Income Tax Calculator

Assessee who falls under the category of the taxpayer is liable to pay specific tax from their income during a financial year. In India, it is obligatory for specific individuals who fall under the category of taxpayers to pay a certain amount of tax for the growth of the country. It is a liability that needs to be fulfilled by every citizen earning taxable income.

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The taxable income can be calculated using an online Income Tax Calculator. One can evaluate the taxes on the basis of the income he generates during a financial year. However, it is crucial to note that the assessee must be aligned with the latest updates of the Union Budget in order to calculate the taxable income. Nevertheless, the online income tax calculators are updated with the latest Union Budget.

Let us understand how one can use the online Income Tax Calculator in order to determine taxable income.

Use of Income Tax Calculator

Listed below are the steps to use an online income tax calculator.

  • First, the assessee needs to select the financial or assessment year for which he wishes to calculate the tax. 

  • Later, in the second step, the individual is required to select the nature of the taxpayer, whether the taxpayer is an individual, firm, or Hindu Undivided Family (HUFs).

  • In the third step, the gender and age group of the assessee need to be selected. 

  • In the fourth step, the individual must select his residential status. It could be resident, non-resident, or non-ordinarily resident. As per the income tax act 1961, the resident status of individuals, HUF, and companies is defined under section 6.

  • Moving forward, the assessee needs to fill his income along with the income from the house property. The income from house property is subject to deduction to some extent. Hence, the proper calculation should be done to determine the income generated from the house property. Further, the assessee must keep in mind that if he possesses more than two houses, he must pay tax on the remaining houses apart from two houses even if no income is generated. 

  • Later, the capital gains and income from other sources are also required to be calculated by the assessee. In addition, the PGBP (Profits and Gains of Business or Profession) needs to be calculated along with the agricultural income. To determine the agricultural income, the assessee must fulfill the primary and secondary requirements to prove the income generated from the agricultural activities. It is essential to determine the agricultural income since it is subject to deduction from the taxable income. 

  • Next, the assessee should fill in the details of deductions, if any, which come under sections 80C, 80CCD, 80GG, 80TTB, 80TTA, 80E, 80G, 80D, 87A, etc. 

  • In the next step, he needs to fill out the HRA exemption.

Categories of Taxpayers

The Income tax in India is levied based on the income an individual earns. Therefore, people falling under the lower class or BPL (Below Poverty Line) are not liable to pay any tax. However, the assessee who falls under the middle and upper class is obligated to pay taxes as per his income. Therefore, the more they earn, the higher they are liable to pay taxes. In India, taxpayers are segregated into three categories, as given below:

  • Assessee below 60 years (Resident and non-resident)

  • Senior citizens falling under the age group of 60 to 80 (Resident)

  • Super senior citizens who are more than 80 years of age (Resident)

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Income Tax Slab

The income tax slabs in India highlight the taxable rate payable by an assessee based on annual income and earnings from all sources, including PFBP, house income from rent, abnormal income, etc. The individual is liable to pay tax according to their income. Following are the tax rates for different assesses:

  • No income tax will be charged to individuals earning INR 0 to INR 2.5 lakh annually. 

  • Individuals earning INR 2.5 lakh to INR 3 lakh are liable to pay 5% tax from their annual income. However, under section 87A of the Income Tax Act, 1961, they are also entitled to avail of tax rebates. In addition, the assessee earning under the range of INR 3 lakh to INR 5 lakh annually, is also entitled to tax rebate under section 87A and is liable to pay 5% tax from their taxable income. 

  • Individuals earning INR 5 lakh to 7.5 lakh are liable to pay 10% tax.

  • Further, individuals earning INR 7.5 lakh to INR 10 lakh are compelled to pay 15% tax.

  • 20% tax is levied on the assessee, earning 10 lakhs to 12.5 lakh income annually.

  • For individuals earning INR 12.5 to INR 15 lakh, a 25% tax is levied. 

  • For above INR 15 lakh, 30% tax is levied.

How to Calculate Income Tax?

Income tax for salaried persons can be computed through both the old regime and the new regime of tax calculations. To calculate the financial income of a salaried individual, a sum of their Basic Salary + Allowances (if any) + House Rent Allowance (if they live in rented accommodation) + any Special Allowances is needed.

Tax calculation can be easily understood with the help of the below-mentioned examples.

Illustration:

Ms. Preeti, a salaried employee, earns a basic salary of Rs. 1,00,000 monthly. She lives in a rented apartment in Delhi for Rs. 40,000 and has an HRA of Rs. 50,000 along with Special Allowances of Rs.21,000 monthly. The LTA (Leave Travel Allowance) of Rs. 20,000 is offered annually to Ms. Preeti. The Gross Total Income from the Salary of Ms. Preeti will be:

Details Amount Exemptions Taxable Income as per the Old Regime Taxable Income as per the New Regime
Basic Salary Rs. 12,00,000 - Rs. 12,00,000 Rs. 12,00,000
House Rent Allowance (HRA) Rs. 6,00,000 Rs. 3,60,000 Rs. 2,40,000 Rs. 6,00,000
Special Allowance Rs. 2,52,000 - Rs. 2,52,000 Rs. 2,52,000
Leave Travel Allowance (LTA) Rs. 20,000 Rs. 12,000 (bills submitted) Rs. 8,000 Rs. 20,000
Standard Deduction - Rs. 50,000 Rs. 50,000 -
Gross Total Income from Salary     Rs. 16,50,000 Rs. 20,72,000

In order to compute the income tax, income from all the sources needs to be included:

  • From salary (paid by the employer)

  • From capital gains (buying and selling of house or shares)

  • From house property (from rent or home loan interest)

  • From other businesses (apart from salary, if income is earned from any freelancing or business-related work)

  • From any other source (Fixed Deposits, bonds, etc.)

