Calculate Income Tax on Salary


Understanding how to calculate income tax on salary is essential for financial planning if you’re a salaried employee or a business owner. With changing tax slabs, exemptions, and deductions under the old and new tax regimes, knowing how much income tax you will pay helps in better budgeting and compliance. This webpage provides a step-by-step approach to income tax calculation, including calculating taxable income from salary, calculating HRA exemptions, and determining tax liability under different scenarios.


Calculate your income tax on salary easily by understanding gross salary, deductions, exemptions, and tax slabs. For FY 2024-25, the standard deduction is ₹50,000, increasing to ₹75,000 in FY 2025-26. Use the new or old tax regime to optimize savings and reduce taxable income effectively.

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Table of Contents:

Essentials for Tax Calculation

Before we start with the tax calculations on your salary, it is important to be aware of the fundamental concepts:

  • Gross Salary: Total earnings before any deductions.
  • Exemptions: Amounts excluded from taxable income (e.g., HRA, LTA).
  • Deductions: Reductions in taxable income under various sections like 80C, 80D.
  • Net Salary: The take-home salary after all deductions.
  • Taxable Income: The income on which tax is calculated after exemptions and deductions.

Steps to Calculate Tax on Salary

Calculating income tax on salary can be simplified by following a structured approach. Below are the key steps to determine your tax liability.

  1. Identify your Gross Salary (Basic Pay + Allowances + Perquisites).
  2. Deduct tax-exempt allowances like HRA exemption (if applicable).
  3. Subtract standard deduction (₹50,000 Standard Deduction for FY 2023-24).
  4. Apply income tax slabs based on the chosen tax regime.
  5. Consider tax deductions (only in the old regime) under Section 80C, 80D, and others.
  6. Compute tax payable after applicable deductions and rebates.

Understanding Salary Components

  • Basic Salary: Fixed part of your salary.
  • House Rent Allowance (HRA): Partially tax-free if conditions met.
  • Special Allowances: Fully taxable.
  • Provident Fund (PF) Contribution: Employee’s contribution qualifies for tax deduction.
  • Professional Tax & Standard Deduction: Deductible from salary.

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Calculate Income Tax on Salary in New Regime

As per the recent announcement in Union Budget 2025, new tax slabs are introduced under the New Tax regime. This new tax slabs are applicable for FY 25-26. Presently, for FY 24-25 the old slabs of New Tax regime are applicable.

New Tax Regime Tax Slab FY 24-25

Check the tax slabs of the New Tax regime for the financial year 2024-25 (before the 2025 budget announcement)

Annual Income (₹) Tax Rate
Up to ₹3,00,000 NIL
₹3,00,001 - ₹7,00,000 5%
₹7,00,001 - ₹10,00,000 10%
₹10,00,001 - ₹12,00,000 15%
₹12,00,001 - ₹15,00,000 20%

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*Note for income above ₹50 lakhs, there will be an additional surcharge as per the slabs.

New Tax Regime Updated Tax Slab FY 25-26

Check the tax slabs ofthe New Tax regime for financial year 2025-26 after the union budget 2025.

Annual Income (₹) Tax Rate
Up to ₹4 Lakhs NIL
₹4 Lakhs to ₹8 Lakhs 5%
₹8 Lakhs to ₹12 Lakhs 10%
₹12 Lakhs to ₹16 Lakhs 15%
₹16 Lakhs - ₹20 Lakhs 20%

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*Note for income above ₹50 lakhs, there will be an additional surcharge as per the slabs.

Key Points:

  • No deductions under 80C, 80D, HRA, etc.
  • Standard Deduction of ₹50,000 allowed (FY24-25) and Standard Deduction of ₹75,000 allowed (FY25-26).
  • Lower tax rates compared to the old regime.

