Tax Calculator
Income tax is progressive almost everywhere, which means your marginal rate and your effective rate are very different numbers. This calculator applies bracket-by-bracket tax to your taxable income so you can see the actual liability rather than assuming your top rate applies to everything.
Inputs
Result
210,000
Taxable income 1,050,000 · Take home 990,000
How it works
- 1Taxable = 1,200,000 − 150,000 = 1,050,000
- 2Tax = 1,050,000 × 20% = 210,000
How the tax calculator works
Tax is computed slab by slab: each portion of income is taxed at the rate for that band, and the results are summed.
Effective rate = total tax ÷ total income. Marginal rate = the rate on your next unit of income. The effective rate is always lower in a progressive system.
Taxable income is gross income minus deductions and allowances, so deductions reduce tax at your marginal rate, not your effective one.
Worked example: 900,000 of taxable income across four bands
- First 300,000 at 0%: no tax.
- Next 300,000 at 5%: 15,000.
- Next 200,000 at 10%: 20,000.
- Remaining 100,000 at 15%: 15,000.
- Total tax 50,000 — an effective rate of 5.6% even though the marginal rate is 15%.
Common mistakes to avoid
Applying the top rate to all income
Entering a higher bracket taxes only the income above the threshold. A raise never leaves you with less money in a properly progressive system.
Confusing tax credits with deductions
A deduction reduces taxable income and saves tax at your marginal rate; a credit reduces the tax bill directly and is worth more per unit.
Ignoring social security and surcharges
Payroll contributions, cess and surcharges sit outside the income tax bands and can add several percentage points to the real burden.
Frequently asked questions
What is the difference between marginal and effective tax rate?
Marginal is the rate on your next earned unit; effective is total tax divided by total income. Effective is always lower under progressive brackets.
Does a raise ever leave me worse off?
Not through the brackets themselves. It can happen where a means-tested benefit has a hard cliff, which is a benefit rule, not a tax rule.
How much tax does a deduction save?
Your marginal rate times the deduction. A 50,000 deduction at a 30% marginal rate saves 15,000.
Should I use gross or taxable income here?
Taxable income — gross less deductions, exemptions and allowances. Using gross overstates the liability.
Are capital gains taxed at these rates?
Usually not. Most systems tax long-term gains at separate, lower rates with their own holding-period rules.
Learn more
Marginal vs effective tax: why a raise never costs you money
Entering a new tax bracket does not tax your whole income at the new rate. Here is the bracket arithmetic, worked out.
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