Now,

Ms. Preeti has an FD (Fixed Deposit) and earns interest on the income of Rs. 12,000 yearly, along with interest on income from a savings account of Rs. 8,000. Some important investments made by Preeti to save tax are,

ELSS (Equity Linked Savings Scheme) funds of Rs. 20,000.

PPF (Public Provident Fund) investment of Rs. 50,000.

Medical insurance of Rs. 12,000.

LIC premium of Rs. 8,000.

  1. Calculation of Income Tax under the Old Tax Regime

    Details Amount Total
    Salary 16,50,000  
    Other Sources Income 20,000  
    Gross Total Income   16,70,000
    Deductions
    Section 80C 1,50,000  
    Section 80D 12,000 -
    Section 80TTA 8,000 1,70,000
    Gross Taxable Income   15,00,000
    Total Tax (including cess)   2,73,000
  2. Calculation of Income Tax under the New Tax Regime

    Details Exemptions Amount
    Till Rs. 2,50,000 Exempt from tax 0
    From Rs. 2,50,000 till Rs. 5,00,000 5% (5% of Rs. 5,00,000 - Rs. 2,50,000) Rs. 12,500
    From Rs. 5,00,000 till Rs. 7,50,000 10% (10% of Rs. 7,50,000 - Rs. 5,00,000) Rs. 25,000
    From Rs. 7,50,000 till Rs. 10,00,000 15% (15% of Rs. 10,00,000 - Rs. 7,50,000) Rs. 37,500
    From Rs. 10,00,000 till Rs.  12,50,000 20% (20% of Rs. 12,50,000 - Rs. 10,00,000) Rs. 50,000
    From Rs. 12,50,000 till Rs. 15,00,000 25% (25% of Rs. 15,00,000 - Rs. 12,50,000) Rs. 62,500
    More than Rs. 15,00,000 30% (30% of Rs. 20,92,000 - Rs. 15,00,000) Rs. 1,77,600
    Cess 4% of total tax (4% of Rs. 12,500 + Rs. 25,500+ Rs 37,500 + Rs. 50,000 + Rs. 62,500 + Rs. 1,77,600) Rs. 14,604
    Total Income Tax Rs. 12,500 + Rs. 25,500+ Rs. 37,500 + Rs. 50,000 + Rs. 62,500 + Rs. 1,77,600 + Rs. 14,604 Rs. 3,79,704

Income Tax Exemption

Listed below are the sections defined under Income Tax Act, 1961, which provides exemption on the total income tax.

  1. Section 87A

    An individual earning INR 5 lakh or below can avail tax rebate of up to INR 12,500.

  2. Section 80C

    An individual may avail of a tax rebate of up to INR 1.5 lakh on the premium deposited under ULIP (Unit Linked Insurance Plan), NSC (National Saving Certificate), equity-linked saving scheme, and PPF (Public Provident Fund).

  3. Section 80CCD (1B)

    Under this clause, an individual may avail of a tax exemption of up to INR 2 lakh for the premium deposited under a national pension scheme.

  4. Section 80D

    Tax exemption of up to INR 25,000 can be availed on medical insurance premium bills. The limit may extend to INR 50,000 in the case of senior citizens.

  5. Section 80G

    Any donation to charitable organizations or science & discovery will be fully exempted from taxable income.

  6. Section 80E

    The interest paid on education loans will be fully exempted for up to eight years.

  7. Section 80TTA/80TTB

    Under section 80TTA, the income or interest from a saving account up to INR 10,000 will be waived from taxable income. At the same time, the limit extends to INR 50,000 for senior citizens on all forms of interest.

  8. Section 80GG

    Tax exempted from paying house rent.

Conclusion

A surcharge on income above INR 50 lakh applies to the taxable income. If the income of an individual exceeds INR 50 lakh but does not exceed INR 1 crore, then it is subject to a 10% surcharge. Further, a 15% surcharge is assessed on income exceeding INR 1 crore. Therefore, it is advisable for an assessee to determine the taxes he has already paid, such as TDS, to deduct them from taxable income. Further, he is advised to get form 16 issued by the employer, which includes his total annual salary along with the deductions. Nevertheless, other income, such as income from house property, investments returns, royalties, etc., must be incorporated under total income tax liability.

FAQ's

  • How much tax should one pay on the income?

    It depends on the Income tax slab rate. Here is the table defining the slab rate one should apply to determine the taxable income.
    Income (In INR Lakh) Tax rate
    0 to 2.5 0
    2.5 to 5 5%
    5 to 7.5 10%
    7.5 to 10 15%
    10 to 12.5 20%
    12.5 to 15 25%
    Above 15 30%
  • What details should one possess while e-filing ITR (Income Tax Returns)?

    One needs to possess the following details in order to e-filing the ITR:
    • Details of PAN Card, Aadhaar Card, and Current address
    • Bank account details used during the assessment year
    • Income proof such as Income from investment, rent, employment, etc.
    • Details of deduction claimed under section 80 or chapter VI-A of Income Tax Act 1961
    • Details of tax paid in advance, such as TDS.
  • Under which section can one claim a deduction on Income tax payable?

    One may claim deductions under section 80 and chapter VI-A of the Income Tax Act 1961.
  • What sources does an assessee need to include while determining taxable Income?

    An assessee must include his total salary, house property rent, capital gains, interest on savings, etc. In addition, he should also make a deduction under section 80 of the Income Tax Act 1961.
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