An income tax calculator is a simplified online tool which assists you in assessing the tax liability according to the recent taxation laws. Calculating income tax takes into account factors like age, income, interest on loans (if any), investments (if any), and all miscellaneous expenses to compute your taxes accurately and worry-free. We have updated our income tax calculator to reflect the most current income tax rates and regulations. The tax slabs vary according to a person’s income.
The online income tax calculators are straightforward and can give accurate results.
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How Does Income Tax Calculator Work
Using the income tax calculator is easy and anyone can do it. Below are steps one can follow to use the calculator:-
Step 1: Choose the financial year.
Step 2: Fill in your age as the tax liability varies according to the age groups in India.
Step 3: Fill in your taxable income, i.e. income after deductions of HRA, LTA, etc.
Step 4: Fill in your other incomes (if any), like income from interest, rent, and home loan interest for the rented or owned property.
Step 5: For income from digital assets, fill in the net income (this kind of income is taxed at 30% with an additional cess and surcharge).
Step 6: Click on ‘Next.’
NOTE: If someone wants to determine their tax according to the old tax slabs, then they can fill in the tax, savings, and investments under the 80C, 80D, 80G, 80E, and 80 TTA.
Step 7: After you select ‘Calculate’, the tax will be shown on the redirected page.
Important Terms and Definitions in Tax Calculation
While filing income tax, there are many terms that people are not familiar with. Below are some of the important terms that will help you understand the calculations much better:-
- Assessment Year
An assessment year is the year in which your income from a specific fiscal year is calculated for the next fiscal year.
- Financial Year
The time frame starts on April 1 of the current year and ends on March 31 of the following year. You have until this point to gather all of your paperwork and submit your investment documentation.
- Previous Year
The accounting period that precedes the subsequent assessment year. The following year, your revenue from the current year is evaluated (assessment year).
- Deductions
Based on Section 80 and Chapter VI-A, the total taxable income is decreased. You can get a tax deduction for certain expenses, including paying for your children’s tuition and investing in life insurance policies.
- Exemption
A specified sum is subtracted from gross income before taxes are applied. Sections 10 and 54 both offer exemptions. Examples of exemptions include interest from tax-free bonds and wage components like LTA.
How To Calculate Income Tax
A person’s pay includes transportation allowance, special allowance, house rent allowance (HRA), and basic salary. In the previous administration, certain pay components, such as leave travel reimbursement, phone bill reimbursement, and a portion of the HRA, were tax-exempt. On the other hand, the new administration does not offer these exemptions.
An illustration of how tax calculation functions under the new regime, as opposed to the old regime, is shown below:-
Example:
Basic Salary: Rs. 80000
HRA: Rs. 40,000 per month.
Special Allowance: Rs. 10,000 per month.
Leave Travel Allowance (LTA): Rs. 8,000 per month.
Rent: Rs. 15,000 per month.
| Components | Amount | Deductions | Taxable amount under the old scheme | Taxable amount under the new scheme |
| Basis Salary | Rs. 9,60,000 | Rs. 9,60,000 | Rs. 9,60,000 | |
| Special Allowance | Rs, 1,20,000 | Rs, 1,20,000 | Rs, 1,20,000 | |
| HRA | Rs. 4,80,000 | Rs. 1,80,000 | Rs. 3,00,000 | Rs. 4,80,000 |
| LTA | Rs. 8,000 | Rs. 5,000 (bills must be paid) | Rs. 3,000 | Rs. 8,000 |
| Deductions (Standard) | Rs. 40,000 | Rs. 40,000 | ||
| Gross Income | Rs. 14,23,000 | Rs. 15,68,000 |
The following information must be considered while calculating income tax:-
- Money from rentals or interest on a mortgage.
- Earnings through a job, business, or freelancing.
- Income received through the sale of shares or a home.
- Interest produced by bonds, savings, or fixed deposit accounts.
The reimbursement of phone bills, investments made in saving schemes like PPF, NPS, EPF, etc., and HRA are among the exemptions that are no longer available under the new system.
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