Calculating Tax Payable on a Gross Income of 8 Lakh in India

Introduction

Understanding your tax liability is crucial for proper financial planning. This article explains how to calculate the tax you are supposed to pay if your total gross income for the financial year 2023-24 is 8 lakh Indian Rupees (approximately 10,666 USD as of 2023). This breakdown includes the old tax regime with deductions and the new tax regime without deductions.

Old Tax Regime with Deductions

The old tax regime in India for the assessment year 2024-25 provides different tax slabs under which different tax brackets are applicable. Here’s a detailed computation:

Income Slabs

Up to 2.5 Lakh: No tax 2.5 Lakh to 5 Lakh: 5% 5 Lakh to 10 Lakh: 20%

Tax Calculation:

Income up to 2.5 Lakh: No tax Income from 2.5 Lakh to 5 Lakh (2.5 Lakh): 5% of 2.5 Lakh 12,500 Income from 5 Lakh to 8 Lakh (3 Lakh): 20% of 3 Lakh 60,000

Total Tax: 12,500 60,000 72,500

Health and Education Cess

Cess: 4% on total tax

Cess: 4% of 72,500 2,900

Total Tax Payable: 72,500 2,900 75,400

New Tax Regime without Deductions

The new tax regime, which came into effect from the financial year 2020-21, provides a simplified tax calculation method. Here’s the breakdown:

Income Slabs

Up to 2.5 Lakh: No tax 2.5 Lakh to 5 Lakh: 5% 5 Lakh to 7.5 Lakh: 10% 7.5 Lakh to 10 Lakh: 15%

Tax Calculation:

Income up to 2.5 Lakh: No tax Income from 2.5 Lakh to 5 Lakh (2.5 Lakh): 5% of 2.5 Lakh 12,500 Income from 5 Lakh to 7.5 Lakh (2.5 Lakh): 10% of 2.5 Lakh 25,000 Income from 7.5 Lakh to 8 Lakh (50,000): 15% of 50,000 7,500

Total Tax: 12,500 25,000 7,500 45,000

Health and Education Cess

Cess: 4% on total tax

Cess: 4% of 45,000 1,800

Total Tax Payable: 45,000 1,800 46,800

Summary

RegimeTotal Tax Payable Old Tax Regime75,400 New Tax Regime46,800

You can choose which regime to opt for based on your financial situation, especially if you have deductions or exemptions that could benefit you under the old regime.

Quick Calculation with Tax Buddy

For many permutation and combinations, using a tax calculator such as TaxBuddy can be highly beneficial. This tool simplifies the entire process and allows you to calculate tax liabilities accurately.