Income Tax Calculator

How to Calculate Income Tax

The calculation of Income Tax depends on many factors. Some of the important factors that affect the calculation of Income Tax are the amount of income earned, the source of income and the age of the earning person. To calculate the amount of income tax levied on an individual, they are required to declare their total earnings and the total deductions for the assessment year. ALong with the earnings and deductions, the individual is also required to file exemptions from the taxes as well. A person can claim medical, educational, HRA exemption etc. There are certain investments that attract exemptions from the government. If the taxpayer intimates the Income Tax Department regarding these investments, then they can avail tax exemptions.

Gross Salary

Gross salary is the monthly or yearly salary which is received by a person without any tax deductions. The components of gross salary include: basic salary, house rent allowance, leave travel allowance, provident fund, medical allowances, professional tax etc. The difference between gross and net salary is that, net salary is the total income received by the wage-earner after the total expenses are deducted, the salary calculated without any deductions is considered to be the gross salary. 

• Aadhar number must be linked with UAN

• The Aadhar card and bank details must be verified by the employer

• UAN must be active before applying for EPF withdrawal

• You must be registered in the EPFO member portal

Once you’ve met all these conditions, you need to download form 19-UAN and form 20C-UAN. Post downloading these forms you need to fill them up by providing details like name, PAN, Aadhar Number, UAN and your reason for leaving the service. You need to make sure that the details provided by you are verified, else, it could lead to failure or delay of the withdrawal process.

How to Calculate Income Tax on Salary

The Indian Government has announced the Union Budget for this FY. Many modifications were proposed, of which at least some are certain to alter the budget of a common man’s household. The Union Home Minister, Mr. Arun Jaitley, called the Union Budget historic and claimed it to be for the welfare of the common man. For the salaried middle class, the highlights are mostly income-tax concessions and lowered tax rates for corporates.

The tax slab for salaried individuals is as given below:

Tax slab	Tax rate
Up to 2,50,000	Nil
2,50,000 to 5,00,000	5% of the income exceeding 2,50,000
5,00,000 to 10,00,000	12,500 + 20% of the income exceeding 5,00,000
Above 10,00,000	1,12,500 + 30% of the income exceeding 10,00,000

Many have been under the misconception that tax is not applicable for the 2,50,000 to 5,00,000 tax slab, which is not entirely true. The exemption made was not complete, but such that 5% income tax will be charged only on the income exceeding 2,50,000. So, as we have understood the tax rates for different ranges of income, let us now see how it is calculated on one’s salary.

Now, for instance, let us suppose that Abhi’s gross income is Rs. 9.5 lakhs per annum, and that she had earned an interest of Rs. 10,000  on her savings account. She also has a fixed deposit account that gives her an annual interest of Rs. 12,000. In addition, she has invested Rs. 50,000 in PPF and Rs. 20,000 in tax-saving mutual funds. She has also paid Rs. 80,000 as LIC premium, apart from a medical insurance premium of Rs. 10,000.

First, let us calculate Abhi’s total income:

Source	Income
Salary	9,50,000
Interest earned on savings account	10,000
Interest earned on Fixed deposit	12,000
Total gross income	9,72,000

So, the total gross income earned by Abhi this year = Salary + Interest earned on savings account + Interest earned on fixed deposit = 9,50,000 + 10,000 + 12,000  = 9,72,000

Next, we need to find out the taxable income. To know the taxable income, deductions must also be taken into consideration. Let us calculate the total value of deductibles:

Standard Deductions	Amount can be claimed up to	Amount Abhi can claim
80C (LIC, Mutual funds, and PPF)	1,50,000	80,000 + 20,000 + 50,000 = 1,50,000
80D (Medical insurance)	10,000	10,000
80TTA (Savings account)	10,000	10,000
Total	1,70,000	1,70,000

Under Section 80C of the Income Tax Act, Abhi can claim an amount of Rs. 1,50,000 on LIC premium, mutual funds, and public provident fund, i.e., 80,000 (on LIC premium) + 20,000 (Mutual funds) + 50,000 (PPF) = 1,50,000

Under Section 80D, Abhi can claim an amount of Rs. 10,000 for Medical insurance.

