Progressive tax illustration: average and marginal rate
In a progressive tax system each slice of income is taxed at its own rate. This illustration lets you enter bands and see the total, the average rate and the marginal rate.
How to use this calculator
- Enter an income.
- Enter the upper limit and rate for each of three bands, and a rate for income above the third band.
- Read the total tax, the average rate and the marginal rate.
- Look at the slice-by-slice table to see how each slice adds up.
Worked examples
Example 1
An income of ₹50,00,000 with the example bands.
You enter
| Taxable income | ₹50,00,000 |
|---|---|
| Band 1 upper limit | ₹10,00,000 |
| Band 1 rate | 0% |
| Band 2 upper limit | ₹30,00,000 |
| Band 2 rate | 10% |
| Band 3 upper limit | ₹60,00,000 |
| Band 3 rate | 20% |
| Rate above band 3 | 30% |
You get
| Total tax | ₹6,00,000 |
|---|---|
| Average rate | 12% |
| Marginal rate (on the next rupee) | 20% |
Example 2
A lower income of ₹20,00,000.
You enter
| Taxable income | ₹20,00,000 |
|---|---|
| Band 1 upper limit | ₹10,00,000 |
| Band 1 rate | 0% |
| Band 2 upper limit | ₹30,00,000 |
| Band 2 rate | 10% |
| Band 3 upper limit | ₹60,00,000 |
| Band 3 rate | 20% |
| Rate above band 3 | 30% |
You get
| Total tax | ₹1,00,000 |
|---|---|
| Average rate | 5% |
| Marginal rate (on the next rupee) | 10% |
How it works
The marginal rate is the rate on your next rupee of income. The average rate is total tax divided by income, and it is always lower than the top marginal rate you reach.
Earning more never makes you take home less, because only the extra slice is taxed at the higher rate. The default bands are invented for illustration; for real Indian tax use the income tax calculator.
Formula
Tax = sum over each band of (income in the band x the band's rate). Average rate = tax / income.
Common questions
Are these Indian tax rates?
No, the default bands are invented. Use the income tax calculator for India.
Does a pay rise push me into a higher rate on everything?
No, only on the slice above the band limit.
Does it include deductions?
No.
Learn more
Read the lesson Tax basics and good records on pusaram.com for the ideas behind this calculator.
Calculators give estimates for learning and planning. They are not financial, tax, legal or medical advice, and results depend entirely on the numbers you enter. Check rates, limits and rules with an official source or a qualified professional before acting.