Basics
How income tax slabs work
India uses slab-based tax for individual taxpayers. Each portion of taxable income is taxed at the rate that applies to that slab. The highest slab rate does not apply to the full income; it applies only to the income that falls in that slab.
Slabs are applied after calculating taxable income. That means deductions, exemptions, and regime selection matter before slab tax is calculated.
- Tax is progressive.
- Each slab applies to a slice of income.
- Health and education cess is added after tax.
- Old and new regimes can produce different taxable income.
Example
Progressive slab example
Income first enters the lower slabs. Only the portion above a threshold moves into the next rate. Final tax is the sum of tax calculated across all applicable slab slices.
Taxable income matters
Slabs apply to taxable income, not gross salary. Always check the taxable income figure before comparing tax rates.
New regime
New regime slabs for FY 2025-26
For AY 2026-27, the Income Tax Department help pages describe the new regime slab structure for individuals with lower initial slab rates and fewer exemptions. Salaried employees should use current official references before filing.
- Up to ₹4,00,000: nil
- ₹4,00,001 to ₹8,00,000: 5%
- ₹8,00,001 to ₹12,00,000: 10%
- Higher bands continue at 15%, 20%, 25%, and 30%
Example
New regime calculation idea
Start with taxable income, apply each new-regime slab in order, add tax across slabs, then apply cess to reach the final estimated tax.
Verify before filing
Tax rates and relief rules can change. Use the calculator for planning and verify final filing assumptions with official Income Tax Department guidance.
Old regime
Old regime slabs for FY 2025-26
The old regime uses familiar slab rates and allows several deductions and exemptions, such as HRA and Chapter VI-A deductions. It may still be better for employees with substantial eligible deductions.
- Basic exemption slab
- Lower slab taxed at 5%
- Middle slab taxed at 20%
- Higher slab taxed at 30%
- Deductions can reduce taxable income before slabs apply
Example
Old regime planning
An employee with rent, HRA exemption, full 80C, 80D, and NPS deduction may reduce taxable income enough for the old regime to compete with or beat the new regime.
Compare, do not guess
The right regime depends on your taxable income after deductions. Run the old and new regime comparison before making a choice.
FAQ
Frequently asked questions
No. Slabs apply to taxable income after eligible exemptions and deductions, not directly to gross salary.
Official links
Government references
Government references
Official portals
Important
Disclaimer
Educational reference only