Joining in October: Part-Year Salary and Your Regime Choice

How much salary lands in the first tax year

Tax year 2026-27 under the Income-tax Act, 2025_Bill.pdf) runs from 1 April 2026 to 31 March 2027. Here is a hypothetical fresher offer: ₹18,00,000 CTC, of which ₹1,50,000 a month is fixed gross, joining on 1 October 2026.

Total income is under ₹12,00,000, so the full tax is rebated. The slab table and rebate are on the department's AY 2026-27 page and carry into tax year 2026-27 unchanged.

The tax-free monthly ceiling by joining month

Rearranging the rebate condition, months × monthly gross − ₹75,000 ≤ ₹12,00,000 gives the highest monthly gross that stays tax-free:

Just above the ceiling, marginal relief caps the tax at the income over ₹12,00,000, and 4% cess is added on top. So the first rupees over the line are taxed at about 104% until total income passes about ₹12,70,588. A joining bonus paid in the same tax year counts too, and can push you over. Joining bonus tax works that case.

What happens if payroll annualises your CTC

Section 392(1) requires TDS at the average rate on the estimated salary for the tax year. The correct estimate for an October joiner is six months, not twelve. Suppose payroll instead projects ₹18,00,000 of fixed salary:

• Total income on a full-year projection: ₹17,25,000
• Tax: ₹1,20,000 + 20% of ₹1,25,000 = ₹1,45,000, or ₹1,50,800 with cess
• Monthly TDS spread over six months: ₹25,133

That is about ₹1,50,800 withheld when nothing is due. It comes back as a refund only after you file the return. On a first salary, that is a large amount to wait for. Payroll can correct its estimate within the year under section 392(5)(c), so ask them to do it.

# Synthetic salary. New regime, tax year 2026-27, rebate and relief included.
def new_regime_tax(ti):
    bands = [(400000, 0), (800000, .05), (1200000, .10), (1600000, .15),
             (2000000, .20), (2400000, .25), (float("inf"), .30)]
    tax, low = 0.0, 0
    for high, rate in bands:
        tax += max(0, min(ti, high) - low) * rate
        low = high
    return 0.0 if ti <= 1200000 else round(min(tax, ti - 1200000) * 1.04, 2)

def months_in_tax_year(join_month):
    """join_month: 4 = April ... 12 = December, 1 = January ... 3 = March."""
    return (3 - join_month) % 12 + 1

def first_year_view(monthly_gross, join_month):
    months = months_in_tax_year(join_month)
    correct = new_regime_tax(months * monthly_gross - 75000)
    annualised = new_regime_tax(12 * monthly_gross - 75000)
    return {"months": months, "tax_due": correct,
            "tds_if_annualised": annualised,
            "tax_free_ceiling": round((1200000 + 75000) / months)}

print(first_year_view(150000, 10))
print(first_year_view(150000, 1))

Budgeting for the second year

The zero-tax first year is a timing effect, not a pay rise. Your first full tax year, 2027-28, will carry twelve months of salary, and its rates are not yet known. As a planning figure only: if the 2026-27 rates were still in force, twelve months at ₹1,50,000 would owe ₹1,50,800, about ₹12,567 a month. Build that deduction into your budget from April 2027, rather than getting used to a first-year take-home you will not keep.

The regime choice in your first year

If you have no business or professional income, section 202(4)(b) lets you choose the old regime with your return, year by year. In the October example the new regime already gives zero tax, so no set of old-regime deductions can do better. The old regime's own rebate stops at ₹5,00,000 of income. Tell payroll you are on the new regime so it does not demand rent receipts or investment proof it does not need.

The choice becomes real from your first full year. Old vs new regime break-even shows how to test it once a full twelve months of salary is in the picture.

A short checklist for the first payslip

• Confirm payroll's projection uses your joining date, not the full-year CTC.
• If you had any other salary earlier in the tax year, declare it. Section 392(4) lets the employer take it into account.
• Check the prorated first month separately. Proration of your first salary explains the three methods.

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