Computation of Total Income and Tax Liability
What this domain tests
This domain tests the final computation sequence: aggregating heads, setting off losses, deducting Chapter VI-A amounts, applying slab rates, rebate, surcharge, cess, and adjusting taxes already paid.
Core rules
- Compute income under each head, apply intra-head and inter-head set-off, and arrive at gross total income.
- Deduct eligible Chapter VI-A amounts to get total income. Round total income to the nearest ₹10 under section 288A.
- Apply the rates for the chosen regime. The new regime is the default; the old regime is optional and requires the prescribed form where applicable.
- For AY 2025-26 under the new regime, the basic exemption is ₹3,00,000, with slabs of 5% on ₹3,00,001–₹7,00,000; 10% on ₹7,00,001–₹10,00,000; 15% on ₹10,00,001–₹12,00,000; 20% on ₹12,00,001–₹15,00,000; and 30% above ₹15,00,000.
- Rebate under section 87A is available to a resident individual whose total income does not exceed ₹7,00,000 under the new regime, up to ₹25,000.
- Surcharge applies at the prescribed income thresholds; marginal relief prevents a sudden excess. Health and education cess is 4% of tax plus surcharge. Round tax to the nearest ₹10 under section 288B.
- Subtract TDS, TCS, advance tax, and self-assessment tax to arrive at the balance payable or refund.
Worked example
A salaried person under the new regime has salary income of ₹12,00,000 and claims the ₹75,000 standard deduction. Total income = ₹11,25,000. Tax: nil up to ₹3,00,000; 5% of ₹4,00,000 = ₹20,000; 10% of ₹3,00,000 = ₹30,000; 15% of ₹1,25,000 = ₹18,750. Total tax = ₹68,750. Rebate is nil because total income exceeds ₹7,00,000. Cess = 4% × ₹68,750 = ₹2,750. Tax liability = ₹71,500.
Traps
Rebate is not a deduction from income. Surcharge is on tax, not on total income. Do not apply the old-regime slab and the new-regime deduction together. Loss set-off rules differ by head.