How to Calculate Income Tax on Salary (New Regime, 2026-27)

# How to Calculate Income Tax on Salary (New Regime, 2026-27)

Most people assume their income tax is simply their gross salary multiplied by a rate. The reality has more steps — and a few of them save you money. This guide walks through the calculation from salary slip to final tax, then shows you how to check it in seconds.

Step 1: Start With Your Gross Salary

Your annual gross salary includes basic pay, allowances, bonuses, and any taxable perks. Everything that appears on your Form 16 as "earnings" is the starting point.

Step 2: Subtract the Standard Deduction

Under the new regime, a standard deduction of ₹75,000 applies to salaried individuals. That simply means your first ₹75,000 of salary is exempt before any slab applies.

Step 3: Know the New-Regime Slabs (FY 2026-27)

Income above the standard deduction is taxed in slabs:

Annual taxable income	Tax rate
Up to ₹4,00,000	Nil
₹4,00,001 – ₹8,00,000	5%
₹8,00,001 – ₹12,00,000	10%
₹12,00,001 – ₹16,00,000	15%
₹16,00,001 – ₹20,00,000	20%
₹20,00,001 – ₹24,00,000	25%
Above ₹24,00,000	30%

Each slab tax applies only to the portion of income within that slab, not to your whole salary. Always cross-check slab rates with the current Finance Ministry rules, since budgets can revise them.

Step 4: Apply the Section 87A Rebate

If your total taxable income is ₹12,00,000 or less in the new regime, the rebate under Section 87A can make your tax liability NIL. Above ₹12 lakh, the rebate stops applying and slabs kick in fully.

A Worked Example

Take Ashok, annual gross salary ₹14,00,000 (new regime):

• Taxable income after standard deduction: ₹14,00,000 − ₹75,000 = ₹13,25,000
• Tax: Nil on ₹4L + 5% of ₹4L (₹20,000) + 10% of ₹4L (₹40,000) + 15% of ₹1,25,000 (₹18,750) = ₹78,750
• Plus 4% health and education cess: ₹3,150 → total ₹81,900

His tax is ₹81,900, not the ₹3.9 lakh a naive 28% guess would suggest.

Check Your Numbers in Seconds

Instead of spreadsheets, use the ToolPilot Income Tax Calculator. Enter your gross salary, choose the regime, and it shows taxable income, rebate, and final tax including cess — ready for filing.

Conclusion

The tax you pay is decided by three things: your taxable income after the standard deduction, the slab you land in, and the 87A rebate. Get those three right and your numbers will match the calculator every time.