How to Calculate Income Tax on Salary: FY 2026-27 Examples
To calculate income tax on your salary for FY 2026-27, take your taxable salary, subtract the standard deduction (₹75,000 in the new regime, ₹50,000 in the old), subtract any other deduction your regime allows, apply the slab rates, deduct the Section 87A rebate if you qualify, and add 4% cess. In the new regime, a salary of up to ₹12.75 lakh ends up with zero tax. This guide walks through each step with worked examples you can copy for your own numbers.
Short answer: most of the work is applying the slabs correctly. Tax is charged slab by slab, not at one rate on your whole income.
The 6 Steps to Calculate Your Salary Tax
- Find your taxable salary. Add up everything your employer pays you that is taxable: basic pay, dearness allowance, bonus, special allowance and the taxable part of HRA and other allowances.
- Subtract the standard deduction. ₹75,000 under the new regime, ₹50,000 under the old regime.
- Subtract other deductions your regime allows. In the new regime that is mainly your employer’s NPS contribution. In the old regime it includes 80C, 80D, home loan interest and HRA.
- Apply the slab rates to the result, which is your taxable income.
- Subtract the Section 87A rebate if your taxable income is within the limit: ₹60,000 rebate up to ₹12 lakh in the new regime, ₹12,500 rebate up to ₹5 lakh in the old regime.
- Add 4% health and education cess on the tax that is left.
Surcharge applies only above ₹50 lakh of income, so most salaried taxpayers can skip it.
Quick Reference: New Regime Slabs for FY 2026-27
| Taxable income | Rate | Tax at the top of the slab |
|---|---|---|
| Up to ₹4,00,000 | Nil | ₹0 |
| ₹4,00,001 – ₹8,00,000 | 5% | ₹20,000 |
| ₹8,00,001 – ₹12,00,000 | 10% | ₹60,000 |
| ₹12,00,001 – ₹16,00,000 | 15% | ₹1,20,000 |
| ₹16,00,001 – ₹20,00,000 | 20% | ₹2,00,000 |
| ₹20,00,001 – ₹24,00,000 | 25% | ₹3,00,000 |
| Above ₹24,00,000 | 30% | ₹3,00,000 plus 30% of the excess |
Shortcut: find the slab your taxable income falls in, take the tax at the bottom of that slab from the last column of the row above it, and add the slab rate on the extra income. For a taxable income of ₹13,25,000, that is ₹60,000 plus 15% of ₹1,25,000, which is ₹78,750.
Example 1: ₹9 Lakh Salary, New Regime
- Gross salary: ₹9,00,000
- Less standard deduction: ₹75,000
- Taxable income: ₹8,25,000
- Slab tax: ₹20,000 (on ₹4–8 lakh at 5%) plus ₹2,500 (on ₹25,000 at 10%) = ₹22,500
- Section 87A rebate: ₹22,500 (the rebate wipes out the whole tax)
- Cess: ₹0
- Tax payable: ₹0
Example 2: ₹14 Lakh Salary, New Regime
- Gross salary: ₹14,00,000
- Less standard deduction: ₹75,000
- Taxable income: ₹13,25,000
- Slab tax: ₹20,000 (₹4–8 lakh) + ₹40,000 (₹8–12 lakh) + ₹18,750 (₹1,25,000 at 15%) = ₹78,750
- Rebate: none, because taxable income is above ₹12 lakh. Marginal relief does not help either, since the normal tax is already lower than the income above ₹12 lakh.
- Cess at 4%: ₹3,150
- Tax payable: ₹81,900
Example 3: ₹25 Lakh Salary, New Regime
- Gross salary: ₹25,00,000
- Less standard deduction: ₹75,000
- Taxable income: ₹24,25,000
- Slab tax: ₹3,00,000 up to ₹24 lakh, plus 30% of ₹25,000 = ₹7,500, so ₹3,07,500
- Cess at 4%: ₹12,300
- Tax payable: ₹3,19,800
Example 4: ₹15 Lakh Salary, Old Regime With Deductions
Say you claim ₹4.5 lakh of deductions on top of the standard deduction: ₹1.5 lakh under 80C, ₹50,000 for NPS, ₹25,000 for health insurance and ₹2.25 lakh of home loan interest and HRA together.
