Everyone who generates a sound revenue comes under the purview of income tax. It is, obviously, subject to certain terms and conditions. This article tries to simplify the process of Income Tax calculation.
The Income Tax Calculator is a tool that helps you evaluate your tax liability online. This calculator uses the updated tax laws while calculating your tax amount.
Income Taxation:
Calculating Income Tax has become a relatively simple task, thanks to the advent of the IT Calculator. Income Tax is calculated based on the applicable tax slab. Basic steps could be as follows:
- Calculate your total income from salary and any other sources.
- Next, calculate the deductions and exemptions.
- Subtraction of total income and total deductions will get you the Gross Taxable Income.
- Check the tax slab and calculate the tax to be paid.
Currently, there are two different systems in place. Let's understand them with the following example.
Example:
Shivam receives a basic salary of Rs. 12,00,000, HRA of Rs. 6,00,000, Special allowance Rs. 2,52,000, Rs. 20,000 LTA per annum.
As per the Old Process:
The tax can be calculated as:
Income from salary: Rs. 16,50,000 (A)
Income from other sources: Rs. 20,000 (B)
Gross Income (A+B): Rs. 16,70,000 (C)
Deductions:
80C: Rs. 1,50,000 (D)
80D: Rs. 12,000 (E)
80TTA: Rs. 8000 (F)
Total Deductions (D+E+F): Rs. 1,70,000 (G)
Gross Taxable Income = (C - G): Rs. 15,00,000 (H)
Total Tax on H: Rs. 2,73,000
As per the New Process:
The tax can be calculated as:
Income from salary: Rs. 20,72,000 (A)
Income from other sources: Rs. 20,000 (B)
Gross Income (A+B): Rs. 20,92,000 (C)
Total tax on (C)*: Rs. 3,79,704
* This tax includes CESS
*Please note the CESS to be paid on the Income Tax is 4%
- The old regime allows some additional exemption and benefits.
- The new one has a little relaxed slab structure.
Income Tax Calculator
Income Tax Slabs
Union Budget 2020 introduced a new range of slabs. It started to allow the taxpayers to use either old or new regimes as per their wishes.
Old Regime:
For Individuals below 60:
Income | Tax Rate |
Up to ₹ 2,50,000 | Nil. |
₹ 2,50,001 to ₹ 5,00,000 | 5% |
₹ 5,00,001 to ₹ 10,00,000 | ₹ 12,500 + 20% of income exceeding ₹ 500,000. |
Above ₹ 10,00,000 | ₹ 1,12,500 + 30% of income exceeding ₹10,00,000. |
Please note the CESS to be paid on the Income Tax is 4%
Senior Citizens (from 60 to 80):
Income | Tax Rate |
Up to ₹ 3,00,000 | Nil. |
₹ 3,00,001 to ₹ 5,00,000 | 5% |
₹ 5,00,001 to ₹ 10,00,000 | ₹10,000 + 20% of income exceeding ₹ 500,000. |
Above ₹ 10,00,000 | ₹ 1,10,000 + 30% of income exceeding ₹10,00,000. |
Super Senior Citizens (above 80):
Income | Tax Rate |
Up to ₹ 5,00,000 | Nil. |
₹ 5,00,001 to ₹ 10,00,000 | 20% |
Above ₹ 10,00,000 | ₹ 1,00,000 + 30% of income exceeding ₹10,00,000. |
New Regime:
Income | Tax Rate |
Up to ₹ 2,50,000 | Nil. |
₹ 2,50,001 to ₹ 5,00,000 | 5% |
₹ 5,00,001 to ₹ 7,50,000 | ₹ 12,500 + 10% of income exceeding ₹ 500,000. |
₹ 7,50,001 to ₹ 10,00,000 | ₹ 37500 + 15% of total income exceeding ₹ 7,50,000 |
₹ 10,00,001 to ₹ 12,50,000 | ₹ 75000 + 20% of total income exceeding ₹ 10,00,000 |
₹ 12,50,001 to ₹15,00,000 | ₹ 125000 + 25% of total income exceeding ₹ 12,50,000 |
Above ₹15,00,000 | ₹ 187500 + 30% of total income exceeding ₹ 15,00,000 |
Please note the CESS to be paid on the Income Tax is 4%
Exemptions
A tax rebate mechanism is in place so that the morale of the taxpayer is high at times. The Income Tax Act provides a list of sections and clauses exempted from the total Income Tax.
80C, 80CC, 80CCD(1)- NPS, PPF, ELSS, tax saver FD, tuition fees.
80D- health insurance premiums for self and dependents (spouse, kids, and dependent parents)
80C, 24B, 80EE/80EEA (Interest on home loan)
80G- donations and charities to approved organizations.
80TTA- Interest on savings account
Note:
The various exemption schemes are subjected to the government's policies. So they keep changing.
A fixed sum or percentage of income could be declared to be deducted from your net tax amount. It's termed as standard deduction.
Total Income Tax Liability
You can calculate total income tax liability by following the steps below:
Calculate your taxable income by adding income from all the sources like salary, capital gains, rent, investments, etc.
Subtract the exemptions from the net income, and there you go!
Please note that TDS or any form of advance tax should be calculated while calculating Income Tax.
Frequently Asked Question
Q1. Which kinds of income are not taxable in India?
Ans. India adheres to a progressive taxation system. So, an income up to a certain limit is exempted from taxation. Incomes from agriculture and other basic sources aren't also considered.
Q2. How much tax should I pay on my salary?
Ans. The tax amount depends on your income and the tax slab applicable. The tax slab is different in the new and old regime, besides it also depends on your age group.
Q3. What is the upper limit for non-taxable income?
Ans. The below table explains the varying non-taxable income limits:
Age Group | As per the old regime | As per the new regime |
18 to 60 | Up to ₹2,50,000 | Up to ₹2,50,000 |
60 to 80 | Up to ₹3,00,000 | Up to ₹2,50,000 |
80 and above | Up to ₹5,00,000 | Up to ₹2,50,000 |
Q4. Does the IT Calculator calculate TDS?
Ans. The Tax Deducted at Source (TDS) amount is not processed by the Income Tax Calculator.
Q5. What information do you need when you are e-filing your income tax returns?
Ans. While e-filing your income tax returns, we advise you to keep the below documents handy:
- PAN, Aadhaar details, and current address.
- Statement of Bank Accounts
- Income proof
- All the deductions are to be claimed under Section 80 or Chapter VI (A).
- Tax payment details, including TDS and advance tax payments receipts.