How Much Tax Do I Have to Pay: Calculate for FY 2025-26
Asharam Swain- Apr 16
- 14 min read
Determining how much tax you need to pay is a crucial step in managing your finances. Every taxpayer must understand their tax obligations to ensure timely and accurate tax filings. Whether you're a salaried individual, a small business owner, or someone earning through investments, the calculation of your tax liability depends on a variety of factors, such as your income level, deductions, exemptions, and the tax regime you choose.
Let’s explore the details of how much tax do you have to pay for different income levels, including common scenarios such as tax on 10 lakh income and tax above 10 lakh. Also, the deductions and exemptions available to you, which can significantly reduce your taxable income and the overall tax burden.
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Understanding How Much Tax I Have to Pay
Income tax is a financial obligation that every working individual in India must adhere to. It's the tax levied by the government on the income earned by individuals, businesses, and other entities. The amount of tax an individual needs to pay is determined by their income level, the tax regime they opt for, and any eligible deductions or exemptions they can claim.
It is crucial to calculate tax liabilities accurately to avoid underpayment, which can lead to penalties, or overpayment, which means you’re not utilizing available tax-saving opportunities. By understanding the different income tax slabs, deductions, and exemptions, taxpayers can not only estimate how much tax they owe but also optimize their tax outgo to ensure they’re paying the right amount.
This guide will walk you through the key aspects of income tax calculations for the financial year 2025-26. We will examine the tax slabs applicable under the new tax regime, how much tax will be deducted based on income levels like ₹10 lakh and more, and the available exemptions and deductions that can lower your taxable income.
Income Tax Slabs for FY 2025-26: Breakdown of Tax Rates
For the financial year 2025-26, the government has revised the income tax slabs under the new tax regime, which applies to individual taxpayers opting for this regime. Here’s a breakdown of the income tax slabs for FY 2025-26:
Income Range (₹) | Tax Rate (%) |
Up to ₹4,00,000 | Nil |
₹4,00,001 to ₹8,00,000 | 5% |
₹8,00,001 to ₹12,00,000 | 10% |
₹12,00,001 to ₹16,00,000 | 15% |
₹16,00,001 to ₹20,00,000 | 20% |
₹20,00,001 to ₹24,00,000 | 25% |
Above ₹24,00,000 | 30% |
These revised slabs are part of the new tax regime, which was introduced to simplify tax calculations by removing various exemptions and deductions. Under this system, the tax is calculated directly based on income after applying the relevant tax rate for each income bracket. The slabs are progressive, meaning the higher the income, the higher the tax rate applied to the income exceeding a particular threshold.
Additionally, the new regime offers a significant relief for individuals with income up to ₹4 lakh, as they are exempt from tax. It's important to note that taxpayers must opt for either the old or the new tax regime. Once a taxpayer selects a regime for a particular financial year, they must stick to it for the entire year.
How Much Tax Will Be Deducted (TDS) on ₹10 Lakh Income?
For individuals earning ₹10 lakh per annum, the tax calculation can be broken down into the different applicable income tax slabs. Let’s calculate how much tax would be deducted under the new and old regimes.
New Tax Regime (FY 2025-26)
Under the new tax regime, the ₹10 lakh income will be taxed based on the following breakdown:
Up to ₹4,00,000 - No tax (0% rate)
₹4,00,001 to ₹8,00,000 - Taxable at 5% (₹4,00,000 × 5% = ₹20,000)
₹8,00,001 to ₹10,00,000 - Taxable at 10% (₹2,00,000 × 10% = ₹20,000)
Total Tax Payable: ₹20,000 (5%) + ₹20,000 (10%) = ₹40,000
Old Tax Regime (FY 2025-26)
In the old tax regime, taxpayers can avail of various exemptions and deductions, such as HRA, 80C deductions, and more. However, without factoring in these deductions, here’s how the tax would look for ₹10 lakh income:
Up to ₹2,50,000 - No tax (0% rate)
₹2,50,001 to ₹5,00,000 - Taxable at 5% (₹2,50,000 × 5% = ₹12,500)
₹5,00,001 to ₹10,00,000 - Taxable at 20% (₹5,00,000 × 20% = ₹1,00,000)
Total Tax Payable: ₹12,500 (5%) + ₹1,00,000 (20%) = ₹1,12,500
So, for an income of ₹10 lakh, under the new tax regime, the total tax payable would be ₹40,000, whereas under the old tax regime, it would be ₹1,12,500, excluding any deductions that may apply.