Under 80TTA, she can claim an amount of Rs. 10,000 as interest from a savings account, which is not taxable.

Hence, Abhi can claim up to Rs. 1,70,000 as deductions.

Therefore, Taxable income = Gross Salary - Deductions

                    = Rs. 9,72,000 - Rs. 1,70,000

                    = Rs. 8,02,000

Now, based on the tax rate, we need to find out Abhi’s income tax amount.

Tax slab	Tax rate	Tax Amount
Up to 2.5 lakhs	Nil	0
2.5 lakhs to 5 lakhs	5% of 2,50,000(income exceeding 2,50,000)	12,500
5 lakhs to 10 lakhs	20% of [8,02,000(taxable income) - 5,00,000]	60,400
Cess	3% of total tax	2,187
Total Tax	12,500 + 60,400 + 2,187	75,087

Up to 2.5 lakhs, the tax deducted is nil. Therefore, tax deducted(A) = 0.

Between 2.5 lakhs to 5 lakhs, the tax rate is 5% of the income exceeding 2,50,000. 

Here, in this case, tax deducted (B)=  5% of 2,50,000(as his income is greater than 8 lakhs) = Rs. 12,500

Between 5 lakhs to 10 lakhs, the tax rate is 20% of [taxable income - 5,00,000]. 

In Abhi’s case, tax deducted (C) = 20% of [8,02,000 - 5,00,000] 

            = 20% of 3,02,000

            = Rs. 60,400

Additional cess (D) = 3% of total tax

            = 3% of (0+12,500+60,400)

            = Rs. 2,187

Total tax = A+B+C+D

      = 0+12,500+60,400+2,187

      = Rs. 75,087

Therefore, the total tax Abhi must pay is Rs. 75,087.

Computation of Tax

Computation of Tax Liability

Normal tax rates applicable to a resident individual of the age of 60 years or above at any time during the year but below the age of 80 years

Net income range	Income-tax rates	Health and Education Cess
Up to Rs. 3,00,000	Nil	Nil
Rs. 3,00,000 – Rs. 5,00,000	5%  of  (total  income  minus  Rs.3,00,000) [*]	4% of income-tax
Rs. 5,00,000 – Rs. 10,00,000	Rs. 10,000 + 20% of (total income minus Rs. 5,00,000)	4% of income-tax
Above Rs. 10,00,000	Rs. 1,10,000 + 30% of (total income minus Rs. 10,00,000)	4% of income-tax

Normal tax rates applicable to a resident individual of the age of 80 years or above at any time during the year

Net income range	Income-tax rates	Health and Education Cess
Up to Rs. 5,00,000	Nil	Nil
Rs. 5,00,000 – Rs. 10,00,000	20%  of  (total  income  minus  Rs. 5,00,000)	4% of income-tax
Above Rs. 10,00,000	Rs. 1,00,000 + 30% of (total income minus Rs. 10,00,000)	4% of income-tax

 Non-resident individual irrespective of age

Net income range	Income-tax rates	Health and Education Cess
Up to Rs. 2,50,000	Nil	Nil
Rs. 2,50,000 – Rs. 5,00,000	5%  of  (total  income  minus  Rs. 2,00,000) [*]	4% of income-tax
Rs. 5,00,000 – Rs. 10,00,000	Rs. 12,500 + 20% of (total income minus Rs. 5,00,000)	4% of income-tax
Above Rs. 10,00,000	Rs. 1,12,500 + 30% of (total income minus Rs. 10,00,000)	4% of income-tax

Normal tax rate applicable to resident/non-resident Hindu Undivided Family (HUF)

Net income range	Income-tax rates	Health and Education
Up to Rs. 2,50,000	Nil	Nil
Rs. 2,50,000 – Rs. 5,00,000	5%  of  (total  income  minus  Rs.2,50,000)	4% of income-tax
Rs. 5,00,000 – Rs. 10,00,000	Rs. 12,500 + 20% of (total income minus Rs. 5,00,000)	4% of income-tax
Above Rs. 10,00,000	Rs. 1,12,500 + 30% of (total income minus Rs. 10,00,000)	4% of income-tax