Calculate Income Tax on Salary with Example in New Tax Regime

Let’s Say:

Gross Salary: ₹10,00,000

  • Standard Deduction: ₹50,000
  • Taxable Income: ₹9,50,000

Tax Calculation:

  • ₹3,00,000 – ₹6,00,000: 5% = ₹15,000
  • ₹6,00,001 – ₹9,00,000: 10% = ₹30,000
  • ₹9,00,001 – ₹9,50,000: 15% = ₹7,500

Total Tax Payable = ₹52,500 + 4% Cess = ₹54,600

Calculation of Income from Salary:

Gross Salary = Basic salary + HRA + Special Allowance + Transport Allowance + any other allowance.

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Calculate Income Tax on Salary in Old Regime

In the old tax regime, there are several exemptions and provisions for tax deductions. Firstly let’s go through the tax slabs:

Old Tax Regime Slabs for FY 2023-24

Annual Income (₹) Tax Rate
Up to ₹2,50,000 NIL
₹2,50,001 - ₹5,00,000 5%
₹5,00,001 - ₹10,00,000 20%
Above ₹10,00,000 30%
*Note for income above ₹50 lakhs, there will be an additional surcharge as per the slabs.

Key Points:

  • Eligible for deductions under 80C (₹1.5 lakh), 80D, 80E, HRA exemption, etc.
  • Higher tax rates compared to the new regime.

Calculate Income Tax on Salary with Example in Old Tax Regime

Let’s say:

Gross Salary: ₹10,00,000

  • Standard Deduction: ₹50,000
  • 80C Deductions (PPF, EPF, LIC): ₹1,50,000
  • Taxable Income: ₹8,00,000

Tax Calculation:

  • ₹2,50,001 – ₹5,00,000: 5% = ₹12,500
  • ₹5,00,001 – ₹8,00,000: 20% = ₹60,000

Total Tax Payable = ₹72,500 - ₹12,500 (Rebate under 87A) = ₹60,000 + 4% Cess = ₹62,400

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Things to Know for Income Tax Calculations

Understanding income tax calculations helps individuals plan their finances and reduce tax liabilities effectively. Below are the key aspects to consider while calculating income tax.

  • TDS (Tax Deducted at Source): Employers deduct TDS based on salary structure.
  • Rebate under Section 87A: Available for income up to ₹7 lakh in new regime.
  • HRA Exemption Calculation: Minimum of (i) Actual HRA received, (ii) 50% of Basic (Metro) / 40% (Non-Metro), (iii) Rent paid - 10% of Basic Salary.
  • Professional Tax: Deductible as per state rules.
  • Identifying Income Sources
  • Additional Cess & Surcharge
  • Understand Tax Regimes: Old vs New

Identify Your Income Sources

Income can come from multiple sources, and each is taxed differently. The Income Tax Department of India categorizes income into five sources:

Source of Income Examples
Salary Income Basic salary, allowances, bonuses, commissions
Income from House Property Rental income, deemed rental income
Business or Professional Income Freelancing, consultancy, business profits
Capital Gains Profits from selling property, stocks, or other assets
Income from Other Sources Interest from savings accounts, FDs, dividends, gifts, lottery winnings

Understand Tax Regimes: Old vs New

The Old Tax Regime provides tax exemptions and deductions, whereas the New Tax Regime offers lower tax rates but eliminates most exemptions.

Key Differences: Old vs. New Regime

Criteria Old Regime New Regime
Tax Rates Higher Lower
Deductions Allowed Yes (80C, 80D, HRA, etc.) No (except ₹50,000 Standard Deduction)
Standard Deduction ₹50,000 ₹75,000
Best for Those claiming deductions Those preferring simplicity

Fill Form 10IE or Form 10IEA to choose from new or old tax regimes

Taxable Income Calculation Formula

Taxable Income=Gross Income−Deductions

Gross Income Includes:

  • Salary (Basic + Allowances + Bonus)
  • Income from house property, business, or capital gains
  • Other income like interest or dividends

Consider TDS - Tax Deducted at Source

  • Employers deduct TDS on salary before paying employees.
  • Banks deduct TDS on FD interest if it exceeds ₹40,000 (₹50,000 for senior citizens).
  • TDS can be adjusted against the final tax payable while filing returns.

