₹60 lakh salary: Here is how to calculate final tax liability after surcharge under new tax regime

An annual salary of ₹60 lakh requires one additional step in tax calculation under the new tax regime compared to lower income levels. In addition to applying slab-wise tax rates, taxpayers must also account for a 10% surcharge, which applies once taxable income exceeds ₹50 lakh.

Here is a step-by-step breakdown of how the tax is calculated.

How is tax calculated on a ₹60 lakh salary in the new tax regime?

Step 1: Claim the standard deduction

Before calculating tax, salaried individuals can claim a standard deduction of ₹75,000 under the new tax regime. As a result, although the employee earns ₹60 lakh, tax is calculated only on ₹59.25 lakh.

Step 2: Calculate final tax liability after considering slab-wise rates, surcharge and health & education cess

After deducting the standard deduction, the taxable income is ₹59.25 lakh.

Under the new tax regime, income is taxed progressively across different slabs. In this case, only the income above ₹24 lakh, i.e., ₹35.25 lakh, falls into the 30% tax slab. Based on the slab-wise calculation, the total income tax comes to ₹13,57,500.

Surcharge: Since the taxable income exceeds ₹50 lakh, a surcharge of 10% is applicable on the income tax payable. Under the new tax regime, the surcharge rate is 10% for income between ₹50 lakh and ₹1 crore, with higher rates applying to higher income levels.

In this case, the surcharge comes out to ₹1,35,750. After adding the surcharge, the tax plus surcharge amount becomes ₹14,93,250.

Health and education cess: At the end, a 4% health and education cess is levied on the tax (including surcharge amount). The cess in this case is ₹59,730.

Therefore, the final tax liability on a salary of ₹60 lakh under the new tax regime is ₹15,52,980.

Step 3: Calculate the effective tax rate

Effective tax rate = Final tax liability ÷ Gross salary × 100

= ₹15,52,980 ÷ ₹60,00,000 × 100

= 25.88%

The effective tax rate is 25.88%, which is the final tax liability as a percentage of the gross annual salary.

How does the surcharge affect the effective tax rate?

A taxpayer earning more than ₹50 lakh in a financial year is liable to pay a surcharge of 10% under the new tax regime. This surcharge is calculated on the income tax payable after deductions and exemptions are applied, not on the gross salary.

Even after accounting for the surcharge and cess, the effective tax rate remains lower than the highest tax rate of 30% in the new regime, providing a more accurate measure of the actual tax burden on a ₹60 lakh salary.

Disclaimer: This is only for informational and educational purposes. Please consult a qualified tax expert for the latest tax laws and regulations.