How to Calculate Income Tax
Income tax in India is calculated based on tax slabs. You can choose between the Old Regime (with deductions) and the New Regime (lower rates, fewer deductions).
Income Tax Formula
Tax = Σ (Income in slab × Slab rate) + Cess
Where:
- Gross Income = Total income from all sources
- Deductions = 80C, 80D, HRA, etc. (Old Regime)
- Taxable Income = Gross Income - Deductions
- Cess = 4% Health and Education Cess on tax
Step-by-Step:
- 1
Calculate gross income
Sum all income sources: salary, interest, rental, etc.
- 2
Apply deductions
Section 80C (₹1.5L), 80D (health insurance), NPS, HRA, etc.
- 3
Apply slab rates
Calculate tax for each income slab.
- 4
Add cess
Add 4% health and education cess on total tax.
Worked Examples:
₹10 LPA (New Regime 2024-25)
Gross Income: ₹10,00,000Regime: New
Result: Tax ≈ ₹54,600 (after standard deduction of ₹75,000)
Taxable income = ₹9,25,000. Tax computed across slabs + 4% cess.