Income Tax Calculator

Step 1:

Components involved in Step 1 are: Assessment Year, Category, Gross Taxable Salary, HRA Exemption and Transport Allowance,

Income Calculation:

House Rent Allowance (HRA):

(Considering the final value based on the rent paid and basic computation)

The HRA is decided depending on your basic salary. There are several other factors affecting it, including the city in which you reside. If you’re residing in a metropolitan city, then you are entitled to the HRA equivalent to 50% of your salary, whereas for all other cities the HRA comes out to be 40% of the salary.

The salary is described as the sum of basic pay, dearness allowance (if any), and any other commission. If you’re not getting a dearness allowance or any other commissions, then the HRA will be 40%-50% of your basic pay.

The actual House Rent Allowance will be the least of three provisions mentioned below:

• The sum of money received as the HRA from your employer
• Your rent minus 10% of your basic pay
• 50% of your basic pay if you’re living in a metropolitan city and 40% if you’re residing in a non-metro city.

Transport Allowance:

(Maximum exemption Rs. 19,200)

Step 2:

Components involved in Step 2 are: Medical Insurance Premium, Interest Paid on Home Loan u/s80EE (if any), Education Loan u/s 80E (if any), Basic Deductions u/s 80C, Basic Deductions u/s 80CCD and Donations to Charity u/s 80G (if any).

Investment Calculation (IC):

Total Taxable Income = X-(Y+Z+ all the investment calculations in the above table)

Being on the verge of reaching the deadline for submitting proofs of your investment, you must be a little pre-occupied seeking the best investments options, depending on the income tax bracketyou fall into. If you Google it, you will find n number of investment options flooding the Internet. But seeking the best deal for yourself is a really difficult task.

Before we move ahead, let us have a look at the Income Tax Slab Rate for AY 2018-19:

Calculation of Tax under this Tax Slab:

Helpful Resource: Income Tax Slab Rate for FY 2019-20 | Income Tax Slab Rate for FY 2020-2021

Income Tax Slab ( FY-2019-2020) VS Income Tax Slab ( FY-2020-2021)

Income Tax Slab rate for Senior Citizen above 60 Years and below 80 Years

Income Tax Slab rate for Senior Citizen above 60 Years and below 80 Years

Income Tax Slab rate for Senior Citizen above 80 Years

# - for special cases

Now, let’s see where you should invest your money to save tax depending on the different tax slabs.

Tax Slab 1: Taxable Income up to Rs. 2.5 Lakh:

Calculation of Tax under this Tax Slab:

Following are the details you need to enter in this Income Tax calculator:

Personal Details required in the income tax calculator

• Name: This field in the Income tax calculator requires your name as per your government and financial records.
• E-mail: In this field of the Income tax calculator you are required to enter your E-mail address. Make sure that you enter the correct E-mail address so as to ensure that you receive the reports on your E-mail.
• Mobile Number: This field in the Income tax calculator requires your mobile number for record keeping purposes.
• Date of Birth: The date of birth you need to enter in this field of the income tax calculator is majorly for record keeping purposes. At the time of buying a policy on the basis of this income calculation, you might need to submit documentary proofs supporting the same. Therefore, in order to get the most reliable results, make sure that the date of birth you enter in the Income tax calculator is as per your government IDs.
• Gender: This field of the Income Tax calculator has been put in place because the income tax slabs for men and women in India are different.
• City: In this column of the Income tax calculator you need to select your city from the dropdown menu. The reason why the income tax calculator requires your city is that the tax treatment for House Rent Allowance varies between metro cities and non-metro cities.

What are the Different Taxable Heads of Income?