It is clear that, unless there are specific exemptions or deductions that significantly reduce taxable income, the new tax regime may be more beneficial for individuals earning ₹10 lakh annually. However, taxpayers should consider their eligibility for deductions under the old regime before making a decision.
Tax Calculation Examples: Income Above ₹10 Lakh
When your income exceeds ₹10 lakh, your tax liability increases as you move into higher tax brackets. The tax rates for such income fall within the 15%, 20%, and 30% slabs, depending on the total income. Here’s a breakdown of how tax is calculated for individuals earning more than ₹10 lakh annually:
Example 1: Income of ₹12,00,000
For an income of ₹12 lakh, the tax calculation would be as follows:
The first ₹4,00,000 is tax-free.
The next ₹4,00,000 (₹4,00,001 to ₹8,00,000) is taxed at 5%, which results in ₹20,000.
The next ₹4,00,000 (₹8,00,001 to ₹12,00,000) is taxed at 10%, resulting in ₹40,000.
Total Tax = ₹0 (tax-free portion) + ₹20,000 + ₹40,000 = ₹60,000
Example 2: Income of ₹18,00,000
For an income of ₹18 lakh, the tax calculation would be:
The first ₹4,00,000 is tax-free.
The next ₹4,00,000 (₹4,00,001 to ₹8,00,000) is taxed at 5%, resulting in ₹20,000.
The next ₹4,00,000 (₹8,00,001 to ₹12,00,000) is taxed at 10%, resulting in ₹40,000.
The next ₹6,00,000 (₹12,00,001 to ₹18,00,000) is taxed at 15%, resulting in ₹90,000.
Total Tax = ₹0 + ₹20,000 + ₹40,000 + ₹90,000 = ₹1,50,000
Example 3: Income of ₹25,00,000
For an income of ₹25 lakh, the tax calculation would be:
The first ₹4,00,000 is tax-free.
The next ₹4,00,000 (₹4,00,001 to ₹8,00,000) is taxed at 5%, resulting in ₹20,000.
The next ₹4,00,000 (₹8,00,001 to ₹12,00,000) is taxed at 10%, resulting in ₹40,000.
The next ₹8,00,000 (₹12,00,001 to ₹20,00,000) is taxed at 15%, resulting in ₹1,20,000.
The remaining ₹5,00,000 (₹20,00,001 to ₹25,00,000) is taxed at 20%, resulting in ₹1,00,000.
Total Tax = ₹0 + ₹20,000 + ₹40,000 + ₹1,20,000 + ₹1,00,000 = ₹2,80,000
Example 4: Income of ₹40,00,000
For an income of ₹40 lakh, the tax calculation would be:
The first ₹4,00,000 is tax-free.
The next ₹4,00,000 (₹4,00,001 to ₹8,00,000) is taxed at 5%, resulting in ₹20,000.
The next ₹4,00,000 (₹8,00,001 to ₹12,00,000) is taxed at 10%, resulting in ₹40,000.
The next ₹8,00,000 (₹12,00,001 to ₹20,00,000) is taxed at 15%, resulting in ₹1,20,000.
The next ₹4,00,000 (₹20,00,001 to ₹24,00,000) is taxed at 25%, resulting in ₹1,00,000.
The remaining ₹16,00,000 (₹24,00,001 to ₹40,00,000) is taxed at 30%, resulting in ₹4,80,000.
Total Tax = ₹0 + ₹20,000 + ₹40,000 + ₹1,20,000 + ₹1,00,000 + ₹4,80,000 = ₹7,60,000
Tax Implications for Bloggers and Small Business Owners
Bloggers and small business owners, including those engaged in affiliate marketing, sponsorships, and other self-employment activities, must treat their income as business income. This income is taxed under the head "Profits and Gains of Business or Profession."
Taxation on Blogging Income:
Bloggers earning through affiliate links, sponsored content, ads, or digital products are liable to pay tax on their income. This income is classified as business income, and all expenses related to the business are deductible. For example, bloggers can claim deductions for:
Website-related expenses: Domain registration, web hosting, software subscriptions, and any technical support costs.
