What Is Income Tax on a 4 Lakh Salary?
Income tax on a Rs 4 lakh annual salary in FY 2025-26 is zero under the new tax regime and zero under the old regime without deductions.
The new tax regime introduced by the Finance Act 2025 is the clear choice for a Rs 4 lakh salary: zero TDS deduction, Rs 31,133 monthly in-hand, and no paperwork for exemptions or declarations. The old regime produces Rs 0 in tax on the same gross with no deductions, a gap of Rs 0 per year that no Section 80C or 80D claim can recover.
The Finance Act 2025 expanded the new tax regime to deliver lower rates across all slabs. For a Rs 4 lakh gross salary, the standard deduction of Rs 75,000 brings taxable income to Rs 3,25,000, taxed at new regime slab rates to give Rs 0 in annual tax.
Income Tax Formula: How to Calculate Tax on 4 LPA
Income tax on salary is computed in four steps: gross salary minus standard deduction gives net salary, apply the applicable slab rates, check for Section 87A rebate eligibility, then add the 4% cess on any remaining tax liability.
Tax = (Slab rates on taxable income) - 87A rebate, then add 4% cess| Variable | Value for 4 LPA | Notes |
|---|---|---|
| Gross salary | Rs 4,00,000 | Total annual CTC |
| Standard deduction | Rs 75,000 | Flat deduction under both regimes |
| Taxable income | Rs 3,25,000 | Gross minus standard deduction |
| Tax (new regime slabs) | Rs 0 | Before Section 87A rebate |
| Section 87A rebate | Nil | Taxable income above Rs 12L ceiling |
| Net tax (new regime) | Rs 0 | After rebate; cess also zero |
| Net tax (old regime) | Rs 0 | No deductions; includes 4% cess |
Income Tax on 4 Lakh Salary in Excel: Three Methods
You can compute income tax on a Rs 4 lakh salary in Excel using a slab-by-slab formula. Place the taxable income (Rs 3,25,000) in cell A1.
| Method | Formula | Result |
|---|---|---|
| Slab-by-slab | =MAX(0,(MIN(A1,800000)-400000)*0.05)+(MAX(0,MIN(A1,1200000)-800000)*0.1) | Rs 0 |
| With 87A rebate | =IF(A1<=1200000,0,[above formula]*1.04) | Rs 0 |
| Old regime | =MAX(0,(MIN(A1,500000)-250000)*0.05)+(MAX(0,MIN(A1,1000000)-500000)*0.2)+(MAX(0,A1-1000000)*0.3) | Rs 5,000 |
| Old regime + cess | =[old regime formula]*1.04 | Rs 0 |
New Regime Tax Breakdown: Why 4 LPA Pays Zero
Under the new tax regime in FY 2025-26, a Rs 4 lakh salary produces taxable income of Rs 3,25,000 after the standard deduction, which generates Rs 0 in tax before the Section 87A rebate eliminates it entirely.
| Income slab | Rate | Tax amount |
|---|---|---|
| Rs 0 to Rs 3,25,000 | 0% | Rs 0 |
| Total tax before rebate | Rs 0 | |
| Less: Section 87A rebate | Nil | |
| Net tax payable | Rs 0 | |
| Health and education cess (4%) | Rs 0 |
Old Regime Tax Computation for 4 Lakh Salary
Under the old tax regime with no Chapter VI-A deductions beyond the standard deduction, income tax on Rs 4 lakh salary is zero.
| Income slab | Rate | Tax amount |
|---|---|---|
| Rs 0 to Rs 2,50,000 | 0% | Rs 0 |
| Rs 2,50,001 to Rs 3,25,000 | 5% | Rs 3,750 |
| Total tax before cess | Rs 0 | |
| Health and education cess (4%) | Rs 0 | |
| Total tax payable | Rs 0 |
Old vs New Regime: Which Is Better for 4 LPA?