Income taxes are levied depending on the source of Income. Following are the five main income heads from which taxes are deducted:

1. Income from Salaries - Taxable income that all employees receive from their employers, is categorized under this head. As per section 192 of the Income Tax Act, the employer will withhold taxes if the employees do not come within the taxable bracket. All about tax deductions and the net paid income are detailed in Form 16 that must be provided by the employer to the employee.
2. Income from Capital Gains - Capital gains taxation applies to earnings from sale of capital assets held by the tax assessee. Capital assets refer to the properties such as buildings, lands, bonds, equities, debentures, and jewelleries etc. Taxes are levied on the income of the assessee when such properties are sold.
3. Income on House Property - Income Tax is levied on house property, if the house is given out on rent by the owner. However, under this head, the property cannot be used for business or professional purposes.
4. Income (profits) from Business - As per section 30 to 43D of the Income Tax Act, the profits earned from businesses or by providing professional services are considered taxable as per applicable rates. This income head is also known as “Profits and Gains of Business or Profession”.
5. Income from Other Sources - Income from any sources other than the four listed above, are categorized under this head. Some specific income coming under this head is listed below:

• Lottery/horse race winnings
• Income from dividends
• Pension received after the pensioner’s death.
• Rental income (other than house properties)
• Gifts received
• Interest on government securities, debentures and bonds.

What are Income Tax Returns?

Every individual, who has a source of income, regular or irregular, is legally required to file their income tax returns. Even if your income is below the Taxable bracket, you should file your income tax returns. There are prescribed forms through which the income earned by a person and the income tax paid thereon are informed to the Income Tax Authority. The following table shows different forms prescribed for different classes of taxpayers.

List of Deductions Included in Income Tax Calculation

• Section 80C
• Section 80D Mediclaim
• Home Loan (Section 24B)
• House Rent Allowance

After entering your annual income in the Income tax calculator, you are required to enter your investments that can be claimed as income tax deductions under the following:

Section 80C

Section 80C comprises certain instruments, investing in which can save you tax up to Rs. 45,000 per annum; depending on your income tax slab. These instruments include equity linked saving scheme (ELSS), term insurance plans, unit-linked insurance plans (ULIPs), public provident fund (PPF), bank fixed deposits (FDs), and National Saving Certificates (NSCs). A maximum of Rs. 1.5 lakh invested in all these instruments together is eligible as a deduction from your gross total income or taxable income. Also, an additional deduction, up to Rs. 50,000, against the amount invested towards new pension scheme (NPS) is available under the section. However, to make the best use of these instruments for claiming deduction under the Income Tax Act, it is essential to know these instruments in detail.

Therefore, this field in the income tax calculator requires a total of all the investments you have made under Section 80C.

Section 80D Mediclaim 

Under this income tax section, you can claim deductions equal to the amount spent for medical expenses for self or dependent family members. However, a maximum of Rs. 35,000 can be claimed as a income tax deduction under Section 80D. This amount includes a maximum of Rs. 25,000 for self and dependent family members; and the Rs. 25,000 for parents. However, if your parents are above 60 years of age, then the maximum deduction available for them is Rs. 30,000. The benefit under Section 80D is over and above the deduction of Rs. 1.5 lakhs under Section 80C.

There are majorly 4 types of health insurance policies to choose from. These include medical insurance plan, super top-up plan, critical illness plan, and hospitalization plan.

Therefore, this field of the Income Tax calculator requires a total of the amounts you pay towards the medical insurance of you and your dependent family members within the limit of Rs. 25,000 and Rs. 25,000 (Rs. 30,000 if parents are senior citizens) for your parents.

For example, Rahul claims a deduction a deduction of Rs. 25,000 against the medical expenses of his parents in the Income Tax calculator. Now, even if he spends Rs. 15,000 on his dependent child’s health, he can claim only 10,000 out of it; because the total limit of income tax deduction is Rs. 35,000.

Home Loan (Section 24B)

As per this section, any amount, up to Rs. 2,00,000, which you pay as interest towards a home loan, during that particular financial year, can be claimed as income tax deduction from your taxable income.

As per the recent changes made in the union budget of 2016-17, you may be eligible for an additional deduction of Rs. 50,000 over the current deduction limit. However, this is applicable only if the loan is sanctioned in 2016-17 or later, total home loan amount does not exceed Rs. 35 lakhs, and the total cost of the new house is equal to or below Rs. 50 lakhs.

Therefore, in this field of the Income tax calculator you need to enter the amount of interest you have paid as interest towards your home loan.

House Rent Allowance

As per the Income Tax Act, 1961, the amount you pay towards house rent is also eligible as an income tax deduction from your taxable income. However, the minimum amongst the following three amounts is eligible for the exemption:

• 1. Actual house rent allowance (HRA) receive
• 2. Actual rent paid minus 10% of your basic salary
• 3. 50 % of your basic salary if you live in Mumbai, Delhi, Chennai, or Kolkata and 40 % if you live in a non-metro city.