Office space expenses: If operating from a home office, a portion of the rent, utilities, and maintenance can be claimed as a deduction.
Marketing and Advertising: Any expenditure related to promoting the blog, including paid ads, social media marketing, etc.
Business Equipment: Computers, cameras, and other equipment used in the business are eligible for depreciation and tax deduction.
Deductible Expenses:
Travel expenses: If the travel is for business purposes like attending conferences or meetings.
Salary to staff or freelancers: If you employ people or freelancers for work like content writing, SEO, or web design.
Depreciation on business assets: Items like computers, printers, and other equipment can be depreciated and claimed over time.
It’s crucial for bloggers to maintain accurate records of their income and expenses to claim these deductions and reduce their overall tax liability.
Example:
If a blogger earns ₹10,00,000 from various sources (affiliate marketing, ads, etc.), they can subtract business-related expenses from their total income before calculating the tax. If their total expenses amount to ₹3,00,000, their taxable income would be ₹7,00,000.
Tax on Savings and Fixed Deposits
Interest income from savings accounts and fixed deposits is subject to tax in India. However, there are certain exemptions and deductions that help reduce the tax burden.
Tax on Savings Account Interest:
Under Section 80TTA of the Income Tax Act, interest earned on savings accounts is exempt from tax up to ₹10,000 per annum. This exemption applies to both individual taxpayers and Hindu Undivided Families (HUFs). If the total interest exceeds ₹10,000, the excess is taxed according to the individual's income tax slab.
Example: If you earn ₹12,000 as interest from your savings account, ₹10,000 is exempt under Section 80TTA, and ₹2,000 will be taxed according to your applicable tax rate.
Tax on Fixed Deposit Interest:
Interest income from fixed deposits (FDs) is fully taxable under the individual's income tax slab. Banks deduct TDS (Tax Deducted at Source) at the rate of 10% if the interest income exceeds ₹40,000 in a financial year (₹50,000 for senior citizens). If your total interest income is below this threshold, no TDS will be deducted, but you are still required to report the income on your tax return.
Example: If you earn ₹50,000 from a fixed deposit, the bank will deduct ₹5,000 as TDS. However, if your income is within a lower tax bracket, you may be eligible for a refund when filing your tax return.
Senior Citizens:
Senior citizens (aged 60 or above) benefit from a higher TDS exemption threshold. They can earn up to ₹50,000 in interest from fixed deposits before TDS is deducted. However, if their total income exceeds the basic exemption limit, the interest income will still be taxable.
How to Optimize Your Tax: Deductions and Exemptions
Tax optimization is a critical part of effective financial planning. By utilizing available deductions and exemptions, you can reduce your taxable income and minimize your tax liability. Below are some of the most common ways to optimize your tax:
Section 80C Deductions:
How Investments in LIC, PPF, and Other Eligible Financial Instruments Can Reduce Taxable Income
Section 80C is one of the most popular ways to reduce taxable income. It allows taxpayers to claim deductions for various investments and expenses up to ₹1.5 lakh in a financial year. These deductions are available to both salaried and self-employed individuals. Some common investments eligible under Section 80C include:
Life Insurance Premium (LIC): Payments made for life insurance policies for yourself, your spouse, or your children can be claimed as deductions.
Public Provident Fund (PPF): Contributions to PPF accounts, which offer tax-free interest, are eligible for deductions under this section.
Employee Provident Fund (EPF): Contributions made by the employee to EPF are deductible under Section 80C.
Tax-saving Fixed Deposits (FDs): Investments in fixed deposits with a 5-year lock-in period qualify for deductions.
National Savings Certificates (NSC): Investments in NSCs also count toward the ₹1.5 lakh limit.
By strategically investing in these instruments, you can effectively reduce your taxable income and ensure significant tax savings.
Section 80D: Benefits of Health Insurance Deductions for Individuals and Senior Citizens
Section 80D allows individuals to claim deductions for premiums paid on health insurance policies. This benefit is not just for individuals but extends to the health insurance premiums paid for family members and senior citizens. The maximum amount you can claim under Section 80D is:
For self and family (excluding senior citizens): Up to ₹25,000 can be claimed for premiums paid on policies covering yourself, your spouse, children, or parents.
