Understanding Income Tax Calculation in India
Income tax in India is calculated based on your taxable income, which is your total income after deductions and exemptions. The tax rates are progressive, meaning the higher your income, the higher the tax rate.
Key Factors for Calculating Income Tax on 1 Crore Income
- Tax Regime: India has two tax regimes – the Old Regime and the New Regime. The Old Regime offers various deductions and exemptions, while the New Regime has lower tax rates but fewer deductions. You need to choose the regime that benefits you most.
- Income from Different Sources: Your 1 crore income might come from various sources like salary, business, capital gains, etc. Each income source has its own tax rules and deductions.
- Deductions and Exemptions: You can reduce your taxable income by claiming deductions under various sections like 80C, 80D, 80TTA, etc., in the Old Regime.
- Surcharge: A surcharge is levied on income tax if your income exceeds a certain limit.
- Cess: Health and education cess is levied at 4% on the income tax and surcharge.
Illustrative Calculation (New Tax Regime)
Let’s assume your total income is 1 crore, and you choose the New Tax Regime (no deductions considered here):
- Income: ₹1,00,00,000
- Taxable Income: ₹1,00,00,000 (assuming no deductions)
- Income Tax:
- Up to ₹15,00,000: ₹1,40,000
- On remaining ₹85,00,000 (30%): ₹25,50,000
- Total Income Tax: ₹26,90,000
- Surcharge (15% on income tax): ₹4,03,500
- Cess (4% on income tax + surcharge): ₹1,23,740
- Total Tax Liability: ₹32,17,240
Important Notes:
- This is a simplified calculation for illustrative purposes.
- The actual tax liability may vary based on your specific income sources, deductions, and exemptions.
- It’s crucial to consult a tax advisor for personalized tax planning and accurate calculations.
Additional Resources:
- Income Tax Department Website: https://www.incometax.gov.in/
- Tax Calculators: Many online tax calculators can help you estimate your tax liability.
https://incometaxindia.gov.in/pages/tools/tax-calculator.aspx
How To Save Tax For Salary Above 1 Crore?
The first step towards tax saving is to understand the country’s tax structure. At present, there are two tax regimes operational in the country. The taxpayers now have the choice to pick a tax regime that can help them save more money. If you haven’t made any choice, you will be shifted to the new tax regime by default.
If you want to know how to save tax on a 1 crore salary, this is just for you.
Latest Update Budget 2024
Finance Bill 2024 has proposed new tax structure for the FY 2024-25, as follows
| Tax Slab | Tax Rate |
| upto ₹ 3 lakh | Nil |
| ₹ 3 lakh – ₹ 7 lakh | 5% |
| ₹ 7 lakh – ₹ 10 lakh | 10% |
| ₹ 10 lakh – ₹ 12 lakh | 15% |
| ₹ 12 lakh – ₹ 15 lakh | 20% |
| more than ₹ 15 lakh | 30% |
Furthermore, there has been changes in standard deduction and family pension deduction particularly in the new tax regime. There has been an increase in the standard deduction from ₹ 50,000 to ₹ 75,000, and deduction on family pension has also increased from ₹ 15,000 to ₹ 25,000.
Tax Slabs Under Old vs New Tax Regime
As per the new income tax guidelines, you can opt for either the new or the old regime while filing your taxes. Here is a difference between the two:
| Tax Slab | FY 2023-24 Tax Rate (Old tax regime) | Tax Slab | FY 2023-24 Tax Rate (New tax regime) |
| Up to Rs 2,50,000 | Nil | Up to Rs 3,00,000 | Nil |
| Rs 2,50,000 – Rs 5,00,000 | 5% | Rs 3,00,000 – Rs 6,00,000 | 5% |
| Rs 5,00,000 – Rs 10,00,000 | 20% | Rs 6,00,000 – Rs 9,00,000 | 10% |
| Rs 10,00,000 and beyond | 30% | Rs 9,00,000 – Rs 12,00,000 | 15% |
| NA | NA | Rs 12,00,000 – Rs 15,00,000 | 20% |
| NA | NA | Rs 15,00,000 and beyond | 30% |
Tax Saving Options – New Tax Regime
Here are the points to note under the New Tax Regime if you are a salaried individual having more than Rs 1 crore Salary:
- Surcharge Rates if income exceeds Rs. 50 lakhs are as follows
- Taxable income > 50,00,000 = Surcharge 10%
- Taxable income > 1,00,00,000 = Surcharge 15%
- Taxable income > 2,00,00,000 = Surcharge 25%
- Health and Education Cess of 4% is applicable on gross tax liability plus surcharge.
