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Methodology

This page documents exactly how the calculator works for FY 2026-27 (AY 2027-28), so you can verify every number. Constants come from a single configuration file aligned to the Finance Act 2025 (retained unchanged by Finance Act 2026).

1. Splitting your CTC

We split CTC into Basic (default 50%, adjustable), HRA (50% of basic for metros, 40% otherwise), employer PF (12% of basic, capped by default at the ₹15,000/month statutory wage ceiling — most large employers do this; toggle it off for PF on full basic), gratuity (4.81% of basic), and a balancing Special Allowance. Employer PF and gratuity are part of CTC but excluded from your monthly cash, since they are not paid out as salary.

2. Taxable income

Taxable salary is your basic + HRA + special allowance + bonus. The new regime subtracts a ₹75,000 standard deduction. The old regime subtracts a ₹50,000 standard deduction plus HRA exemption (least of actual HRA, rent − 10% of basic, or 50%/40% of basic) and deductions under 80C (max ₹1.5L), 80D (max ₹25,000), home-loan interest (max ₹2L), NPS under 80CCD(1B) (max ₹50,000), and professional tax paid (Section 16(iii)). Employer NPS under 80CCD(2) is deductible in both regimes — up to 14% of basic in the new regime (FY 2025-26 onward) and 10% in the old regime.

3. Tax slabs

New regime
  • ₹0L – ₹4L: 0%
  • ₹4L – ₹8L: 5%
  • ₹8L – ₹12L: 10%
  • ₹12L – ₹16L: 15%
  • ₹16L – ₹20L: 20%
  • ₹20L – ₹24L: 25%
  • Above ₹24L: 30%
Old regime
  • ₹0L – ₹3L: 0%
  • ₹3L – ₹5L: 5%
  • ₹5L – ₹10L: 20%
  • Above ₹10L: 30%

4. Rebate, surcharge, cess & marginal relief

Section 87A rebate makes income up to ₹12,00,000 (new) or ₹5,00,000 (old) taxable tax-free, with marginal relief just above the new-regime threshold. Surcharge applies above ₹50L (10%), ₹1Cr (15%), ₹2Cr (25%, and 37% over ₹5Cr in the old regime), with marginal relief at each band. A 4% health & education cess applies on tax plus surcharge. Finally we subtract employee PF (12% of basic, capped by default at the ₹15,000/month wage ceiling) and state professional tax to reach monthly in-hand.

Assumptions & limitations

  • Figures are estimates; your actual payslip depends on your employer's exact structure.
  • Less common deductions (80E education loan, 80G donations, 80TTA) are not modelled.
  • Professional tax uses the annual state maximum and is deducted from old-regime taxable income.
  • Always confirm with your HR/payroll team or a tax professional.

Sources: incometax.gov.in, Finance Act 2025 and 2026, cleartax.in. Last reviewed July 2026 for FY 2026-27.