Taxes
How To Calculate Income Tax India
Indian income tax is charged in slabs, so only the income within each band is taxed at that band's rate. This calculator applies the slabs, the standard deduction, the section 87A rebate and the four percent cess for the new and old regimes.
Quick Answer
Tax = (slab tax - 87A rebate) x 1.04
- Income
- Gross annual income
- Slab tax
- Tax from applying the slab rates
- Rebate
- Section 87A rebate where applicable
- Cess
- Four percent health and education cess
An income of 12,00,000 under the new regime gets a standard deduction of 75,000, leaving 11,25,000 taxable. The slab tax is 68,750, the 87A rebate does not apply at this level, and with the four percent cess the total is about 71,500, an effective rate near six percent.
What Is Income Tax India?
Indian income tax is progressive and charged in slabs. Each band of income is taxed at its own rate, so a higher slab never applies to the whole income, only to the income within that band.
The new regime is the default. It offers wider slabs, a larger standard deduction and lower rates, but it strips out most exemptions and deductions, including the HRA exemption and the common section 80C investments.
The old regime keeps the deductions. Section 80C, section 80D, HRA, home loan interest and others remain available, but the slab rates are higher and the standard deduction is smaller.
Salaried taxpayers and pensioners get a standard deduction that applies automatically. It is seventy-five thousand rupees under the new regime and fifty thousand under the old, and it should not be entered again in the deductions field.
Slab tax is worked out band by band. Under the new regime income up to three lakh is untaxed, the next four lakh is taxed at five percent, the next three lakh at ten percent, and the bands above that at fifteen, twenty and thirty percent.
The section 87A rebate cancels the liability for smaller incomes. Under the new regime it is up to twenty-five thousand rupees where taxable income is seven lakh or less, and under the old regime it is up to twelve thousand five hundred where taxable income is five lakh or less.
The rebate is what makes the new regime effectively tax-free below seven lakh of taxable income, because the tax on income at that level is exactly cancelled by the rebate.
The health and education cess is added on top of the tax after the rebate. It is four percent of the tax, so it is a small but unavoidable addition to the final liability.
The effective tax rate is the total tax divided by gross income. It is always lower than the marginal slab rate, because the lower bands are taxed less or not at all, and it is the more useful number for planning.
Choosing between the regimes comes down to deductions. The new regime usually wins for people with few deductions and straightforward salary income, while the old regime can win when deductions are large, such as a home loan, substantial 80C investments or HRA in a high-rent city.
The crossover is often somewhere around three to four lakh of deductions. Below that the new regime tends to win; above it the old regime can pull ahead. The calculator lets you test both by changing the regime and the deductions.
Surcharge can apply at very high incomes, adding a percentage of the tax on top. This calculator does not model surcharge, so the figure is closest for incomes below the surcharge threshold.
Tax is normally paid through deduction at source by the employer, with any shortfall settled at filing. The figure here is the annual liability before any tax already deducted.
The calculator models the slab rates, the standard deduction, the 87A rebate and the cess for FY 2024-25 and nothing more. It does not know your residential status, your other income or any surcharge, so treat the output as an estimate and confirm against the official utility.
Formula
Slab tax = sum of rate x income within each band
Each band's rate applies only to the income that falls within it.
| Symbol | Meaning | Unit | Notes |
|---|---|---|---|
| x | Taxable income | currency | Gross income less deductions. |
| r | Slab rate | rate | Rate applying to a band. |
| l | Band lower | currency | Lower bound of the band. |
| u | Band upper | currency | Upper bound of the band. |
Total = (slab tax - 87A rebate) x 1.04
The rebate is removed, then the four percent health and education cess is added.
| Symbol | Meaning | Unit | Notes |
|---|---|---|---|
| T | Slab tax | currency | Tax from the slab rates. |
| R | Rebate | currency | Section 87A rebate where applicable. |
How To Calculate Income Tax India
- 1
Subtract the standard deduction
Remove seventy-five thousand under the new regime or fifty thousand under the old to get taxable income.
- 2
Subtract any deductions
Under the old regime remove eligible deductions such as 80C, 80D and home loan interest. The new regime allows none of these.
- 3
Apply the slab rates
Tax each band of taxable income at its own rate and add the bands together.
