Income Tax Calculation for Financial Year 2024–25

 Calculating your income tax liability involves three key steps: determining your taxable income, applying the applicable tax slabs, and adding cess. Below is a clear guide for both the old and new tax regimes to help you compute your tax for FY 2024–25 (Assessment Year 2025–26).

1. Determine Your Taxable Income

1. Gross Total Income
   Sum all income sources:
• Salary or professional fees
• Income from house property
• Business or profession profits
• Capital gains
• Other sources (interest, dividends)
2. Deductions (Old Regime Only)
   Subtract eligible deductions under Chapter VI-A:
• Section 80C (PPF, ELSS, life insurance, principal repayment) up to ₹1,50,000
• Section 80CCD(1B) (NPS) up to ₹50,000
• Section 80D (medical insurance) up to ₹25,000 (₹50,000 if senior citizen)
• Section 24(b) (home loan interest) up to ₹2,00,000
• Other sections (80E, 80G, etc.)
3. Standard Deduction
• ₹50,000 for salaried individuals (old regime)
• ₹75,000 under new regime
4. Taxable Income
   Taxable Income = Gross Total Income – Deductions – Standard Deduction

2. Apply Tax Slabs

Old Tax Regime Slabs

Income Range (₹)	Tax Rate
0 – 2,50,000	0%
2,50,001 – 5,00,000	5%
5,00,001 – 10,00,000	20%
Above 10,00,000	30%

New Tax Regime Slabs (Section 115BAC)

Income Range (₹)	Tax Rate
0 – 3,00,000	0%
3,00,001 – 6,00,000	5%
6,00,001 – 10,00,000	10%
10,00,001 – 13,00,000	15%
13,00,001 – 18,00,000	20%
Above 18,00,000	30%

 

3. Compute Tax Payable and Cess

1. Calculate Tax
• For each slab, multiply the portion of your taxable income within that slab by the slab’s rate.
• Sum across all slabs.
2. Add Health & Education Cess (@ 4%)
   Cess = 4% of Tax
3. Add Surcharge (if applicable)
• 10% surcharge on tax if taxable income exceeds ₹50 lakh
• 15% surcharge if income exceeds ₹1 crore

4. Example Calculation

Assume a salaried individual with:

• Gross income: ₹12,00,000
• Deductions under 80C: ₹1,50,000
• Standard deduction (old regime): ₹50,000
  Taxable Income = ₹12,00,000 – ₹1,50,000 – ₹50,000 = ₹10,00,000

Under Old Regime

Slab 1 (0–2.5L): ₹2,50,000 × 0% = ₹0
Slab 2 (2.5–5L): ₹2,50,000 × 5% = ₹12,500
Slab 3 (5–10L): ₹5,00,000 × 20% = ₹1,00,000
Slab 4 (10L–10L): ₹0 × 30% = ₹0
Tax before cess = ₹12,500 + ₹1,00,000 = ₹1,12,500
Cess (4%) = ₹4,500
Total Tax = ₹1,17,000

Under New Regime

No deductions except standard deduction (₹75,000)
Taxable Income = ₹12,00,000 – ₹75,000 = ₹11,25,000

Slab 1 (0–3L): ₹3,00,000 × 0% = ₹0
Slab 2 (3–6L): ₹3,00,000 × 5% = ₹15,000
Slab 3 (6–10L): ₹4,00,000 × 10% = ₹40,000
Slab 4 (10–11.25L): ₹1,25,000 × 15% = ₹18,750
Higher slabs: ₹0
Tax before cess = ₹15,000 + ₹40,000 + ₹18,750 = ₹73,750
Cess (4%) = ₹2,950
Total Tax = ₹76,700

Decision Point:

• Old Regime Tax: ₹1,17,000
• New Regime Tax: ₹76,700

In this scenario, the new tax regime results in a lower tax liability.

5. Key Considerations

• Regime Choice: Evaluate both regimes annually; your optimal choice can change with investment and expense patterns.
• Documentation: Keep proofs for all deductions (investment receipts, insurance premiums, loan interest certificates).
• Advance Tax: Pay quarterly advance tax if annual liability exceeds ₹10,000 to avoid interest penalties.

Use this framework to accurately compute your tax liability for FY 2024–25 and choose the regime that best fits your financial profile.