How Much Tax Will You Pay on a ₹20 Lakh Salary in India (FY 2025–26)?
Accurate, step-by-step tax calculations for a ₹20,00,000 annual salary under both the Old Tax Regime and the New Tax Regime, plus real examples that show how deductions change your tax and take-home pay.
Quick summary (answer upfront)
- Old Regime (no deductions): Tax payable ≈ ₹4,29,000 (including 4% cess).
- New Regime (no deductions): Tax payable ≈ ₹2,75,600 (including 4% cess).
- Old Regime with typical deductions (80C + 80D + home loan interest): Tax payable may reduce to ≈ ₹3,04,200.
Bottom line: For a straight ₹20 lakh salary without claiming large deductions the New Regime typically produces a lower tax bill. However, if you can legitimately claim big deductions (80C, home loan interest, 80D, NPS), the Old Regime can be competitive — always run the numbers for your exact situation.
Tax rules & assumptions used in these calculations
- Calculations are for FY 2025–26 (AY 2026–27).
- Old regime basic exemption assumed: ₹2,50,000 (general taxpayers).
- New regime basic exemption assumed: ₹3,00,000 (as per the revised new regime thresholds used widely in 2024–25/25–26 guidance).
- Standard income tax slab rates used (digit-by-digit arithmetic shown below).
- 4% Health & Education Cess added to the calculated tax.
- No professional tax, employer contributions or special state levies included in examples unless stated.
Step-by-step: Old Tax Regime calculation (₹20,00,000 gross, no deductions)
Old regime slabs used (typical):
- ₹0 – ₹2,50,000 : 0%
- ₹2,50,001 – ₹5,00,000 : 5%
- ₹5,00,001 – ₹10,00,000 : 20%
- ₹10,00,001 and above : 30%
| Slab | Taxable amount | Rate | Tax |
|---|---|---|---|
| ₹0 – ₹2,50,000 | ₹2,50,000 | 0% | ₹0 |
| ₹2,50,001 – ₹5,00,000 | ₹2,50,000 | 5% | ₹12,500 |
| ₹5,00,001 – ₹10,00,000 | ₹5,00,000 | 20% | ₹1,00,000 |
| ₹10,00,001 – ₹20,00,000 | ₹10,00,000 | 30% | ₹3,00,000 |
| Total tax before cess | ₹4,12,500 | ||
| Health & Education Cess (4%) | ₹16,500 | ||
| Net tax payable | ₹4,29,000 | ||
Old Regime result (no deductions)
Net tax payable = ₹4,29,000.
Step-by-step: New Tax Regime calculation (₹20,00,000 gross, no deductions)
Common new regime slab structure used here (representative for recent years):
- ₹0 – ₹3,00,000 : 0%
- ₹3,00,001 – ₹7,00,000 : 5%
- ₹7,00,001 – ₹10,00,000 : 10%
- ₹10,00,001 – ₹12,00,000 : 15%
- ₹12,00,001 – ₹15,00,000 : 20%
- ₹15,00,001 – ₹20,00,000 : 25%
- Above ₹20,00,000 : 30% (not applicable exactly here)
| Slab | Taxable amount | Rate | Tax |
|---|---|---|---|
| ₹0 – ₹3,00,000 | ₹3,00,000 | 0% | ₹0 |
| ₹3,00,001 – ₹7,00,000 | ₹4,00,000 | 5% | ₹20,000 |
| ₹7,00,001 – ₹10,00,000 | ₹3,00,000 | 10% | ₹30,000 |
| ₹10,00,001 – ₹12,00,000 | ₹2,00,000 | 15% | ₹30,000 |
| ₹12,00,001 – ₹15,00,000 | ₹3,00,000 | 20% | ₹60,000 |
| ₹15,00,001 – ₹20,00,000 | ₹5,00,000 | 25% | ₹1,25,000 |
| Total tax before cess | ₹2,65,000 | ||
| Health & Education Cess (4%) | ₹10,600 | ||
| Net tax payable | ₹2,75,600 | ||
New Regime result (no deductions)
Net tax payable = ₹2,75,600.
Monthly net (take-home) quick estimates
(Simplified: gross annual ₹20,00,000 minus net tax above, divided by 12 — other employer deductions like EPF withheld, professional tax, employer benefits not included.)
| Scenario | Annual net after tax | Approx monthly take-home |
|---|---|---|
| Old Regime (no deductions) | ₹20,00,000 − ₹4,29,000 = ₹15,71,000 | ₹1,30,917 |
| New Regime (no deductions) | ₹20,00,000 − ₹2,75,600 = ₹17,24,400 | ₹1,43,700 |
What if you claim deductions under the Old Regime?
