{"id":38218,"date":"2025-04-17T06:25:38","date_gmt":"2025-04-17T06:25:38","guid":{"rendered":"https:\/\/www.tatacapitalmoneyfy.com\/blog\/?p=38218"},"modified":"2025-04-17T06:25:39","modified_gmt":"2025-04-17T06:25:39","slug":"how-to-calculate-income-tax-on-salary","status":"publish","type":"post","link":"https:\/\/www.tatacapitalmoneyfy.com\/blog\/investment-guide\/how-to-calculate-income-tax-on-salary\/","title":{"rendered":"How to Calculate Income Tax on Salary with Example?"},"content":{"rendered":"\n<p><\/p>\n\n\n\n<p>Understanding how income tax is calculated on salary is essential for smart financial planning. It helps you estimate tax liabilities, claim deductions, and maximise savings.&nbsp;<\/p>\n\n\n\n<p>In this guide, we\u2019ll walk you through how to calculate income tax on salary with example.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>What is Income Tax on Salary?<\/strong><\/h2>\n\n\n\n<p>Income tax on salary is a compulsory tax imposed by the government on the income earned by individuals. The amount of tax payable depends on income slabs defined by the government, with higher earnings attracting higher tax rates.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Breaking Down Salary Components<\/strong><\/h2>\n\n\n\n<p>Your salary has different components, each impacting how income tax is calculated on salary. Here\u2019s a quick overview:<\/p>\n\n\n\n<p><strong>\u2022 Basic Salary: <\/strong>The fixed part of the salary.<\/p>\n\n\n\n<p><strong>\u2022 House Rent Allowance (HRA):<\/strong> Allowance for accommodation expenses, with partial or full tax exemption.<\/p>\n\n\n\n<p><strong>\u2022 Special Allowances:<\/strong> Travel, medical, and dearness allowance.<\/p>\n\n\n\n<p><strong>\u2022 Bonuses:<\/strong> Performance-based incentives that are fully taxable.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Steps to Calculate Income Tax on Salary<\/strong><\/h2>\n\n\n\n<p>Here\u2019s the step-by-step approach to calculate tax on salary-<\/p>\n\n\n\n<p>1.<strong> <\/strong>Compute gross salary by adding basic salary, HRA, allowances, and bonuses.<\/p>\n\n\n\n<p>2. Deduct eligible exemptions like HRA and standard deduction to get net taxable salary.<\/p>\n\n\n\n<p>3.<strong> <\/strong>Calculate taxable income based on 80C, 80D, and other deductions to arrive at the final taxable income.<\/p>\n\n\n\n<p>4.<strong> <\/strong>Calculate your tax as per the income slab.<\/p>\n\n\n\n<p>5.<strong> <\/strong>Deduct rebate under Section 87A, if applicable.<\/p>\n\n\n\n<p>6.<strong> <\/strong>Add 4% cess on total tax payable.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Tax Slabs for Individuals Below 60 Years, according to the old tax regime:<\/strong><\/h3>\n\n\n\n<p><\/p>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td><strong>Net Income Range<\/strong><\/td><td><strong>Income Tax Rate<\/strong><\/td><\/tr><tr><td>Up to \u20b92,50,000<\/td><td>NIL<\/td><\/tr><tr><td>\u20b92,50,000- \u20b95,00,000<\/td><td>5%<\/td><\/tr><tr><td>\u20b95,00,000- \u20b910,00,000<\/td><td>20%<\/td><\/tr><tr><td>Above \u20b910,00,000<\/td><td>30%<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Tax slabs according to the new tax regime-<\/strong><\/h3>\n\n\n\n<p><\/p>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td><strong>Net Income Range<\/strong><\/td><td><strong>Income Tax Rate<\/strong><\/td><\/tr><tr><td>Up to \u20b93,00,000<\/td><td>NIL<\/td><\/tr><tr><td>\u20b93,00,001- \u20b96,00,000<\/td><td>5%<\/td><\/tr><tr><td>\u20b96,00,001- \u20b99,00,000<\/td><td>10%<\/td><\/tr><tr><td>\u20b99,00,001- \u20b912,00,000<\/td><td>15%<\/td><\/tr><tr><td>\u20b912,00,001- \u20b915,00,000<\/td><td>20%<\/td><\/tr><tr><td>Above \u20b915,00,000<\/td><td>30%<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Income Tax Calculation on Salary with Example<\/strong><\/h2>\n\n\n\n<p>Let\u2019s understand income tax calculation with an example, under old and new tax regime.