The new regime is better for 4 LPA in every deduction scenario because the new regime slabs produce lower tax, while the old regime also produces zero tax for this salary level.
| Metric | New regime | Old regime |
|---|---|---|
| Gross salary | Rs 4,00,000 | Rs 4,00,000 |
| Standard deduction | Rs 75,000 | Rs 75,000 |
| 80C deductions | Not allowed | Up to Rs 1,50,000 |
| 80D deductions | Not allowed | Up to Rs 25,000 |
| Taxable income | Rs 3,25,000 | Rs 3,25,000 |
| Pre-rebate tax | Rs 0 | Rs 5,000 |
| Section 87A rebate | Not applicable | Rs 5,000 |
| Net tax | Rs 0 | Rs 0 |
| 4% cess | Rs 0 | Rs 0 |
| Total annual tax | Rs 0 | Rs 0 |
| Monthly TDS | Rs 0 | Rs 0 |
| Monthly in-hand | Rs 31,133 | Rs 31,133 |
The monthly in-hand difference of Rs 0 (Rs 31,133 vs Rs 31,133) is a direct result of the zero TDS under the new regime. The old regime figure assumes no Chapter VI-A deductions. Claiming 80C and 80D reduces old regime TDS, narrowing the gap but never eliminating it.
Section 87A Rebate: Why It Does Not Apply to 4 LPA
Section 87A of the Income Tax Act 1961 provides a tax rebate of up to Rs 60,000 for resident individuals whose net taxable income does not exceed Rs 12,00,000 under the new regime in FY 2025-26. For Rs 4 lakh salary, taxable income is Rs 3,25,000, which exceeds the Rs 12,00,000 ceiling, so no rebate applies.
Key facts about the Section 87A rebate
Income Tax on 4 Lakh Salary with Deductions
Even with maximum Chapter VI-A deductions, the old regime tax on Rs 4 lakh salary is Rs 0, higher than the new regime's zero.
| Deductions claimed | Old regime tax | New regime tax | Verdict |
|---|---|---|---|
| No deductions (standard only) | Rs 0 | Rs 0 | Equal |
| 80C only: Rs 1,50,000 | Rs 0 | Rs 0 | Equal |
| 80C + 80D: Rs 1,75,000 | Rs 0 | Rs 0 | Equal |
| 80C + 80D + NPS: Rs 2,25,000 | Rs 0 | Rs 0 | Equal |
| Maximum deductions: Rs 3,50,000 | Rs 0 | Rs 0 | Equal |
In-Hand Salary for 4 LPA: The Monthly Breakup
The monthly in-hand salary for Rs 4 lakh per annum is Rs 31,133 under the new tax regime, calculated after deducting Rs 2,000 in employee PF (12% of Rs 16,667 basic) and Rs 200 in professional tax, with zero income tax TDS.
| Component | Per month | Per year |
|---|---|---|
| Basic salary (50% of gross) | Rs 16,667 | Rs 2,00,004 |
| HRA (20% of gross) | Rs 6,667 | Rs 80,004 |
| Special allowance | Rs 9,999 | Rs 1,19,988 |
| Gross salary | Rs 33,333 | Rs 4,00,000 |
| Less: Employee PF (12% of basic) | - Rs 2,000 | - Rs 24,000 |
| Less: Professional tax | - Rs 200 | - Rs 2,400 |
| Less: Income tax TDS | Nil | Nil |
| Net in-hand salary | Rs 31,133 | Rs 3,73,596 |
The 50% basic assumption is standard across most Indian companies. At 40% basic, PF drops to Rs 1,600/month and in-hand rises to Rs 31,533. At 60% basic, PF rises to Rs 2,400/month and in-hand falls to Rs 30,733.
Use the In-Hand Salary Calculator to enter your exact CTC split, basic percentage, and actual deductions for a precise monthly take-home figure.
How to Use the Old vs New Tax Regime Calculator
The Old vs New Tax Regime Calculator computes your exact income tax under both regimes based on your actual salary structure and deductions.
- Enter gross salary: Type Rs Rs 4,00,000 or drag the salary slider to your annual CTC figure.
- Enter your deductions: Add your 80C investments (PPF, ELSS, LIC), 80D health insurance premium, NPS contribution, and HRA exempt amount.
- Compare regimes: The calculator shows old regime tax, new regime tax, and the exact savings difference for your specific inputs.
- Check the breakeven: The calculator shows the minimum deduction level at which the old regime would match the new regime.
When These Tax Numbers May Not Apply to You
All calculations on this page assume a resident individual with salary as the only income source in FY 2025-26. Four common situations produce a different tax outcome.
Frequently Asked Questions
Disclaimer: All calculations on this page are indicative only, based on standard salary structure assumptions for FY 2025-26. Actual tax liability depends on your exact salary components, declared deductions, and any income other than salary. Tax laws are subject to change. This page is for educational and planning purposes and does not constitute financial or tax advice. Consult a qualified CA or SEBI-registered financial adviser before making tax-related decisions.