Below is a common realistic scenario for a 20 lakh salary earner who uses available deductions:
- Section 80C investments (PF / PPF / ELSS / Life Insurance) = ₹1,50,000
- Health insurance premium (80D) = ₹50,000
- Home loan interest (let’s assume claimable interest under Section 24) = ₹2,00,000
Total deductions = ₹1,50,000 + ₹50,000 + ₹2,00,000 = ₹4,00,000
Taxable income (Old Regime) = ₹20,00,000 − ₹4,00,000 = ₹16,00,000
| Slab | Taxable amount | Rate | Tax |
|---|---|---|---|
| ₹0 – ₹2,50,000 | ₹2,50,000 | 0% | ₹0 |
| ₹2,50,001 – ₹5,00,000 | ₹2,50,000 | 5% | ₹12,500 |
| ₹5,00,001 – ₹10,00,000 | ₹5,00,000 | 20% | ₹1,00,000 |
| ₹10,00,001 – ₹16,00,000 | ₹6,00,000 | 30% | ₹1,80,000 |
| Total tax before cess | ₹2,92,500 | ||
| Health & Education Cess (4%) | ₹11,700 | ||
| Net tax payable | ₹3,04,200 | ||
Old Regime result with ₹4 lakh deductions
Net tax payable ≈ ₹3,04,200. Annual take-home ≈ ₹20,00,000 − ₹3,04,200 = ₹16,95,800 → monthly ≈ ₹1,41,317.
Which regime is better for ₹20 lakh salary?
From the examples above:
- New Regime (no deductions): Tax ≈ ₹2,75,600 — best if you have little or no major deductions.
- Old Regime with ₹4 lakh deductions: Tax ≈ ₹3,04,200 — slightly higher than the New Regime in this specific scenario.
- If you can increase allowable deductions (for example, larger home loan interest or other valid deductions), the Old Regime may become better.
Practical advice: Always compute your tax both ways for your real numbers before locking into a regime — the difference can change a lot depending on your exact investments, HRA, rent, home loan interest and other allowable claims.
Top legal strategies to reduce tax on a ₹20 lakh salary
- Maximise Section 80C (₹1.5 Lakh): PF, PPF, ELSS, life insurance — this directly reduces taxable income.
- Use health insurance (Sec 80D): Premiums for self and family give extra relief.
- Claim HRA if you live in rented accommodation: HRA formula can save substantial tax for city dwellers.
- Home loan interest: Section 24 (and principal under 80C) — if you have an eligible home loan, interest claims reduce taxable income.
- Consider NPS contributions: Additional deduction under 80CCD(1B) (upto ₹50,000) lowers taxable income in the Old Regime.
- Tax-efficient investments: Use ISAs? (UK only) — in India use ELSS for equity exposure + tax break.
- Salary structuring: Discuss salary components (conveyance, meal vouchers, performance bonuses, employer PF) with employer for optimal tax treatment.
Common mistakes & pitfalls
- Assuming New Regime is always better — it isn’t if you have large legal deductions.
- Ignoring the lock-in period of some tax-saving investments (ELSS, PPF).
- Incorrect HRA calculation or not keeping rent receipts.
- Forgetting to account for cess, surcharges (if applicable) and employer deductions when estimating take-home.
Frequently Asked Questions (FAQ)
Q1: How much tax will I pay on ₹20 lakh per year in India?
A: If you don’t claim deductions, Old Regime tax ≈ ₹4,29,000, while New Regime tax ≈ ₹2,75,600. With substantial deductions under the Old Regime your tax may reduce (example above showed ≈ ₹3,04,200).
Q2: Which tax regime should I pick for ₹20 lakh salary?
A: Run the numbers. If you have high deductible expenses/investments (80C, 80D, home loan interest, NPS), the Old Regime might be better. If you have few deductions, New Regime is likely cheaper.
Q3: Can I switch regimes anytime?
A: For salaried taxpayers, once you opt for the New Regime you may be allowed to switch each year depending on rules; for the Old Regime there are conditions. Check current income tax rules when filing. It’s usually best to calculate both annually before choosing.
Q4: Do I have to pay surcharge on ₹20 lakh?
A: Surcharge rates apply at higher income levels (e.g., ₹50 lakh+ etc.). For ₹20 lakh, standard surcharge usually does not apply — only regular rates and cess are applicable.
Q5: Are the calculations exact?
A: The numbers shown are precise arithmetic for the stated slabs and assumptions (we included 4% cess). Small differences may occur if you have additional components like professional tax, employer PF, or tax-exempt allowances; always compute with your payroll slips or consult a CA for exact payroll reconciliation.
Final words
If you earn ₹20,00,000 per year it is worth spending 30–60 minutes to compute tax both under Old and New regimes with your exact deductions (80C, 80D, HRA, home loan interest, NPS). For many taxpayers at this income level, the New Regime is attractive because of simplicity and lower tax without needing to invest in forced tax-saving instruments — but frequent exceptions exist. If you want, I can run a personalised calculator for your exact numbers (investments, HRA, loan interest) and tell you which regime saves more — just give me the details and I’ll compute it precisely.