I earn ₹12 lacs per year. What is my tax liability exactly?

Income tax in India is determined by the Income Tax Act which changes from time to time when the government revises the slab rates. The slab rates are nothing but different rates of taxes applied to different levels of incomes. This is called progressive taxation. For instance, someone earning up to ₹ 2,50,000 a year is exempted from tax. However, those earning ₹ 3,00,000 a year have to pay tax only on the additional ₹ 50,000.

In India, there are different tax rates for different slabs . Below are the Income Tax Slabs & Tax Rate in India for Financial year 2019-2020

Income Range	Income Tax Rate	Education Cess
Up to ₹2.5 lakhs	Nil	Nil
₹2.5 lakhs to ₹5 lakhs	5% of (Total income – ₹2.5 lakhs)	3% 4%of income tax
₹5 lakhs to ₹10 lakhs	₹25,000 + 20% of (Total income – ₹5 lakhs)	4% of income tax
Above ₹10 lakhs	₹1,12,500 + 30% of (Total income – ₹10 lakhs)	4% of income tax

Let’s take an example:

If your salary is ₹ 12 lakh per year, what is your total tax liability if you follow the current slab rates? This is shown below.

Income Tax Calculation 2019

Income Slab	Tax Rate	Income in this slab	Total tax you will pay
₹0.00 to ₹2,50,000	Nil	0	0
₹2,50,000 to ₹5,00,000	5%	₹2,50,000	₹12,500
₹5,00,000 to ₹10,00,000	20%	₹5,00,000	₹1,00,000
₹10,00,000 +	30%	₹2,00,000	₹60,000
Total			₹1,72,500

As shown above, the taxes on each slab of income rise as the percentage rises. However, the additional rates are charged only on the additional income from that slab instead of being applied to the total income. So, even if you are in the highest slab rate of 30% because your income is more than ₹ 10 lakh a year, you pay the 30% tax only on the amount above ₹ 10 lakh while other slab rates apply for different levels of income.

This total is without any tax deductions

There are possible components for tax deductions which can help you save taxes:

Annuity Plans

Child Tuition Fees

Employee National Pensions Scheme (NPS)

Equity Linked Savings Scheme Investment

Fixed Deposits

Housing Loan Interest

Interest on Saving Account Deposits

Interest on the loan is taken for Residential House

Life Insurance Premium

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