowances of ₹2,00,000. He also contributes ₹50,000 to his Provident Fund (PF) and pays ₹20,000 annually towards a life insurance policy.
He has opted for the Old Tax Regime and wants to calculate his income tax liability for FY 2024–25.
Component | Amount (₹) |
Gross Salary | 12,00,000 |
HRA Exemption | 1,50,000 |
Standard Deduction (Sec 16) | 50,000 |
Net Salary After Exemptions | 10,00,000 |
80C Deductions (PF + LIC) | 70,000 |
Taxable Income | 9,30,000 |
Tax on ₹2.5L–₹5L @ 5% | 12,500 |
Tax on ₹5L–₹9.3L @ 20% | 86,000 |
Total Basic Tax | 98,500 |
Health & Education Cess @ 4% | 3,940 |
Total Tax Payable | 1,02,440 |
Paying income tax becomes super easy when you know your income, your savings, and which tax slab you fall into. Just like Rina, Amit, and Mr. Sharma, you can calculate your tax step by step. Choose the right regime, old or new, based on what suits you best. Simple planning and understanding can help you save more and stay stress-free at tax time!
Q1: How is income tax computed in India?
Income tax is computed on tax slabs and eligible deductions on your entire taxable income.
Q2: What are the popular deductions under the old tax regime?
Popular deductions are Section 80C (such as PF, LIC) and Section 80D (mediclaim).
Q3: What is the distinction between old and new tax regimes?
The old regime provides exemptions, whereas the new regime has lower rates but no significant exemptions.
Q4: How much tax will I have to pay if I make ₹12,00,000 annually?
Depends on deductions and options exercised; for instance, Mr. Sharma pays ₹1,02,440 under the old regime.
Q5: Do I have to pay tax if my income is less than ₹2.5 lakh?
No, income up to ₹2.5 lakh is exempt from tax under both regimes.
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