How to calculate income tax with latest tax slabs: Have taxable income above Rs 12 lakh? Know how it will be taxed under new income tax regime
New Income Tax Slabs FY 2025-26: From April 1, 2025, individuals selecting the new income tax regime for FY 2025-26 will not pay any tax on taxable income up to Rs 12 lakh. However, your net taxable income might exceed Rs 12 lakh after accounting for the standard deduction of Rs 75,000 and 14% employer’s contribution to the National Pension System (NPS).
If you are wondering how your income tax outgo will be calculated in the new income tax regime for the new financial year, here is an example:
Latest Income Tax Slabs Under New Income Tax Regime FY 2025-26
One should note that once your net taxable income goes beyond Rs 12 lakh, taxation applies to the entire amount. The income tax rates will be implemented on the complete taxable income.
In the February Budget, Finance Minister Nirmala Sitharaman announced revised income tax slabs under the new income tax regime for the financial year 2025-26. Understanding the tax brackets under the new income tax regime is essential to comprehend the tax calculation process.
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New Tax Regime: How is Income Tax Calculated? Income Tax Calculator For Taxable Income Above Rs 12 Lakh
ET has considered a scenario where your total taxable income amounts to Rs 21 lakh, comprising salary earnings, bank savings interest and equity share dividends. Note that capital gains are excluded as they typically attract distinct tax rates.
- You are entitled to claim Rs 75,000 as standard deduction and Rs 1.5 lakh towards employer’s NPS contribution.
- The first step involves determining the net taxable income. The assessment of income tax will be based on the net taxable sum of Rs 18.75 lakh. The computation process involves calculating tax liability for individual tax brackets.
- For the initial tax bracket ranging from 0 to Rs 4,00,000, the applicable rate is 0%. When computing tax on Rs 18.75 lakh, the first Rs 4 lakh attracts no tax.
- The remaining sum of Rs 14.75 lakh will be subject to taxation according to subsequent tax brackets.
- For earnings between Rs 4,00,001 and Rs 8,00,000, a 5% tax rate applies. When calculating tax on Rs 14.75 lakh, first subtract Rs 4 lakh. The tax on this Rs 4 lakh portion amounts to Rs 20,000 (calculated at 5%). Therefore, from the Rs 14.75 lakh income, Rs 20,000 is payable as tax on the first Rs 4 lakh segment.
- The remaining amount of Rs 10.75 lakh requires further tax calculations using additional slabs. For the range between Rs 8,00,001 and Rs 12,00,000, a 10% tax rate is applicable. From the Rs 10.75 lakh, deduct Rs 4 lakh. The tax calculation on this Rs 4 lakh at 10% equals Rs 40,000. Thus, for this Rs 4 lakh portion of the Rs 10.75 lakh, the tax liability is Rs 40,000.
- The remaining sum of Rs 6.75 lakh will be taxed according to subsequent tax slabs. For the fourth tax bracket ranging from Rs 12,00,001 to Rs 16,00,000, a 15% tax rate applies. From the total amount of Rs 6.75 lakh, Rs 4 lakh is subject to taxation. The tax calculation at 15% on Rs 4 lakh amounts to Rs 60,000. Therefore, on Rs 4 lakh of the Rs 6.75 lakh income, the tax liability is Rs 60,000.
- The remaining sum of Rs 2.75 lakh will be taxed according to other applicable slabs. The fifth tax bracket spans from Rs 16,00,001 to Rs 20,00,000, with a 20% tax rate. The remaining income of Rs 2.75 lakh is taxed under this bracket, resulting in a tax payment of Rs 55,000.
The aggregate tax liability stands at Rs 1,75,000. Additionally, a 4% cess is applicable on this amount, which equals Rs 7,000. Consequently, the total tax payable amounts to Rs 1,82,000.
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For the tax brackets of Rs 20,00,001-24,00,000 and above Rs 24,00,001, the entries are NA as no taxable income remained after the fifth bracket. Had there been any remaining income after the fifth bracket, it would have been taxed at 30%, but in this case, no balance remained for taxation.