Added Cess & Surcharge

After calculating tax, add Health & Education Cess (4%). Besides that for income above ₹50 lakhs, there will also be a surcharge based on the slab surcharge rates.

Total Income (₹) Surcharge Rate
₹50 lakh – ₹1 crore 10%
₹1 crore – ₹2 crore 15%
₹2 crore – ₹5 crore 25%

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Ways to Save Income Tax as a Salaried Individual

Here are some effective ways to save tax as salaried employees:

  1. Claim Deductions Under Section 80C (Up to ₹1.5 Lakh)

    2. Section 80C allows deductions on investments and expenses up to ₹1,50,000 per year. Some eligible investments include:

    Investment/Expense Maximum Deduction (₹)
    Employees' Provident Fund (EPF) ₹1,50,000
    Public Provident Fund (PPF) ₹1,50,000
    National Pension System (NPS) – Tier 1 ₹1,50,000
    Equity-Linked Savings Scheme (ELSS) ₹1,50,000
    Life Insurance Premium (LIC) ₹1,50,000
  2. Claim Standard Deduction (₹50,000 - ₹75,000)
    • New Regime: Standard deduction of ₹75,000 (from FY 2024-25 onwards).
    • Old Regime: Standard deduction of ₹50,000.
  3. Save Tax on Home Loans (Section 80C & Section 24(b))

    4. If you have a home loan, you can claim:

    Section Deduction Maximum Limit (₹)
    80C Principal Repayment ₹1,50,000
    24(b) Home Loan Interest ₹2,00,000
  4. Save on Medical Insurance (Section 80D) (Up to ₹1 Lakh)

    5. You can claim a deduction on health insurance premiums paid for yourself and your family.

    Category Maximum Deduction (₹)
    Self & Family (Below 60 years) ₹25,000
    Self & Family (Above 60 years) ₹50,000
    Parents (Below 60 years) ₹25,000
    Parents (Above 60 years) ₹50,000
    Preventive Health Check-up (Included in 80D) ₹5,000
  5. Avoid Tax on EPF & Gratuity (If Withdrawn After 5 Years)
    • EPF withdrawal is tax-free if withdrawn after 5 years of continuous service.
    • Gratuity up to ₹20 lakh is tax-free under the Payment of Gratuity Act.

    Check more on EPF withdrawal rules from the linked page.

  6. Use Tax-Saving Fixed Deposits & Bonds

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Frequently Asked Questions

Income tax is calculated based on your total taxable income after deductions, using applicable tax slabs under the chosen regime (old or new).

Under the new tax regime, an annual income of up to ₹7.5 lakh is tax-free due to the standard rebate of ₹25,000 for income below ₹7 lakh.

For a monthly salary of ₹80,000, the annual taxable income and applicable tax depend on deductions, exemptions, and tax slabs.

For a ₹19,00,000 salary, tax is calculated based on applicable slabs, deductions, and exemptions under the old or new regime.

Income tax is calculated by subtracting deductions and exemptions from total income, then applying the respective tax slabs.

Tax on ₹10 lakh income varies depending on deductions and whether the old or new regime is chosen, with slabs starting at 10%.

TDS on ₹80,000 salary is deducted as per estimated annual income and tax liability, adjusted with exemptions and deductions.

Taxes can be reduced by maximizing exemptions (like HRA), claiming deductions (like Section 80C investments), and using tax-saving allowances.

For a CTC of 8 LPA, in-hand salary depends on deductions (PF, taxes, etc.), typically ranging between ₹55,000-60,000 per month.

You can pay zero tax by ensuring taxable income stays within ₹7 lakh under the new regime or fully utilizing deductions under the old regime.

Calculate tax by applying the new regime slabs on taxable income (e.g., for ₹10 lakh: ₹25,000 at 5%, ₹75,000 at 10%).

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