Compute India income tax under the new regime.
Tax payable (incl. cess)
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Tax before cess + surcharge
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87A rebate applied
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Worked example
Take a salaried person with a gross annual income of Rs 15,00,000 under the new regime for FY 2026-27. The Rs 75,000 standard deduction reduces taxable income to Rs 14,25,000. The new-regime slabs are then applied band by band. The first Rs 4,00,000 is nil. The next Rs 4,00,000 (the Rs 4L to Rs 8L band) is taxed at 5 percent, which is Rs 20,000. The Rs 8L to Rs 12L band adds 10 percent of Rs 4,00,000, or Rs 40,000. The remaining Rs 2,25,000 that falls in the Rs 12L to Rs 16L band is taxed at 15 percent, adding Rs 33,750. That gives a base tax of Rs 93,750. Because taxable income is above Rs 12,00,000, the Section 87A rebate does not apply. Add 4 percent Health and Education Cess of Rs 3,750 and the total tax payable is Rs 97,500, an effective rate of 6.50 percent on gross income.
| Step | Amount (Rs) |
|---|---|
| Gross income | 15,00,000 |
| Less standard deduction | 75,000 |
| Taxable income | 14,25,000 |
| Tax in 4L to 8L band at 5 percent | 20,000 |
| Tax in 8L to 12L band at 10 percent | 40,000 |
| Tax in 12L to 14.25L band at 15 percent | 33,750 |
| Base tax | 93,750 |
| Health and Education Cess at 4 percent | 3,750 |
| Total tax payable | 97,500 |
How it is calculated
The new regime uses progressive slabs, so each rupee is taxed only at the rate of the band it falls into, not a single flat rate on the whole income. Salaried taxpayers and pensioners first subtract the Rs 75,000 standard deduction to reach taxable income. The slabs for FY 2026-27 are nil up to Rs 4L, then 5, 10, 15, 20, 25 and 30 percent on successive Rs 4L bands, with everything above Rs 24L taxed at 30 percent. The Section 87A rebate of up to Rs 60,000 wipes out tax entirely when taxable income is at or below Rs 12,00,000, with marginal relief just above that line so a small rise in income never costs more in tax than it adds. A surcharge applies once taxable income crosses Rs 50L, and a 4 percent Health and Education Cess is added on top of tax plus surcharge to give the final liability.