How to Calculate Income Tax for Salaries Over ₹12.75 Lakh?

New Tax Benefits Announced

The Union Budget 2025 introduced tax relief for the middle class, ensuring that individuals earning up to ₹12.75 lakh per year will not have to pay any income tax. However, those earning above this limit will have a tax liability based on the revised tax slabs. Let’s break it down.

Estimated Tax Savings for Different Salary Levels

According to the government’s calculations, tax savings for various income brackets are:

• ₹13 lakh – Save ₹25,000
• ₹14 lakh – Save ₹30,000
• ₹15 lakh – Save ₹35,000
• ₹16 lakh – Save ₹50,000
• ₹17 lakh – Save ₹60,000
• ₹18 lakh – Save ₹70,000
• ₹19 lakh – Save ₹80,000
• ₹20 lakh – Save ₹90,000
• ₹21 lakh – Save ₹95,000
• ₹22 lakh – Save ₹1 lakh
• ₹23 lakh – Save ₹1.05 lakh

For individuals earning ₹24 lakh or more, the savings can go up to ₹1.10 lakh based on the new tax structure.

Revised Tax Slabs for FY 2025-26

Under the new tax regime, the applicable tax rates are:

• Up to ₹4 lakh – No tax
• ₹4-8 lakh – 5% tax
• ₹8-12 lakh – 10% tax
• ₹12-16 lakh – 15% tax
• ₹16-20 lakh – 20% tax
• ₹20-24 lakh – 25% tax
• Above ₹24 lakh – 30% tax

How to Calculate Your Tax?

To determine your tax liability, apply the relevant tax percentage based on your total annual income. Additionally, deductions and exemptions, if applicable, can further reduce the taxable amount.

Step 1: Identify Your Tax Slab

Based on your income, check which slabs apply to you:

• Up to ₹4 lakh – No tax
• ₹4-8 lakh – 5% tax on income exceeding ₹4 lakh
• ₹8-12 lakh – 10% tax on income exceeding ₹8 lakh
• ₹12-16 lakh – 15% tax on income exceeding ₹12 lakh
• ₹16-20 lakh – 20% tax on income exceeding ₹16 lakh
• ₹20-24 lakh – 25% tax on income exceeding ₹20 lakh
• Above ₹24 lakh – 30% tax on income exceeding ₹24 lakh

Step 2: Apply Tax Rates

Let’s calculate tax for an annual income of ₹18 lakh:

1. First ₹4 lakh → No tax
2. Next ₹4 lakh (₹4-8 lakh) → 5% of ₹4 lakh = ₹20,000
3. Next ₹4 lakh (₹8-12 lakh) → 10% of ₹4 lakh = ₹40,000
4. Next ₹4 lakh (₹12-16 lakh) → 15% of ₹4 lakh = ₹60,000
5. Remaining ₹2 lakh (₹16-18 lakh) → 20% of ₹2 lakh = ₹40,000

Total Tax = ₹20,000 + ₹40,000 + ₹60,000 + ₹40,000 = ₹1,60,000

Step 3: Apply Tax Benefits

According to the Budget 2025, individuals earning ₹18 lakh save ₹70,000.
So, the final tax payable = ₹1,60,000 - ₹70,000 = ₹90,000

Step 4: Use Online Tax Calculators

You can also use the Income Tax Department's e-filing portal to automatically compute tax liability.