Income Tax Calculator

What is an Income Tax Calculator?

An Income Tax Calculator is an online financial tool that helps you to estimate the amount of income tax you are required to pay to the Central Board of Direct Taxes (CBDT). It is especially useful during income tax - filing season when you need to determine your tax liability for the previous year.

The calculator takes into account the following factors that can affect your tax liability:

• Income (includes wages, salaries, self-employment income, rental income, interest, dividends, and other sources of income)

• Deductions (like, education expenses, medical expenses, mortgage interest, and charitable contributions)

• Filing Status (single, married filing jointly, married filing separately, or head of household) 

• Dependents (such as children or other qualifying relatives)

• Taxable Events (such as selling investments, realizing capital gains or losses, or receiving distributions from retirement accounts)

• Tax Brackets for your income level

• State and Local Taxes

By inputting the relevant financial information into an Income Tax Calculator, you can get an approximate idea of your taxes and eligibility for tax exemptions as per the new tax regime vs old tax regime.

Steps to Use of Income Tax Calculator 2023

Using Policybazaar Income Tax Calculator is a simple and easy way to estimate your tax liability and plan your finances better. 

Follow the steps mentioned below to learn the use of Policybazaar Income Tax Calculator available online:

Step 1: Go to the Policybazaar website and navigate to the "Income Tax Calculator" section.

Step 2: Enter your annual income salary and mention income from other sources, if any. 

Step 3: Consider other relevant details, such as interest income, rental income, capital gains, and tax exemptions.

Step 4: Fill in your deductions, if any, such as investments in ELSS, PPF, life insurance, health insurance, etc.

Step 5: After entering all the details, click on the "Calculate Tax" button.

Step 6: The calculator will provide you with an estimate of your net taxable income, tax liability for the financial year.

Step 7: You can also compare different tax-saving options and their benefits using the calculator.

Step 8: Additionally, you can change the input values to see how it impacts your tax liability and plan your finances accordingly.

Illustration of Income Tax Calculator 2023

Ms. Preeti, a salaried employee, earns a basic salary of Rs. 15,00,000 per annum. She lives in a rented apartment in Delhi where she pays a rent of Rs. 30,000 per month and her company gives her a monthly HRA of Rs. 40,000 along with Special Allowances of Rs. 20,000 per month and an annual LTA (Leave Travel Allowance) of Rs. 20,000. The Gross Total Income from the Salary of Ms. Preeti will be:

In order to compute the income tax, you need to include the income from all the sources to the income tax calculator, such as:

• Income from salary (paid to you by the employer)

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

• Income from house property (income from rental property or interest earned from home loan interest)

• Income from other businesses (income earned from any freelancing or business-related work)

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

Now, Ms. Preeti has an FD (Fixed Deposit) and earns an annual interest Rs. 14,000 from it. She also earns interest income of Rs. 10,000 p.a. from her savings account. 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. 15,000.

• LIC premium of Rs. 10,000.

Calculation of Income Tax under the Old Tax Regime

Calculation of Income Tax under the New Tax Regime

Income Tax Slab Rate

The income tax slabs in India highlight the taxable rate payable by an individual based on annual income and earnings from all sources.

Refer the following income tax rates for new tax regime calculator and old tax regime calculator:

*New Tax Regime was introduced in Budget 2023, which is effective from 01 April 2023.

Income Tax Exemption and Deductions

Income Tax Act, 1961 provides for tax benefits under its various sections, let us learn them below.

Tax Exemptions & Deductions under New Tax Regime FY 2023-24 (AY 2024-25):

If you choose the new tax regime introduced under Section 115 BAC in the Income Tax Act, 1961, you can avail of only a few of the following tax exemption and deduction benefits. Let us learn them below:

• Transport Allowance for PwD: Reimbursement of travel expenses incurred by PwD for commuting between place of residence and place of duty.

• Conveyance Allowance: Reimbursement of expenses incurred on conveyance in performance of duties of an office.

• Travel/ Tour/ Transfer Compensation: Reimbursement of expenses incurred on travel, tour, or transfer.

• Perquisites for Official Purposes: Reimbursement of expenses incurred for official purposes, such as meals, accommodation, and transportation.

• Exemption for Voluntary Retirement Scheme: Income from a voluntary retirement scheme is exempt from tax.

• Gratuity Amount: Gratuity amount received on retirement or death is exempt from tax.

• Leave Encashment: Leave encashment amount received is exempt from tax.

• Interest on Home Loan on Lent-Out Property: Interest paid on a home loan for a rent-out property is eligible for deduction.

• Gifts of up to Rs. 5,000: Gifts received up to Rs. 5,000 in a year are exempt from tax.

• Employer's Contributions to Employees’ NPS Accounts: Employer's contributions to employees' NPS accounts are eligible for deduction.

• Additional Employee Costs: Additional employee costs incurred by an employer are eligible for deduction.

• Standard Deductions on Family Pension: Standard deduction is available on family pension received by a taxpayer.

• Deductions on Deposits in Agniveer Corpus Fund: Deduction is available on deposits made in the Agniveer corpus fund.

Tax Exemptions & Deductions under Old Tax Regime FY 2023-24 (AY 2024-25):

• Section 87A: You can avail of tax rebate of up to Rs. 12,500 if you are earning Rs. 5 lakhs or below.

• Section 80C: You can avail of a tax rebate of up to Rs. 1.5 lakhs on the premium deposited for schemes like ULIP (Unit Linked Insurance Plan), Equity-Linked Saving Scheme (ELSS), and PPF (Public Provident Fund).

• Section 80CCD (1B): Under this clause, you can avail of a tax exemption of up to Rs. 2 lakhs for the premium deposited under a National Pension Scheme (NPS).

• Section 80D: Tax exemption of up to Rs. 25,000 can be availed on medical insurance premium bills for self and family. The limit may extend to Rs. 50,000 in the case of senior citizens.

• Section 80G: Any donation to charitable organizations or science & discovery can be fully exempted from taxable income under this section.

• Section 80E: The interest paid on education loans is fully exempted for up to 8 years.

• Section 80TTA/80TTB: Under Section 80TTA, the income or interest from savings account up to Rs. 10,000 will be waived from taxable income. At the same time, the limit extends to Rs. 50,000 for senior citizens on all forms of interest.

• Section 80GG: You can avail of tax exemption on annual payment of house rent.

• Section 10(14): Exemption for specific allowances like children's education allowance, hostel allowance, etc.

• Standard Deduction: A flat deduction of Rs. 50,000 is allowed to salaried individuals and pensioners.

• House Rent Allowance (HRA): Tax exemption on the portion of the salary received as HRA, subject to certain conditions.

• Leave Travel Allowance (LTA): Exemption for expenses incurred on domestic travel.

To Sum Up!

The use of an income tax calculator can help you to plan your finances better and make informed decisions about your investment options and tax-saving strategies. All taxpayers can use this online calculator to quickly know their tax liability. You must accurately calculate your net taxable income, overall tax liability, deductions, and investments. However, if you possess the knowledge, an income tax calculator should come in handy to learn certain aspects of your tax paying cycle.