- 4
Apply the section 87A rebate
Cancel the liability up to twenty-five thousand under the new regime or twelve thousand five hundred under the old, where the income thresholds are met.
- 5
Add the health and education cess
Add four percent of the tax after the rebate to reach the total liability and the take-home figure.
Examples
Example 1: 12,00,000 under the new regime
- Annual income
- 1200000
- Regime
- New
- Deductions
- 0
| Step | Calculation | Result |
|---|---|---|
| Standard deduction | 75000 | 75000 |
| Taxable income | 1200000 - 75000 | 1125000 |
| Slab tax | 0.05 x 400000 + 0.10 x 300000 + 0.15 x 125000 | 68750 |
| Section 87A rebate | 1125000 > 700000 | 0 |
| Total with 4 percent cess | 68750 x 1.04 | 71500 |
Result: The slab tax is 68750, the rebate does not apply, and with cess the total is 71500, leaving 1128500 of the 1200000.
Example 2: The same income under the old regime with 2,50,000 of deductions
- Annual income
- 1200000
- Regime
- Old
- Deductions
- 250000
| Step | Calculation | Result |
|---|---|---|
| Standard deduction | 50000 | 50000 |
| Taxable income | 1200000 - 50000 - 250000 | 900000 |
| Slab tax | 0.05 x 250000 + 0.20 x 400000 | 92500 |
| Section 87A rebate | 900000 > 500000 | 0 |
| Total with 4 percent cess | 92500 x 1.04 | 96200 |
Result: With 250000 of deductions the taxable income falls to 900000, the slab tax is 92500 and the total is 96200, so the new regime wins on these numbers.
Calculator
Total tax payable
$71,500.00
- Taxable income
- $1,125,000.00
- Take-home (annual)
- $1,128,500.00
- Effective tax rate
- 5.96%
Values update as you type. This calculator covers the single scenario its formula assumes — see Common Mistakes for what it leaves out.
Prefer a full-width tool? Open the Income Tax India calculator page.
Common Mistakes
Applying the top slab rate to the whole income
Slabs are progressive. Only the income within each band is taxed at that band's rate, so the effective rate is far below the marginal rate.
Entering the standard deduction twice
It is applied automatically. Adding it again in the deductions field double-counts it and understates the tax.
Claiming old-regime deductions under the new regime
The new regime does not allow 80C, 80D, HRA or home loan interest. Entering deductions there produces a figure that does not apply.
Forgetting the health and education cess
The cess adds four percent to the tax after the rebate. Ignoring it understates the liability.
Assuming the 87A rebate always applies
The rebate is limited to incomes at or below the threshold and is capped at a fixed amount. Above the threshold it disappears entirely.
Ignoring surcharge at high incomes
Very high incomes attract a surcharge on the tax, which this calculator does not model. The figure is closest below the surcharge threshold.
Comparing regimes on pre-tax income
The choice between regimes depends on deductions, not income alone. Test both by changing the regime and the deductions.
FAQ
Which regime is better, new or old?
It depends on your deductions. The new regime has wider slabs and a bigger standard deduction; the old regime keeps 80C, 80D, HRA and home loan interest. The answer usually flips once deductions pass roughly three to four lakh.
What is the section 87A rebate?
A rebate that cancels the liability for smaller incomes: up to twenty-five thousand rupees under the new regime when taxable income is seven lakh or less, and up to twelve thousand five hundred under the old regime when it is five lakh or less.
What standard deduction applies for FY 2024-25?
Seventy-five thousand rupees for salaried and pension income under the new regime, and fifty thousand under the old. It applies automatically and should not be re-entered as a deduction.
What is the health and education cess?
A four percent charge added to the tax after the rebate. It is small but unavoidable and is included in the total liability shown here.
Why is my effective rate lower than my slab rate?
Because the lower bands are taxed less or not at all. The effective rate is the total tax divided by gross income, so it is always below the marginal slab rate.
Does this include surcharge?
No. Surcharge applies at very high incomes and is not modelled here, so the figure is closest for incomes below the surcharge threshold.
References
- [1]Income Tax Department, Income tax slabs and rates — https://www.incometax.gov.in/
- [2]Income Tax Department, Section 87A rebate — https://www.incometax.gov.in/iec/foportal/
- [3]Central Board of Direct Taxes, Health and education cess — https://www.incometaxindia.gov.in/