For senior citizens (aged 60 years or above): The deduction is increased to ₹50,000 if the premium is paid for the health insurance of senior citizens.
This section helps you not only save on taxes but also ensures you have adequate health coverage. By taking full advantage of Section 80D, you can reduce your tax burden while securing medical insurance for yourself and your family.
HRA Exemption: How Salaried Individuals Can Optimize Their Tax Using HRA Exemptions
House Rent Allowance (HRA) is an allowance given by employers to employees to cover rent expenses. Salaried individuals who live in rented accommodation can claim an exemption on HRA, which reduces their taxable income. The amount of exemption depends on several factors:
Basic Salary: The higher the basic salary, the higher the HRA exemption.
Rent Paid: The amount of rent paid is a major determining factor.
Location of Residence: If you live in a metro city, the HRA exemption might be higher.
Income Tax Slabs: Your tax slab will also influence the amount of exemption.
The HRA exemption is calculated based on the following three factors:
Actual HRA received.
Rent paid minus 10% of salary.
50% of salary if residing in metro cities or 40% if residing in non-metro cities.
To optimize your tax, ensure that you declare your HRA correctly and keep all rent receipts as proof.
Why PAN is Required for Bank Account Opening
The Permanent Account Number (PAN) is an essential document for all financial transactions in India, including opening a bank account. PAN is required by the Income Tax Department to track and record the financial activities of individuals. It helps the government monitor taxable income and prevent tax evasion.
Here’s why PAN is required for opening a bank account:
Identity Verification: PAN serves as an official identity proof, ensuring that the individual is correctly identified for tax purposes.
Tax Filing: PAN is linked to your income tax returns and helps the government track your tax obligations. It's also mandatory for filing ITR (Income Tax Returns).
TDS Deduction: PAN is required for Tax Deducted at Source (TDS) to be accurately deducted on income from savings accounts, fixed deposits, and other financial instruments. Without PAN, banks may deduct TDS at a higher rate.
In summary, PAN plays a crucial role in ensuring compliance with tax laws and is mandatory for individuals engaging in financial transactions, making it essential for opening a bank account.
Common Tax Questions on Income from Savings Accounts and Fixed Deposits
Q1: Is interest income from savings accounts taxable?
Yes, interest income earned on savings accounts is taxable. However, under Section 80TTA, interest income up to ₹10,000 per annum from savings accounts is exempt from tax for individuals below 60 years. For senior citizens, this exemption is enhanced under Section 80TTB to ₹50,000.
Q2: What is the tax on interest earned from fixed deposits?
Interest income from fixed deposits (FDs) is taxable as per the individual's applicable tax slab. If the interest earned exceeds ₹40,000 in a financial year (₹50,000 for senior citizens), the bank will deduct TDS at the rate of 10%. However, if you don't have PAN, the TDS will be deducted at a higher rate of 20%.
Q3: Can I claim tax deductions on FD interest?
No, you cannot claim tax deductions specifically for FD interest. However, you can include the interest as part of your total income and pay taxes accordingly.
Q4: How is TDS on FD interest calculated?
TDS on FD interest is calculated based on the total interest earned in a financial year. If the interest amount exceeds the TDS threshold, the bank will deduct TDS at the rate of 10% (if PAN is provided).
Q5: Is there any way to avoid TDS on FD interest?
To avoid TDS on FD interest, you can ensure that the total interest income from all your FDs in a financial year does not exceed ₹40,000 (₹50,000 for senior citizens). Alternatively, you can submit a Form 15G or 15H to the bank, declaring that your total income is below the taxable limit.
Q6: Do I need to report FD interest in my tax return?
Yes, all interest earned from fixed deposits must be reported in your Income Tax Return, whether or not TDS is deducted. This ensures that your tax is calculated correctly.
Resources for Accurate Tax Calculation
Accurately calculating your tax liability requires the right tools and resources. Here are some reliable platforms where you can access comprehensive tax calculators and tools to help with your tax planning:
TaxBuddy: TaxBuddy provides easy-to-use online tools to help you calculate your taxes based on your income level, deductions, and exemptions. With the assistance of this platform, you can streamline your tax filing process, ensuring you comply with the latest tax regulations while optimizing your tax savings. Visit TaxBuddy
Income Tax Department (India): The official website of the Income Tax Department provides access to tax calculators, tax filing portals, and the latest tax slabs and policies. It’s an essential resource for understanding your tax obligations and ensuring compliance with Indian tax laws. Visit Income Tax Department
Using these resources, you can confidently calculate your tax liability, plan for deductions, and file your taxes in compliance with current regulations.