<\/p>\n\n\n\n<p>Rajesh Sharma is a 30-year-old marketing manager at ABC Pvt Ltd in Delhi, paying a rent of \u20b920,000. He also makes <a href=\"https:\/\/www.tatacapitalmoneyfy.com\/blog\/investment-guide\/top-5-tax-saving-investment-products\/\">tax saving investments<\/a> and pays health insurance premium. His salary breakdown is-<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Step 1: Compute Gross Salary<\/strong><\/h3>\n\n\n\n<p>Salary Breakdown:<\/p>\n\n\n\n<p><\/p>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td><strong>Salary Component<\/strong><\/td><td><strong>Amount (\u20b9)<\/strong><\/td><\/tr><tr><td>Basic Salary<\/td><td>8,00,000<\/td><\/tr><tr><td>House Rent Allowance (HRA)<\/td><td>2,00,000<\/td><\/tr><tr><td>Other Allowances<\/td><td>1,00,000<\/td><\/tr><tr><td>Total Gross Salary<\/td><td><strong>11,00,000<\/strong><\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Step 2: Calculate the exemptions<\/strong><\/h3>\n\n\n\n<p>Under Section 10(13A) of the Income Tax Act, HRA exemption is calculated as the least of the following three:<\/p>\n\n\n\n<ul>\n<li>Actual HRA received<\/li>\n\n\n\n<li>50% of salary (for metro cities like Delhi; 40% for non-metros)<\/li>\n\n\n\n<li>Rent paid minus 10% of salary<\/li>\n<\/ul>\n\n\n\n<p>In Rajesh\u2019s case-<\/p>\n\n\n\n<p>Basic Salary = \u20b98,00,000\/year<\/p>\n\n\n\n<p>HRA received = \u20b92,00,000\/year<\/p>\n\n\n\n<p>Rent paid = \u20b920,000\/month = \u20b92,40,000\/year<\/p>\n\n\n\n<p>So, HRA exemption will be the least of-&nbsp;<\/p>\n\n\n\n<p>Actual HRA received = \u20b92,00,000<\/p>\n\n\n\n<p>50% of salary = 50% of \u20b98,00,000 = \u20b94,00,000<\/p>\n\n\n\n<p>Rent paid \u2013 10% of salary = \u20b92,40,000 \u2013 \u20b980,000 = \u20b91,60,000<\/p>\n\n\n\n<p>= \u20b91,60,000<\/p>\n\n\n\n<p><\/p>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td><strong>Nature<\/strong><\/td><td><strong>Amount (\u20b9)<\/strong><\/td><td><strong>Exemptions\/Deductions (\u20b9)<\/strong><\/td><td><strong>Taxable income (Old regime)<\/strong><\/td><td><strong>Taxable income (New regime)<\/strong><\/td><\/tr><tr><td><strong>Gross salary<\/strong><\/td><td>11,00,000<\/td><td>&#8211;<\/td><td>11,00,000<\/td><td>11,00,000<\/td><\/tr><tr><td><strong>Less: HRA Exemption<\/strong><\/td><td>2,00,000<\/td><td>1,60,000<\/td><td>(1,60,000)<\/td><td>NA<\/td><\/tr><tr><td><strong>Less: Standard Deduction<\/strong><\/td><td>&#8211;<\/td><td>50,000<\/td><td>(50,000)<\/td><td>(50,000)<\/td><\/tr><tr><td><strong>Less: 80C Deductions<\/strong><\/td><td>&#8211;<\/td><td>1,50,000<\/td><td>(1,50,000)<\/td><td>NA<\/td><\/tr><tr><td><strong>Less: 80D<\/strong><\/td><td>&#8211;<\/td><td>25,000<\/td><td>(25,000)<\/td><td>NA<\/td><\/tr><tr><td><strong>Net taxable income<\/strong><\/td><td>&#8211;<\/td><td><\/td><td>7,15,000<\/td><td>10,50,000<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Step 3: Calculate income tax based on slabs<\/strong><\/h3>\n\n\n\n<p><\/p>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td><strong>Regime<\/strong><\/td><td><strong>Old Regime<\/strong><\/td><td><strong>New Regime<\/strong><\/td><\/tr><tr><td><strong>Taxable income (\u20b9)<\/strong><\/td><td>7,15,000<\/td><td>10,50,000<\/td><\/tr><tr><td><strong>Tax calculation<\/strong><\/td><td>2.5L-5L: 5% = \u20b912,5005L-7.15L: 20% = \u20b943,000<\/td><td>3L-6L: 5% = \u20b915,0006L-9L: 10% = \u20b930,0009L-12L: 15% = \u20b922,500<\/td><\/tr><tr><td><strong>Tax (\u20b9)<\/strong><\/td><td>55,500<\/td><td>67,500<\/td><\/tr><tr><td><em>Add Cess- 4%<\/em><\/td><td>2,220<\/td><td>2,700<\/td><\/tr><tr><td><strong>Total Tax Payable<\/strong><\/td><td>\u20b957,720<\/td><td>\u20b970,200<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Final Thoughts<\/strong><\/h2>\n\n\n\n<p>Understanding income tax calculations helps you make smarter financial decisions. Regularly reviewing your salary structure, exemptions, and deductions can reduce tax liability and increase savings.<\/p>\n\n\n\n<p>Looking for the best tax-saving investments? Turn to Tata Capital Moneyfy \u2013 visit the website or download the app today!<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Understanding how income tax is calculated on salary is essential for smart financial planning. It helps you estimate tax liabilities, claim deductions, and maximise savings.&nbsp; In this guide, we\u2019ll walk you through how to calculate income tax on salary with example. What is Income Tax on Salary? Income tax on salary is a compulsory tax [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":38219,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"inline_featured_image":false,"footnotes":""},"categories":[68],"tags":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v21.5 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>How to Calculate Income Tax on Salary with Example | Tata Moneyfy<\/title>\n<meta name=\"description\" content=\"Learn how to calculate income tax on your salary with examples for FY\u20192025-26. 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