1. How Income Tax Is Calculated On Salary

Indian income tax on salary is calculated using a slab system where different portions of your income are taxed at different rates. The tax calculation depends on your taxable income, chosen tax regime (new or old), and age group.

2. Tax Calculation Methodology

The calculator uses the following formula:

Where:

• Taxable Income — Gross salary minus deductions (HRA, 80C, etc.)
• Slab Rate — Progressive tax rates based on income brackets
• Rebates — Tax reductions like Section 87A

Additional Components: Health and Education Cess (4%) is added to the final tax amount after rebates.

3. New vs Old Tax Regime

New Regime (2023-24): Lower tax rates but fewer deductions available. Default option for most taxpayers.

Old Regime: Higher tax rates but allows more deductions (HRA, 80C, 80D, etc.). Beneficial for those with significant investments and deductions.

4. Using the Calculator

Steps: Enter your taxable income (after deductions if using old regime), select tax regime, and choose your age group. The calculator will compute your tax liability including applicable rebates and cess.

5. Frequently Asked Questions (FAQ)

Q1: Which regime should I choose?
A: New regime is better if you have few deductions. Old regime may be better if you have significant investments eligible for deductions.

Q2: What's the tax-free limit?
A: Under new regime: ₹7 lakh (with rebate). Under old regime: ₹2.5-5 lakh depending on age.

Q3: Are there any surcharges?
A: Surcharge applies if income exceeds ₹50 lakh (10-37% based on income level).

Q4: What is Section 87A rebate?
A: Rebate up to ₹12,500 (old regime) or ₹25,000 (new regime) for incomes below ₹5/7 lakh respectively.

Q5: How is cess calculated?
A: 4% health and education cess is calculated on tax after rebates.