Salary Tax Calculation Guide in India (2025)
By A1UtilityHub – autilityhub@gmail.com
Reviewed by Priya Sharma, CA
Last updated: 2025-10-09
Taxes can feel complex, but a few basics make them easier. This guide explains the new vs. old regimes for FY 2024–25 (AY 2025–26), common salary components, key deductions, and example calculations. Use it to understand your slip and plan better.
Step 1: Income tax slabs (New Regime FY 2024–25)
| Annual Income (₹) | Tax Rate |
|---|---|
| Up to 3,00,000 | 0% |
| 3,00,001 – 6,00,000 | 5% |
| 6,00,001 – 9,00,000 | 10% |
| 9,00,001 – 12,00,000 | 15% |
| 12,00,001 – 15,00,000 | 20% |
| Above 15,00,000 | 30% |
Note: Health & Education Cess (4%) applies. Surcharge may apply for higher incomes. The new regime is default, but eligible taxpayers can opt for the old regime.
Step 2: Salary components to know
- Basic: Fully taxable.
- HRA: Partially exempt if you pay rent (conditions apply).
- Special allowances: Generally taxable (e.g., conveyance).
- LTA: Exempt twice in a 4-year block for travel within India.
- Perquisites: Taxed based on valuation (e.g., car, accommodation).
- Bonus/Incentives: Taxed in the year received.
Step 3: Deductions (mostly Old Regime)
- Section 80C: Up to ₹1.5 lakh (PPF, ELSS, LIC, EPF, NPS, etc.).
- Section 80D: Health insurance premiums (limits vary by age).
- Section 24(b): Home-loan interest up to ₹2 lakh (self-occupied).
- HRA exemption: If you live in rented accommodation.
- Standard deduction: Flat ₹50,000 for salaried (both regimes).
Step 4: Quick examples
Example A: Annual salary ₹10,00,000 under New Regime
- ₹0–3,00,000 = 0%
- ₹3,00,001–6,00,000 = 5% → ₹15,000
- ₹6,00,001–9,00,000 = 10% → ₹30,000
- ₹9,00,001–10,00,000 = 15% → ₹15,000
- Total tax = ₹60,000 + 4% cess = ₹62,400
Example B: Annual salary ₹10,00,000 under Old Regime with 80C ₹1.5 lakh + 80D ₹25,000
Taxable income ≈ ₹8,25,000. Compute as per old slabs, add cess. Depending on your deductions, the old regime may save more.
Step 5: Use our calculator
Skip manual math. Try the Salary Tax Calculator to compare regimes and see your estimated liability in seconds.
Common mistakes to avoid
- Not declaring HRA while paying rent.
- Missing proofs for 80C/80D investments.
- Confusing CTC with taxable income.
- Ignoring cess/surcharge in estimates.
- Not comparing regimes before filing.
Mini FAQ
- Is the new regime compulsory?
It’s default. You may opt for the old regime if you qualify and prefer it. - Is income up to ₹7,00,000 tax-free?
Section 87A rebate can make tax nil up to a threshold, subject to conditions. - Does the calculator include HRA?
Yes—enter rent, salary, and city details to estimate.
Official references
- Income Tax Department (Official Portal)
- Tax Slabs (Old Regime) — Official Help
- Rebate under Section 87A — Official Help