- Finance Act 2023 has capped the maximum surcharge limit under the New Tax Regime at 25%, whereas if taxable income exceeds Rs. 5 crores in old tax regime, the surcharge is levied at 37%.
Tax Exemption and Deductions Available under the New Tax Regime
- Transport allowances in case of a specially-abled person.
- Conveyance allowance received to meet the conveyance expenditure incurred as part of the employment.
- Any compensation received to meet the cost of travel on tour or transfer.
- Daily allowance received to meet the ordinary regular charges or expenditures you incur on account of absence from his regular place of duty.
- Perquisites for official purposes
- Exemption on voluntary retirement 10(10C), gratuity u/s 10(10) and Leave encashment u/s 10(10AA)
- Interest on Home Loan on the let-out property (Section 24)
- Gifts up to Rs 50,000
- Deduction for employer’s contribution to NPS account [Section 80CCD(2)]
- Deduction for additional employee cost (Section 80JJAA)
- Standard deduction of Rs 50,000 under the New Tax Regime applicable from FY 2023-24
- Deduction under Section 57(iia) of family pension income
- Amount paid or deposited in the Agniveer Corpus Fund under Section 80CCH(2).
Tax Saving Options – Old Tax Regime
If you fall above 1 crore tax slab, here is the tax slab under the old regime. Here are few Points to Note
- Surcharge Rates if income exceeds Rs. 50 lakhs are as follows
- Taxable income > 50,00,000 = Surcharge 10%
- Taxable income > 1,00,00,000 = Surcharge 15%
- Taxable income > 2,00,00,000 = Surcharge 25%
- Taxable income > 5,00,00,000 = Surcharge 37%
- Once you find your gross payable tax liability, an additional 4% of Health and Education Cess shall also be applicable on gross tax liability plus surcharge.
- The above slab rates are applicable for Individual aged less than 60. For individuals aged between 60-80 basic exemption limit will be Rs. 3,00,000, and For individuals aged more than 80 basic exemption limit will be Rs. 5,00,000
Tax Exemption And Deductions Available Under The Old Tax Regime
Deductions
| Standard Deduction | Rs. 50,000 available for all the salaried employees. |
| Paying health insurance policy premium (Section 80D) | Self, your spouse, and your dependent children: Rs 25,000 (Rs 50,000 if aged 60 and above)Parents: Rs 25,000 (Rs 50,000 if aged 60 and above) |
| Opting for an education loan (Section 80E) | Interest deduction for 8 years from the year of repayment of loan taken for the higher education of yourself, your spouse, dependent children, or a student of whom you are the legal guardian |
| Donating to charity (Section 80G) | 50% or 100% of the eligible amount |
| Investing in tax saving instruments (Section 80C) | Tax benefit of Rs.1,50,000 per year. You can invest in the following options:– Employees’ Provident Fund (EPF)– Public Provident Fund (PPF)– Equity Linked Saving Scheme funds (ELSS)– Home loan repayment and Stamp duty– Sukanya Smriddhi Yojana (SSY)– National Savings Certificate (NSC)– Fixed Deposit for 5 years, and more |
| Costs to treat disabled dependents (Section 80DD) | If you have disabled dependents for whom you bear medical expenses, you are eligible for the tax relief: – 40% disability: Rs.75,000– 80% disability: Rs.1,25,000 |
| Deductions on home loan payments | Principal amount: Upto Rs 1.5 lakhs u/s 80CInterest amount: Upto Rs 2 lakhs paid u/s 24b |
| Maturity amount of a Life Insurance Policy | Maturity proceeds are tax exempt if the sum assured is ≤:– 20%: policies issued before 1 April 2012– 10%: policies issued after 1 April 2012– 15%: policies issued after 1 April 2013 for a person with disability or disease. |
Exemptions:
| House Rent Allowance (HRA) | Exempt up to a certain limit. Calculate now |
| Leave Travel Allowance (LTA) | Actual travel ticket expenses exempt for two2 trips in 4 years under 10(5). Read more |
| Mobile/ Internet reimbursement | Exempt if:– used predominantly for office purposes – proofs/bills submitted |
| Children’s Education and hostel Allowance | Rs 4800 per child (max 2 children) |
| Food | Rs 50 per meal (max 2 meals a day)Annual= Rs. 26,400 (50*2*22 days*12 months) |
| Professional Tax | Generally Rs 2,400 (Varies from state to state) |
There are several other deductions and exemptions as well. But this is just to give you a brief idea of the most commonly availed exemptions and deductions.