- Gross salary: ₹15,00,000
- Less standard deduction: ₹50,000
- Less other deductions: ₹4,50,000
- Taxable income: ₹10,00,000
- Slab tax: ₹12,500 (₹2.5–5 lakh at 5%) + ₹1,00,000 (₹5–10 lakh at 20%) = ₹1,12,500
- Cess at 4%: ₹4,500
- Tax payable: ₹1,17,000
The same ₹15 lakh salary in the new regime gives a taxable income of ₹14,25,000 and a tax of ₹97,500 including cess. In this example the new regime is cheaper even after ₹4.5 lakh of deductions. For a full comparison across salary levels, see our old vs new tax regime guide for FY 2026-27.
Skip the manual maths: enter your salary and deductions in the Income Tax Calculator India app and it shows the old and new regime side by side.
What About Other Income?
Salary is only part of the picture for many people.
- Interest from savings accounts and FDs is added to your income and taxed at your slab rate.
- Capital gains on shares and equity mutual funds are taxed at their own special rates, not at slab rates, and the Section 87A rebate does not cancel that special-rate tax.
- Rental income from a house is taxed after a 30% standard deduction.
- Surcharge starts at 10% once total income crosses ₹50 lakh and rises in steps after that.
If you have significant income beyond salary, add it to your taxable income before applying the slabs.
Check Your Employer’s TDS
Your employer deducts tax at source (TDS) from your salary every month based on the regime you chose. At the end of the year, compare three things:
- The tax you calculated yourself
- The TDS shown on your payslips and your annual TDS certificate (commonly called Form 16)
- The tax credit in your Annual Information Statement (AIS) on the income tax portal
If TDS is lower than your actual tax, you pay the difference when you file. If it is higher, you claim a refund. You can also choose a different regime when you file your return, even if your employer used another one for TDS.
6 Common Mistakes to Avoid
- Applying one rate to your whole income. Tax is slab by slab. A taxable income of ₹13.25 lakh does not mean 15% on all of it.
- Forgetting cess. The 4% is added after the rebate, and it is easy to miss.
- Claiming 80C or HRA in the new regime. These are not available there.
- Using gross salary instead of taxable income. Subtract the standard deduction first.
- Ignoring the rebate. If your taxable income is within ₹12 lakh in the new regime, your tax can drop to zero.
- Mixing up the two regimes’ standard deductions. It is ₹75,000 in the new regime and ₹50,000 in the old.
If you want to cut the tax bill legally in the old regime, compare the options in PPF vs ELSS before you invest.
FAQ
How do I calculate income tax on a ₹10 lakh salary in FY 2026-27? In the new regime, subtract the ₹75,000 standard deduction to get ₹9,25,000. The slab tax is ₹20,000 plus ₹12,500, which is ₹32,500, and the Section 87A rebate cancels it, so you pay nothing.
Is income up to ₹12 lakh tax-free in FY 2026-27? Yes, in the new regime, because of the ₹60,000 rebate under Section 87A. Salaried taxpayers also get a ₹75,000 standard deduction, so gross salary up to ₹12.75 lakh pays no tax.
Is the tax charged on my whole income or slab by slab? Slab by slab. Each portion of your income is taxed at the rate for its own slab.
Does the 4% cess apply before or after the rebate? After. First calculate slab tax, subtract the rebate, then add 4% cess on what remains.
Which regime is used if I do not tell my employer? The new regime is the default for TDS. You can still opt for the old regime when you file your return.
Where can I see my tax credit and TDS? On the income tax portal, in your Annual Information Statement and your tax credit statement, and in the TDS certificate your employer issues.
Figures are estimates for a resident individual below 60 whose only income is salary, based on the FY 2026-27 slabs and excluding surcharge. They are for planning only, not tax advice — confirm with the Income Tax Department or a qualified professional. Run both regimes in seconds with the Income Tax Calculator India app — offline, no sign-up. More money tools are covered in our complete guide to personal finance calculators for Indians.