Conclusion: How to Effectively Manage Your Tax Liabilities
In conclusion, understanding how much tax do I have to pay is essential for anyone looking to manage their finances efficiently. By considering factors like your income level, tax regime, and available deductions, you can effectively minimize your tax liability.
The key takeaways from this guide are:
Income Tax Slabs: It’s important to familiarize yourself with the current income tax slabs for FY 2025-26 to ensure you're calculating your tax based on the right tax rates.
Deductions and Exemptions: Utilize deductions under Section 80C for investments, Section 80D for health insurance premiums, and HRA exemptions to reduce your taxable income.
Tax Planning: Tax planning is crucial for minimizing your liabilities. Make use of the resources provided by platforms like TaxBuddy, the Income Tax Department, and others to calculate your taxes accurately and stay informed about the latest tax benefits.
Tax Filing: With accurate calculations and the right deductions, filing your taxes will become more straightforward, ensuring compliance with Indian tax laws and optimizing your tax savings.
By staying informed and planning ahead, you can manage your taxes efficiently and ensure you’re not overpaying while taking full advantage of the available tax-saving opportunities.
FAQs
Q1. How do I calculate tax if my income is ₹5 lakh?
For income up to ₹5 lakh, under the new tax regime, you can avail of a rebate under Section 87A. The tax liability would be zero after applying the rebate.
Q2. Is income from freelancing taxed differently from salaried income?
Yes, income from freelancing is considered business or professional income and is taxed accordingly. It’s subject to the same income tax slabs as salaried income but requires you to maintain accounts and file tax returns under a different category.
Q3. How does the new tax regime affect my tax calculation if I have multiple income sources?
Under the new tax regime, all sources of income (salary, business income, etc.) are aggregated, and the applicable tax rate is applied on the total income. However, you will not be able to claim deductions under sections like 80C, 80D, etc.
Q4. What is the difference between tax deductions and exemptions?
Tax deductions reduce your taxable income, thereby reducing the tax you pay. Exemptions, on the other hand, remove certain income sources from being taxed altogether, such as HRA or income from agriculture.
Q5. How can I claim tax benefits under Section 80C?
Under Section 80C, you can claim tax benefits on investments such as PPF, life insurance premiums, ELSS, and principal repayment on home loans, up to a limit of ₹1.5 lakh per year.
Q6. Does the income from my side business qualify for tax deductions?
Yes, if you run a side business, the income generated qualifies as business income. You can claim deductions for business expenses such as office supplies, equipment, and other operational costs.
Q7. What is the impact of HRA on my tax liability?
House Rent Allowance (HRA) can significantly reduce your tax liability if you live in rented accommodation. The amount of exemption depends on factors like salary, rent paid, and city of residence.
Q8. How much tax will I pay if I earn ₹50 lakh in a year?
For an income of ₹50 lakh, the tax will be calculated based on the progressive tax rates, with higher slabs applying to the income above ₹10 lakh. You will also be liable for surcharge, which increases as the income exceeds ₹50 lakh.
Q9. What is the maximum amount I can claim under Section 80D for health insurance?
Under Section 80D, you can claim a deduction of up to ₹25,000 for premiums paid for yourself, your spouse, and children. For senior citizens, this amount increases to ₹50,000.
Q10. Can I claim deductions for my home loan under the new tax regime?
Under the new tax regime, you cannot claim deductions for home loan interest or principal repayment. However, under the old regime, you can claim deductions under Sections 80C and 24(b).
Q11. Is the interest on my savings account taxable under the new tax regime?
Yes, interest earned on savings accounts is taxable. However, you can claim a deduction of up to ₹10,000 under Section 80TTA if the interest is earned from a savings account with a bank or post office.
Q12. What happens if I don't pay taxes on time?
If you don't pay your taxes on time, you may incur penalties and interest charges. The Income Tax Department may also issue a notice, and in some cases, legal action may be taken for non-compliance.
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