Income tax, from salary slip to final figure
Income tax can feel like a black box, but it's really a short, fixed sequence of steps. Follow it once and every tax figure you ever see will make sense. Here's exactly how your tax on salary is worked out for FY 2025-26.
Step 1 — Add up your gross income
Start with everything you earn: salary (basic, allowances, bonus), plus any income from house property, capital gains, business, and other sources like interest and dividends. Together these make your gross total income.
Step 2 — Subtract deductions
Take off the standard deduction (₹75,000 new, ₹50,000 old). On the old regime, also subtract 80C, 80D, home loan interest, HRA and the rest. What's left is your taxable income.
Step 3 — Apply the slab rates
Run your taxable income through the slabs. Each band is taxed at its own rate — you don't pay one flat rate on the whole amount, only the portion that falls in each band.
Step 4 — Apply the rebate
If you qualify for the Section 87A rebate, your tax drops — to zero if taxable income is within ₹12 lakh on the new regime.
Step 5 — Add surcharge and cess
High incomes attract a surcharge on the tax, and a 4% health and education cess is added to everyone's tax. The result is your final liability.
A worked example
Gross ₹14,00,000 → minus ₹75,000 standard deduction → taxable ₹13,25,000. Slab tax comes to roughly ₹86,000, and after cess the final figure is about ₹90,000. Because the income is above ₹12 lakh, the rebate no longer zeroes it out — but the wide slabs keep it modest.
Rather than track all five steps by hand, the calculator runs them instantly and prints the breakdown line by line, so you can see exactly where each rupee of tax comes from.
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Frequently asked questions
How is income tax calculated on salary?
Add gross income, subtract the standard deduction and other deductions to get taxable income, apply the slab rates, apply the Section 87A rebate if eligible, then add surcharge and 4% cess.
Do I pay one flat tax rate on my whole salary?
No. India uses slab rates — each band of income is taxed at its own rate, so only the part of your income in a higher band is taxed at the higher rate.
Is cess added before or after the rebate?
After. The rebate reduces your tax first, and the 4% cess is calculated on the remaining tax.