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So, how is tax calculated on taxable income in India? To understand this tax calculation, you must be aware of the important salary components in India, and be aware of the various options to grab tax deductions as well.
This post aims to help you calculate tax on your monthly salary in India, so stay tuned and learn the secrets of tax calculation and tax return filing.
Let us begin with the main salary components in India that a salaried person gets to see on a pay slip:
To calculate the CTC, you can use this simple formula:
CTC= Gross Salary + Gratuity + PF
*Gross salary is the total amount after adding the basic salary, overtime pays, and allowance without any tax deductions.
An Example of Payslip with salary components in India
| Salary Components | Total Amounts |
| Basic Salary | Rs. 4,00,000 |
| HRA | Rs. 1,00,000 |
| DA | Rs. 40,000 |
| Medical Insurance | Rs. 7,500 |
| Conveyance Allowance | Rs. 1,500 |
| PF | Rs. 48,000 |
| Total CTC | Rs. 5,97,000 |
As a thumb rule, the employer deducts a TDS from the employee’s salary to pay to the Income Tax Department of India. This TDS deduction is done based on the investment declared by the employee at the beginning of the financial year.
Ensure getting the TDS certificate from your employer in June or July every month because this certificate, also known as Form No.16 states the tax deducted and paid to the income tax department. All salaried people need to submit Form No. 16 while filing their tax returns.
According to the Budget 2023, a salaried employee can seek a maximum standard deduction of Rs. 50,000. This deduction can be availed without showing any documents or bills. But this will be permitted, only if that person opts for the new tax regime.
The best way to get tax deductions for salaried people in India comes in the form of term life insurance and similar investment plans. Salaried people can also invest in a ULIP plan, PPF, or similar investments to save taxes under Section 80C up to the investment of Rs. 1,50,000.
So, coming back to our main query, how is tax calculated on taxable income in India? Follow these steps to calculate tax in Indiafor salaries people:
| Net Income | Income Tax Rate as per the New Regime |
| Up to Rs. 2.5 lakhs | No tax |
| Rs. 2.5 lakhs – Rs. 5 lakhs | 5% of total income exceeding Rs. 2.5 lakhs |
| Rs. 5 lakhs – Rs. 7.5 lakhs | 10% of total income exceeding Rs. 5 lakhs + Rs. 12,500 |
| Rs. 7.5 lakhs – Rs. 10 lakhs | 15% of total income exceeding Rs. 7.5 lakhs + Rs. 37,500 |
| Rs. 10 lakhs – Rs. 12.5 lakhs | 20% of total income exceeding Rs. 10 lakhs + Rs. 75,000 |
| Rs. 12.5 lakhs – Rs. 15 lakhs | 25% of total income exceeding Rs. 12.5 lakhs + Rs. 1,25,000 |
| Over Rs. 15 lakhs | 30% of total income exceeding Rs. 15 lakhs + Rs. 1,87,500 |
| Net Income | Income Tax Rate as per the New Regime |
| Up to Rs. 2.5 lakhs | No tax |
| Rs. 2.5 lakhs – Rs. 5 lakhs | 5% of total income exceeding Rs. 2.5 lakhs |
| Rs. 5 lakhs – Rs. 7.5 lakhs | 10% of total income exceeding Rs. 5 lakhs + Rs. 12,500 |
| Rs. 7.5 lakhs – Rs. 10 lakhs | 15% of total income exceeding Rs. 7.5 lakhs + Rs. 37,500 |
| Rs. 10 lakhs – Rs. 12.5 lakhs | 20% of total income exceeding Rs. 10 lakhs + Rs. 75,000 |
| Rs. 12.5 lakhs – Rs. 15 lakhs | 25% of total income exceeding Rs. 12.5 lakhs + Rs. 1,25,000 |
| Over Rs. 15 lakhs | 30% of total income exceeding Rs. 15 lakhs + Rs. 1,87,500 |
| Net Income | Income Tax Rate as per the New Regime |
| Up to Rs. 3 lakhs | No tax |
| Rs. 3 lakhs – Rs. 6 lakhs | 5% of total income exceeding Rs. 3 lakhs |
| Rs. 6 lakhs – Rs. 9 lakhs | 10% of total income exceeding Rs. 6 lakhs + Rs. 15,000 |
| Rs. 9 lakhs – Rs. 12 lakhs | 15% of total income exceeding Rs. 9 lakhs + Rs. 45,000 |
| Rs. 12 lakhs – Rs. 15 lakhs | 20% of total income exceeding Rs. 12 lakhs + Rs. 75,000 |
| Over Rs. 15 lakhs | 30% of total income exceeding Rs. 15 lakhs + Rs. 1,50,000 |
To Sum Up
We assume you just learned how to calculate income tax on monthly salary in India. In case, you still find difficulty in calculating your income tax or filing the tax return, then speak to an insurance specialist.
Browse PayBima Blogs to read interesting posts related to Health Insurance, Car Insurance, Bike Insurance, Term Life Insurance, and Investment section. You can visit PayBima to Buy Insurance Online.
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Every salaried person gets an employee salary slip. It is a document that states the different salary components of an employee. Each employee gets a salary slip each month after getting the salary.
The total amount of salary including the basic salary, allowances, and benefits before any deductions is known as the gross salary. Whereas, the net salary is the total amount of money taken home by the employee after the deductions.
As per the new income tax regime, the tax rebate for a salaried person in India for FY 2023-24 is Rs. 25,000 for an income up to Rs. 7,00,000.
The following investment options can help you save income tax on your salary:
PPF
ULIP
ELSS
Tax Saving FD
Term Life Insurance Plan
PayBima Team
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