Example Of Tax Calculation Under New And Old Tax Regime For The Salary Above 1 Crore
Let’s take an example for better understanding:
Mr. A has a Salary income of Rs.1.2 Crores. He is also claiming the following deduction and exemption. Calculate tax liability under the Old Tax Regime and New Tax Regime
- HRA exemption = Rs 1,80,000
- LTA exemption = Rs. 55,000
- Children’s Education and Hostel Allowance =Rs. 9,600
- Profession Tax = Rs. 2,400
- Investment in PPF, ELSS = Rs. 1,50,000
- Medical insurance premium towards Parents = Rs. 50,000
- Interest on education loan = Rs. 55,000
| Particular | Old tax regime | New tax regime |
| Gross Salary u/s 17(1) | 1,20,00,000 | 1,20,00,000 |
| Less: Exemption u/s 10 | ||
| HRA Exemption | 1,80,000 | ❌ |
| LTA Exemption | 55,000 | ❌ |
| Children’s education and hostel allowance | 9,600 | ❌ |
| Less: Deduction u/s 16 | ||
| Standard deduction | 50,000 | 50,000 |
| Profession Tax | 2,400 | ❌ |
| Income under the Head Salary | 1,17,03,000 | 1,19,50,000 |
| Less: Deduction under Chapter VI-A | ||
| Section 80C | 1,50,000 | ❌ |
| Section 80D | 50,000 | ❌ |
| Section 80E | 50,000 | ❌ |
| Net Total Income | 1,14,53,000 | 1,19,50,000 |
| Income Tax (Including Surcharge) | 37,35,660 | 37,77,750 |
| Tax Liability (Including Cess) | 38,85,100 | 39,28,900 |
In the above calculation, the tax under the Old Tax Regime is lower than the New Tax Regime. This is due to the deductions and exemptions claimed and allowed under the Old Tax Regime. Careful comparison according to the specific Individual must be made before opting for the appropriate Tax Regime.
Now that you are aware of the two operational tax regimes, you can easily do your tax planning for a salary above Rs 1 crore. There are several schemes, especially under the old tax regime, that can help you substantially bring down your tax liability. On the other hand, the multiple slabs under the new regime can help you avail lower tax rates. Make sure to plan everything well in advance so that you do not miss out on tax savings.
Important Questions and Answers! What is the Surcharge on Rs 1 crore income on the old and new tax regime?
Surcharge on Rs 1 Crore income both in old and new tax regime is 15%.
What is the deduction on Rs 1 Crore salary ?
For Rs 1 Crore Salary tax liability will be as follows and tds will be deducted by your employer accordingly over a period of 12 months
| Particular | Old Regime | New Regime |
| Total Income | 1,00,00,000 | 1,00,00,000 |
| Less : Standard deduction | 50,000 | 50,000 |
| Section 80C deduction | 150,000 | 0 |
| Taxable Income | 98,00,000 | 99,50,000 |
| Total tax liability | 31,48,860 | 30,71,840 |
What is the CTC breakup of Rs 1 crore salary?
Your CTC for Rs 1 Crore will depend upon the Bonus , PF contribution , PT deduction , TDS deduction. Your employer might also provide you will FBP – Fixable benefit plan which allows you to customise your salary component also.
Which ITR is to be filed if your salary is above Rs. 50,00,000?
If your salary is above Rs. 50,00,000 then you will have to file ITR-2.
Which is the better regime (old or new) for salary above Rs. 1 Crores?
The choice of better regime depends on the deduction that you want to avail.
What is the surcharge rate applicable on LTCG and STCG u/s 111A?
In the case of LTCG and STCG u/s 111A the maximum surcharge rate is capped at 15%.
What is the rate of Health and Education Cess?
The rate of Health and Education Cess is 4%.
Is Health and Education cess only applicable on Tax Liability?
No, the health and education cess is applicable on both tax liability as well as surcharge amount.