Normal tax rates applicable to every AOP/BOI/Artificial juridical person

Net income range	Income-tax rates	Health and Education
Up to Rs. 2,50,000	Nil	Nil
Rs. 2,50,000 – Rs. 5,00,000	5%  of  (total  income  minus  Rs. 2,50,000)	4% of income-tax
Rs. 5,00,000 – Rs. 10,00,000	Rs. 12,500 + 20% of (total income minus Rs. 5,00,000)	4% of income-tax
Above Rs. 10,00,000	Rs. 1,12,500 + 30% of (total income minus Rs. 10,00,000)	4% of income-tax

FAQs on Income Tax Calculator

What is an assessment year?

Assessment Year is the year which follows the financial year. For example, FY 2017-18 and AY 2018-19 are the same.

How is assessment year different from the previous year?

From the perspective of Income Tax, financial year is when you earn your income, whereas the assessment year is when you estimate the taxes on your previous year's income and make the payments.

What is the difference between an NRI and an Indian resident?

A Non-Resident Indian is an individual who lives outside the Republic of India but is of Indian origin. An Indian resident is someone born in India and lived in the country for all their life.

If I have paid more tax while filing my income tax returns, can I get a tax refund?

If your tax liability is relatively lesser than the amount which you have paid already as Income Tax, then you are eligible for a tax refund. Additionally, if you have missed out on your investment declaration, you're still eligible for a tax rebate that in turn can save you a large amount of money.

What are receipts? Can all receipts be considered as income receipts?

A receipt is a written validation that a certain amount of money has been transferred from one party to another.

Not all receipts can be used to claim your taxes. Receipts of medical, childcare expenses, work expenditure that hasn't been reimbursed can be used to claim the taxes.

What is considered Income?

The amount of money received by you every month for offering services to a company.individual is essentially the meaning of income. It's the amount of money that is computed for tax deductions and rebates.

What is Income Tax Return?

Income Tax Return is a form prescribed for salaried and self-employed individuals to provide his/her details of income that he/she has earned from various sources and the taxes he/she has paid for that fiscal year to the Income Tax Department.

Will I be required to file income tax returns if my employer deducts the amount from my salary and deposits it on my behalf?

Yes, most certainly! If your income exceeds Rs.2.5 lakh, you'll be required to file your tax returns even if the TDS is being deducted by your employer.

Is e-filing a necessary activity?

In most of the cases, yes, e-filing is necessary. In case your annual income is more than Rs.5 lakhs or you have a tax refund to claim, e-filing becomes a mandatory task.

Is efiling income tax returns important?

If during a particular financial year, your income exceeds Rs.2.5 lakhs, it is a mandate to file an income tax return.

How can I verify whether my tax return is making use of EVC?

• Log in to the website of the income tax department

• Select the option for e-filed returns or forms from the 'My Account' option.

• Select ''Click to view your returns pending for e-verification.''

• Choose the proper assessment year which you want to verify and select from three alternatives to verify the tax returns.

What is Taxable Income?

Incomes which are charged for taxation under the Income Tax Law is called as Taxable Income.

What is Exempt Income?

The type of income which isn't included in the entire taxable income, or is exempted from tax and becomes non-chargeable is known as exempt income.

Are any documents mandated with the income tax return?

No, document attachment isn't a mandate. If you get a command from the Income Tax Department to submit any necessary documents, you should do the same.

What does TDS mean?

Tax deducted at source or TDS is an adjustment made with the payable tax when the income tax return is estimated.

What is Form 16?

Form 16 is a certificate provided by an employer to his/her employee where the details of TDS deduction, allowances and other details are provided.

Normal tax rates applicable to a Co-operative societies

Net income range	Rate of income-tax
Up to Rs. 10,000	10%
Rs. 10,000 - Rs. 20,000	20%
Above Rs. 20,000	30%