Real-time tax computation for Financial Year 2026-27 | Advanced professional tool with step-by-step breakdown
Optimize your HRA exemption by ensuring rent receipts are documented properly and consider increasing 80C investments to maximize deductions.
Understanding the mathematical formula behind salary tax computation is essential for accurate financial planning. The professional calculation follows these steps:
// Step 1: Calculate Basic Salary
Basic Salary = Gross Salary × (Basic Percentage ÷ 100)
// Step 2: Calculate HRA Amount
HRA Amount = Basic Salary × (HRA Percentage ÷ 100)
// Step 3: Calculate HRA Exemption (Least of three)
HRA Exemption = MINIMUM OF:
1. Actual HRA Received
2. Actual Rent Paid - (10% of Basic Salary)
3. 50% of Basic Salary (Metro) or 40% (Non-Metro)
// Step 4: Calculate Taxable Salary
Taxable Salary = Gross Salary - HRA Exemption - Standard Deduction (₹75,000)
// Step 5: Apply Chapter VI-A Deductions
Total Deductions = Section 80C + Section 80D + Other Deductions
// Step 6: Calculate Taxable Income
Taxable Income = Taxable Salary - Total Deductions
// Step 7: Apply Tax Slabs
Income Tax = Calculate using progressive tax slabs
// Step 8: Add Cess
Total Tax = Income Tax + (Income Tax × 4%)
Gross Salary: ₹18,00,000 | Basic (40%): ₹7,20,000 | HRA (50% of Basic): ₹3,60,000
Rent Paid: ₹4,80,000 | 80C Investments: ₹1,50,000 | 80D: ₹25,000
Based on projected tax structure for 2026-27 (Assessment Year 2027-28):
| Income Slab (₹) | Tax Rate | Tax Amount (Example for ₹15L) |
|---|---|---|
| 0 - 3,00,000 | 0% | ₹0 |
| 3,00,001 - 6,00,000 | 5% | ₹15,000 (on ₹3L) |
| 6,00,001 - 9,00,000 | 10% | ₹30,000 (on ₹3L) |
| 9,00,001 - 12,00,000 | 15% | ₹45,000 (on ₹3L) |
| Above 12,00,000 | 20% | ₹60,000 (on ₹3L) |
| Surcharge | 10% on tax > ₹50L | 15% on tax > ₹1Cr | 25% on tax > ₹2Cr | |
| Health & Education Cess | 4% on tax + surcharge | |
The tax slabs for 2026-27 are projections based on current trends. Actual rates will be confirmed in the Union Budget 2026. This calculator uses the most probable structure expected by tax professionals.
A professional earning ₹12L annually with ₹2.4L rent paid:
For ₹15L salary with varying 80C investments:
Two professionals with ₹18L CTC but different salary structures:
Traditional Structure: Basic 40%, HRA 50%, Other 10% → Tax: ₹1,85,000
Optimized Structure: Basic 50%, HRA 40%, LTA 10% → Tax: ₹1,62,000
Savings: ₹23,000 annually through better salary structuring
Financial Year (FY) is when you earn the income (April 1, 2026 to March 31, 2027). Assessment Year (AY) is when you assess and pay tax on that income (AY 2027-28 for FY 2026-27). Tax returns are filed in the Assessment Year for income earned in the previous Financial Year.
If you live with parents and pay rent to them, you can claim HRA exemption provided: 1) You have a valid rent agreement with parents, 2) You actually pay rent (bank transfers are best proof), 3) Your parents show this rental income in their tax return. The calculation follows the same three-rule minimum method.
If Tax Deducted at Source (TDS) by your employer is less than your final computed tax liability, you must pay the balance as advance tax in installments (by June 15, Sept 15, Dec 15, and March 15). Failure results in interest penalties under Sections 234B (1% monthly) and 234C (for missed installments).
Yes, you can file a revised return using ITR-U form within 24 months from the end of the relevant assessment year. For FY 2026-27 (AY 2027-28), you can revise until March 31, 2029. This allows adding forgotten deductions like 80C investments or 80D premiums.
The standard deduction of ₹75,000 is automatically available to all salaried individuals and pensioners. It's deducted from your gross salary before calculating taxable income. Unlike actual expense-based deductions, you don't need bills or proofs - it's a flat deduction for all salaried taxpayers.
For HRA exemption, metro cities are Delhi, Mumbai, Kolkata, and Chennai. Some companies also include Bengaluru, Hyderabad, and Pune as metro cities, but officially only the first four qualify for 50% of basic salary limit. Other cities use 40% of basic salary limit.
With optimal salary structuring, you can save up to 15-20% of your tax liability. Key strategies: 1) Maximize HRA through proper rent documentation, 2) Utilize LTA (Leave Travel Allowance) for actual travel, 3) Optimize basic:HRA ratio, 4) Use special allowances like meal coupons (tax-free up to ₹50/meal), 5) Maximize 80C and 80D investments.
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