From April 1, 2025, there will be zero tax payable on the taxable income up to Rs 12 lakh. This will happen if an individual opts for the new tax regime for FY 2025-26. However, it may happen that your net taxable income is more than Rs 12 lakh. This is after claiming the standard deduction of Rs 75,000 and 14% employer’s contribution to the National Pension System (NPS).ET Wealth tells you how your income tax will be calculated if your taxable income is more than Rs 12 lakh.
Use ET Wealth’s income tax calculator to calculate your income tax
Income tax calculation for incomes above Rs 12 lakh
It is important to understand that if your net taxable income exceeds Rs 12 lakh, then every rupee will be taxable. The income tax slabs will be applied till the last rupee.
It is important to know the income tax slabs under the new tax regime to understand how income tax calculation works.
Income tax slabs under new tax regime for FY 2025-26
| Income (In Rs) | Tax rate (In %) |
| 0-4,00,000 | 0 |
| 4,00,001-8,00,000 | 5 |
| 8,00,001-12,00,000 | 10 |
| 12,00,001-16,00,000 | 15 |
| 16,00,001-20,00,000 | 20 |
| 20,00,001-24,00,000 | 25 |
| 24,00,001 and above | 30 |
Example of Income tax calculation
Here is an example to understand this. Suppose your gross taxable income is Rs 21 lakh. This includes salary income, interest income from savings accounts and dividends from equity shares. No capital gains income is included as they are mostly taxed at special rates.Further, you can claim a standard deduction of Rs 75,000 and an Employer contribution to an NPS account of Rs 1.5 lakh. First, the net taxable income needs to be calculated. It will be calculated as follows:
| Particulars | Amount (In Rs) |
| Gross taxable income | 21,00,000 |
| Less: Standard deduction | 75,000 |
| Less: Employer’s contribution to NPS account | 1,50,000 |
| Net taxable income | 18,75,000 |
Also Read: Your salary structure will decide how much tax savings you will have
The income tax will be calculated on the net taxable income. You will be required to calculate income tax on Rs 18.75 lakh.
The income tax calculation will start by calculating income tax for each income tax slab.
First income tax slab– The first income tax slab is between 0 and Rs 4,00,000. The income tax rate corresponding to this slab is 0%. You are required to deduct Rs 4 lakh from Rs 18.75 lakh. Hence, on the first Rs 4 lakh of Rs 18.75 lakh, zero tax will be payable.
The balance income is Rs 14.75 lakh, on which tax will be calculated using other tax slabs.
Second income tax slab – The second income tax slab is between Rs 4,00,001 and Rs 8,00,000. The income tax rate corresponding to this slab is 5%. You are required to deduct Rs 4 lakh from Rs 14.75 lakh. On Rs 4 lakh, the tax will be calculated at 5%, which will be Rs 20,000. Hence, Rs 4 lakh income of Rs 14.75 lakh, Rs 20,000 will be paid as tax.
The balance income is Rs 10.75 lakh, on which tax will be calculated using other tax slabs.
Third income tax slab – The third income tax slab is between Rs 8,00,001 and Rs 12,00,000. The income tax rate corresponding to this slab is 10%. You are required to deduct Rs 4 lakh from Rs 10.75 lakh. On Rs 4 lakh, the tax will be calculated at 10%, which will be Rs 40,000. Hene, Rs 4 lakh income of Rs 10.75 lakh, Rs 40,000 will be paid as tax.
Also Read: You can still pay zero tax if your CTC is over Rs 17 lakh
The balance income is Rs 6.75 lakh, on which tax will be calculated using other tax slabs.
Fourth income tax slab – The fourth income tax slab is between Rs 12,00,001 and Rs 16,00,000. The income tax rate corresponding to this slab is 15%. You are required to deduct Rs 4 lakh from Rs 6.75 lakh. On Rs 4 lakh, the tax will be calculated at 15%, which will be Rs 60,000. Hene, Rs 4 lakh income of Rs 6.75 lakh, Rs 60,000 will be paid as tax.
The balance income is Rs 2.75 lakh, on which tax will be calculated using other tax slabs.
Fifth income tax slab – The fifth income tax slab is between Rs 16,00,001 and Rs 20,00,000. The income tax rate corresponding to this slab is 20%. You are required to calculate tax on the balance income of Rs 2.75 lakh.
The tax paid on the balance income will be Rs 55,000.
| Income (In Rs) | Tax rate (In %) | Taxed income (Rs) | Tax amount (Rs) | Balance (Rs) |
| 0-4,00,000 | 0% | 400000 | 0 | 1475000 |
| 4,00,001-8,00,000 | 5% | 400000 | 20000 | 1075000 |
| 8,00,001-12,00,000 | 10% | 400000 | 40000 | 675000 |
| 12,00,001-16,00,000 | 15% | 400000 | 60000 | 275000 |
| 16,00,001-20,00,000 | 20% | 275000 | 55000 | 0 |
| 20,00,001-24,00,000 | 25% | NA | NA | NA |
| 24,00,001 and above | 30% | NA | NA | NA |
The total tax paid by an individual in the Rs 1,75,000. On this amount, an individual is required to levy a cess at 4%. This will be Rs 7,000. The final amount payable as tax will be Rs 1,82,000.
The other income tax slabs of Rs 20,00,001-24,00,000 and Rs 24,00,001 and above have NA because there was no taxable income left after the fifth slab. If the balance income was left after the fifth tax slab, then the same method would have applied either there was no balance income left or balance income is taxed at 30%.
