Gross annual salary = Basic salary + allowances + bonuses + other taxable income
Taxable income = Gross annual salary – deductions – exemptions
Apply the income tax slab rates to the taxable income
Add surcharge if applicable
Add health and education cess if applicable
Final tax payable = Tax before cess + cess – tax credits
Example:
Gross annual salary = 12,00,000
Standard deduction = 50,000
Taxable income = 11,50,000
Tax calculation under a sample slab system:
0 to 2,50,000 = 0
2,50,001 to 5,00,000 at 5% = 12,500
5,00,001 to 10,00,000 at 20% = 1,00,000
10,00,001 to 11,50,000 at 30% = 45,000
Total tax before cess = 1,57,500
Health and education cess at 4% = 6,300
Total income tax payable = 1,63,800
Monthly tax deduction = 1,63,800 ÷ 12 = 13,650