Key points
- Gross total income is the sum of income under all heads before deductions.
- Taxable income is what remains after allowed deductions — this is what the slabs are applied to.
- Salaried people get a standard deduction: Rs 75,000 in the new regime, Rs 50,000 in the old regime (FY 2025-26).
- The old regime allows many more deductions (such as section 80C); the new regime allows very few.
- Lower taxable income means lower tax, which is why deductions matter.
A common surprise for new taxpayers: you are not taxed on everything you earn. There is a gap between gross income (what comes in) and taxable income (what the tax rates are applied to). Understanding that gap is the key to understanding your tax.
Gross total income
Your gross total income is the total of income under all five heads — salary, house property, business or profession, capital gains, and other sources — added together, before you subtract any deductions. It is the starting point.
Deductions reduce it
From gross total income you subtract the deductions the law allows. The result is your total income, also called taxable income. The slabs are then applied to this smaller figure, not to your gross income. Two things to know:
- Standard deduction (salaried): a flat amount removed from salary income — Rs 75,000 in the new regime and Rs 50,000 in the old regime for FY 2025-26. You do not need to spend or prove anything to claim it.
- Other deductions: the old regime allows many (for example section 80C for certain investments, section 80D for health insurance, and more). The new regime allows very few. This is the main reason the two regimes can give very different results.
A worked example (illustrative)
Take a salaried person with gross salary of Rs 15,00,000 in FY 2025-26 and no other income, choosing the new regime:
- Gross salary: Rs 15,00,000
- Less standard deduction (new regime): Rs 75,000
- Taxable income: Rs 14,25,000
The slabs then apply to Rs 14,25,000, not to Rs 15,00,000. (Working the slabs through gives tax of Rs 93,750 plus 4% cess of Rs 3,750, i.e. Rs 97,500 — see our how income tax works guide for the step-by-step.) These are illustrative figures to show the method.
Why it matters
Because tax is charged on taxable income, every rupee of allowed deduction reduces the income that faces the slabs. In the old regime, planning eligible deductions can meaningfully lower tax. In the new regime, there is less to plan, but the slab rates themselves are lower. The right choice depends on your actual deductions — which is exactly the comparison our regime guide helps with.
| Step | What it means |
|---|---|
| Gross total income | All heads of income added up |
| Less: deductions | Standard deduction + any allowed deductions |
| = Total (taxable) income | The figure the slabs apply to |
Not tax advice
Frequently asked questions
- Is my CTC the same as my taxable income?
- No. Cost to company (CTC) is what your employer spends on you, which can include contributions and benefits that are treated differently for tax. Your taxable salary is worked out under tax rules, then the standard deduction and any other allowed deductions are subtracted to reach taxable income.
- What is the standard deduction?
- It is a flat deduction from salary income that you get without spending or proving anything. For FY 2025-26 it is Rs 75,000 in the new regime and Rs 50,000 in the old regime. Check the current figure on the Income Tax Department portal.
- Why does the new regime tax more of my income?
- The new regime has lower slab rates but allows very few deductions. The old regime allows more deductions (like section 80C investments and some allowances), so it can reduce taxable income more. Which is better depends on your numbers — compare both.
Official sources
- Income Tax Department — Tax slabs and deductions for AY 2026-27 — Standard deduction and deduction heads
- Income Tax Department e-filing portal — Confirm current deduction limits
Not professional advice