How to Calculate Income Tax in India for Each Slab: A Simple Step-by-Step Guide

Income Tax in India for Each Slab: An income tax calculator is a simple tool that helps you figure out how much tax you need to pay based on your income details. It also allows you to compare the tax amounts between the old and new tax systems. This makes it easier for you to decide which system benefits you the most.

The calculator has been updated according to the Union Budget 2024-25. This update helps you estimate your tax more accurately for better planning. It is a smart way to handle taxes without hiring a professional tax consultant.

What Are the Two Tax Regimes?

In India, taxpayers can choose between two tax regimes: the old tax regime and the new tax regime. Each regime has its own tax slabs and benefits.

New Tax Regime: This regime has lower tax rates but offers fewer deductions and exemptions.
Old Tax Regime: This regime has higher tax rates but allows you to claim several deductions and exemptions.

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The choice between these regimes depends on which one helps you save more money based on your income and deductions.

Tax Slabs in the New and Old Tax Regimes

In the new tax regime, the tax rates are lower, but there are fewer deductions. According to CNBC, one advantage of this regime is the standard deduction of ₹75,000, which helps reduce taxable income without requiring proof of investments.

In the old tax regime, tax rates are higher, but you can claim various exemptions and deductions like HRA, 80C deductions, and more. There is also a rebate of ₹12,500 for taxpayers with income up to ₹5 lakh, which helps reduce the tax amount to zero.

The tax slabs under the old regime are as follows:

Slabs (Rs.)	Individuals (Age < 60 years)	Resident Senior Citizens (>60 but <80 years)	Resident Super Senior Citizens (80 years and above)
Upto 2,50,000	Nil	Nil	Nil
2,50,001 – 3,00,000	5%	Nil	Nil
3,00,001 – 5,00,000	5%	5%	Nil
5,00,000 – 10,00,000	20%	20%	20%
Above 10,00,000	30%	30%	30%

The tax slabs under the new regime are as follows:

Tax Slab for FY 2023-24	Tax Rate	Tax Slab for FY 2024-25	Tax Rate
Upto 3,00,000	Nil	Upto 3,00,000	Nil
3,00,001 – 6,00,000	5%	3,00,001 – 7,00,000	5%
6,00,001 – 9,00,000	10%	7,00,001 – 10,00,000	10%
9,00,001 – 12,00,000	15%	10,00,001 – 12,00,000	15%
12,00,001 – 15,00,000	20%	12,00,001 – 15,00,000	20%
Above 15,00,000	30%	Above 15,00,000	30%

Steps to Calculate Your Income Tax

Step 1: Calculate Your Gross Income

Your gross income includes everything you earn before tax is deducted. This includes:

Salary: This includes basic pay, HRA, LTA, and other allowances.
Other Sources of Income: For example, interest from savings accounts or rental income.

Step 2: Apply Exemptions and Deductions

Once you know your gross income, you can reduce it by applying exemptions and deductions. Here are some common ones:

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Standard Deduction: ₹50,000 in the old regime and ₹75,000 in the new regime.
Section 80C: You can claim up to ₹1.5 lakh for investments in PPF, EPF, ELSS, and life insurance (only in the old regime).

Other Deductions:

Section 80D: Health insurance premiums.
Section 80TTA: Interest on savings accounts (up to ₹10,000).
Section 80CCD(1): Contributions to the National Pension Scheme (NPS) (up to ₹50,000).

Step 3: Calculate Your Taxable Income

Taxable income is what remains after applying exemptions and deductions to your gross income. For example, if your gross income is ₹10 lakh and you have ₹2 lakh in deductions, your taxable income would be ₹8 lakh.

Step 4: Apply Tax Slabs

After calculating your taxable income, apply the relevant tax slabs.

New Regime:

Income up to ₹3 lakh is tax-free.
The next ₹7 lakh is taxed at 5%.

Old Regime:

Income is taxed at higher rates, and deductions will reduce your tax liability.

Step 5: Add Cess and Surcharge

Once you have calculated your tax, you need to add cess and surcharge. 4% of your total tax is added as health and education cess. For those earning more than ₹50 lakh, a surcharge applies: