A ₹30 lakh annual salary does not mean your entire income is taxed at 30% in the new tax regime. The income tax follows a progressive slab structure, where only the income falling within each slab is taxed at the applicable rate.
Moreover, salaried individuals under the new tax regime also get a of ₹75,000, which reduces their taxable income before is calculated.
As a result, someone earning a gross salary of ₹30 lakh pays an effective tax rate of around 15.86% and not 30%. Let’s find out why.
How is tax calculated on a ₹30 lakh salary in the new tax regime?
Step 1: Consider the standard deduction
| Particulars | Amount |
| Gross annual salary | ₹30,00,000 |
| Less: Standard deduction | ₹75,000 |
| Taxable income | ₹29,25,000 |
Before calculating tax, salaried individuals under the can claim a standard deduction of ₹75,000. As a result, although the employee earns ₹30 lakh, tax is calculated only on ₹29.25 lakh.
Step 2: Calculate slab-wise tax liability
| Tax Slab | Rate | Tax |
| Up to ₹4 lakh | Nil | ₹0 |
| ₹4 lakh – ₹8 lakh | 5% | ₹20,000 |
| ₹8 lakh – ₹12 lakh | 10% | ₹40,000 |
| ₹12 lakh – ₹16 lakh | 15% | ₹60,000 |
| ₹16 lakh – ₹20 lakh | 20% | ₹80,000 |
| ₹20 lakh – ₹24 lakh | 25% | ₹1,00,000 |
| ₹24 lakh – ₹29.25 lakh ( ₹5.25 lakh) | 30% | ₹1,57,500 |
| Total Income Tax | ₹4,57,500 | |
| Health & Education Cess @4% | ₹18,300 | |
| Total Tax Liability | ₹4,75,800 |
Note: This calculation assumes an annual salary of ₹30 lakh under the new tax regime for AY 2026–27 (FY 2025–26). Actual tax liability may vary depending on the exemptions and deductions claimed.
The tax rates above are marginal, not flat. This means your entire income is not taxed at 30% just because it crosses ₹24 lakh. Instead, each slab of income is taxed separately at the applicable rate. This significantly reduces the overall tax burden.
For example, if taxable income is ₹29.25 lakh, only the portion above ₹24 lakh falls into the 30% slab. The rest is taxed at lower rates. The remaining income is taxed at lower slab rates ranging from 5% to 25%.
After arriving at the total income tax of ₹457,500 lakh, a health and education cess of 4% is added, taking the total tax liability to ₹475,800 lakh.
Step 3: Calculate effective tax rate
Effective tax rate = Total tax liability/ Gross salary × 100
= ₹4,75,800/ ₹30,00,000 × 100
= 15.86%
The effective tax rate is 15.86%, which is the total tax liability as a percentage of the gross annual salary.
Why is your tax rate much lower than 30%?
The highest tax slab does not apply to your entire income. Instead, every portion of your income is taxed according to the slab it falls into. Only the taxable income above ₹24 lakh is taxed at 30%.
In addition, the standard deduction of ₹75,000 under the new regime reduces the taxable income of salaried individuals before tax is calculated, thereby further reducing the final tax liability.
This is why a person earning ₹30 lakh annually ends up paying ₹475,800 lakh in total tax (including health and education cess), translating into an effective tax rate of 15.86%, nearly half of the headline 30% tax slab.
Disclaimer: This is only for informational and educational purposes. Please consult a qualified tax expert for the latest tax laws and regulations.