This amount is over and above the exemptions and deductions under Section 80C, Section 80D, and Section 24B.

Therefore, in this field of the income tax calculator you have to mention the minimum amongst the given three amounts. However, this tool allows a maximum of Rs. 1,00,000 to be entered in the field as additional proofs and documentary evidences are required beyond this limit.

Understanding Results from Income Tax calculator

After you key in all this information, the income tax calculator gives you the following outputs:

This summary in the Income Tax calculator depicts your level of income, your level of investment, and your tax liability in the form of a bar graph. The Income Tax calculator also gives an estimated amount of income tax savings possible by investing in instruments available at policybazaar.com.

To further simplify it for you, the Income Tax calculator also provides a list of available options suitable for your financial portfolio in a tabular format. This table in the Income Tax calculator represents the kind of investment instrument, benefits of that instrument, tax saving ability of that option, and recommended product belonging to that category of instrument.

Tax Spilt

This tab in the Income Tax calculator shows the tax slab in which your income falls, the rate of tax applicable to your income, and the amount of tax payable. The Income Tax calculator also shows the total tax payable split into 'Income Tax on Total Income' and 'Education Cess'. 

Frequently Asked Questions:

What is Taxable Income?

Taxable income is the amount of money which is used to compute the income tax on individual or a company owes to the government in the given tax year. In simple words we calculate income tax as an individual’s which is subject to income tax. The taxable income of an individual includes wages, salaries, bonuses, commissions and tips among others.  It is important to have proper knowledge of one’s total taxable income as it helps the taxpayers to determine the final payable income tax or refundable tax by applying the tax rates which are applicable and deducting the taxes which has already been paid.

The income tax in India is levied on individuals including HUFs (Hindu Undivided Families), companies, firms, local authorities and body of individuals. Depending on the income earned by each entity, how much tax is imposed varies. The Indian Income Tax Act 1961, governs the tax related to the income. 

What are the different heads under which the income of the taxpayer is classified?

Under section 14 of Income Tax Act, the income of a taxpayer is categorized under 5 different heads of income

• Income from Salary
• Income from House Property
• Income from Capital Gains
• Income from profit and gains of company or business
• Income from other source

How to use online income tax calculator?

Online income tax calculator can be used in a very simple and hassle-free way. There are many different financial advisors and insurance aggregators which offers income tax calculator on their website. With the help of income tax calculator, the individual can calculate the income tax, calculate the tax liability of income and can avail deductions to save on taxes.

What are the details required while using income tax calculator?

The details required while using income tax calculator are:

• Name
• E-mail ID
• Mobile Number
• Date of Birth
• Gender
• City

Is it compulsory to E-file Income tax return?

yes, it is mandatory to e-file income tax return. In case, the annual income of the individual is more than Rs.5lakh or if the taxpayer has to claim income tax refund then e-filing ITR becomes compulsory.

What is gross total income?

The gross total income is described as the total income of the individual from all the income heads as mentioned above.

How TDS on salary is calculated?

The TDS is computed on the current CTC of the individual which includes different elements like medical allowance, basic salary, dearness allowance, special allowance and more. 

What is the maximum non-taxable limit?

Rs.2.5 lakh is set as the maximum limit of non-taxable income for an individual. However, if you have a total taxable income less than Rs. 5 lakh then you ca also get a rebate of Rs.12, 500 under section 87A of Income tax Act. Thus, an individual earning less than Rs.5 lakh will not require paying income tax from FY 2019-2020.

Does Income Tax Calculator Calculate for TDS?

Answer: No, the income tax calculator does not compute tax deduction at source (TDS). However, it does calculate the tax liability for the assessment year.

What details you required while e-filing the income tax returns?

You will need to submit the basic information like Aadhar card details, PAN Number and current address.

Details of all the bank account help in a financial year.

Details of income from investment (FD, Savings bank account) and income proof ( details of current salary)

All tax deductions claimed U/S 80C or Chapter VI-A of IT Act.

Details of tac payment such as TDS and advance tax payment.