Income Tax Liability: How to Calculate What You Owe or Get Back

Income tax liability is a chain of 6 steps, from gross income to the tax payable. This page uses Tax Year 2026-27 rates in the new regime.
 

• Step 1: gross total income, from all heads
• Step 2: less deductions, which gives total income
• Step 3: tax on the slabs, then rebate, surcharge and 4% cess
• Step 4: less tax already paid, which gives tax payable or a refund

• Example: a Rs. 18 lakh salary gives Rs. 1,50,800 of tax, and a refund of Rs. 9,200 if Rs. 1,60,000 was deducted

  
  

Run the chain for both regimes before you file. The result tells you whether to pay a balance, claim a refund or change your declaration.

It is the total tax you must pay for a year, after rebate, relief and cess. It is the final figure on your return, before you subtract what you have already paid.

The tax already paid can be tax deducted at source (TDS), tax collected at source (TCS), advance tax and self-assessment tax. The difference is your tax payable, or your refund if you paid more.

Six steps give the figure. The table shows a Rs. 18 lakh salary in the new regime for Tax Year 2026-27.
 

The slab rates are 0% to Rs. 4 lakh, then 5%, 10%, 15%, 20%, 25% and 30% in bands of Rs. 4 lakh.

Liability is the full tax for the year. Tax payable is what is left after you subtract tax already paid, and a refund arises when the tax paid exceeds the liability.
 

If you owe Rs. 10,000 or more after TDS, advance tax is due during the year. The guide to Section 234C explains the interest for missing it.

The regime changes the deductions you can use and the slabs, so the same salary gives different liabilities.

Formula used: Old-regime taxable income = salary − Rs. 50,000 standard deduction − other deductions.

The new regime costs Rs. 1,45,600 less here. The old regime wins only when deductions are large, as the guide to saving tax on a salary above Rs. 12 lakh shows.

Pay the balance before you file, through e-Pay Tax, as self-assessment tax. Interest runs on any unpaid tax from the due date of the return.

The guide to the income tax challan explains the steps. If you expect a refund, verify the return the same day, as the guide to how long a refund takes explains. The guide to the income tax limit shows the points at which the liability starts.

Consider Kavita Rao, a 36-year-old manager in Hyderabad with a salary of Rs. 18 lakh, a household income of Rs. 1.5 lakh a month and a CIBIL Score of 768, in the new regime.

Kavita files early and verifies the return the same day. The Rs. 9,200 comes back with interest if the department takes long. She asks her employer to lower the TDS next year, because the deduction exceeds her liability.

Bajaj Finance reviews income documents and returns, which show your income and the tax paid on it. A return with the liability and payments clearly shown supports your application.
 

Approval timelines can extend where returns show unpaid tax or a mismatch, and minimum income thresholds can differ by city. Check your home loan eligibility.