Taxable Income

Income tax is the main source of revenue for the government, which it uses to develop the country. The Income Tax Act states that any individual earning a substantial income in India is liable to taxation. The same rules apply for individuals/Hindu Undivided Families/bodies of authorities. All the income earned by individuals and companies is deemed taxable, apart from certain deductions and exemptions as stated in the Act. In this blog, we will look at taxable income in India, income tax rates, and how taxable income is calculated. Let’s begin!

What is Taxable Income?

Taxable income can be the amount of an individual or company’s income used to calculate their income tax liability for the financial year. It can be defined broadly as the gross income before the minimum exemptions and standard deductions. Some types of taxable incomes are salaries, bonuses, wages, tips, etc.

Scope of Taxable Income in India

Income tax is levied on all citizens, HUFs, companies, firms, individual bodies, local authorities, etc. The tax rates vary according to what individual tax bracket the assessee falls under. These rates are administered following the guidelines stated in the Income Tax Act of 1961. 

Taxable Income Calculation

The calculation of taxable income can be very easy and hassle-free if you know what just to do. To calculate the amount of taxable income, the taxpayer just has to total all the earned and unearned income in the financial year. The taxable income can be calculated from this amount by removing any available exemptions or deductions.

Further, the Income Tax Department has set up a calculator on the Income Tax website, which can be used to calculate the assessee’s taxable income. Given below are some of the details that you will have to provide to calculate the taxable income:

• Financial year.
• Taxpayer’s name.
• Taxpayer’s residential status.
• Income from salary.
• Income from house property.
• Capital Gains.
• Income from other miscellaneous sources.
• Profits.
• Income from agricultural activities.
• Applicable deductions.

Taxable Income Examples

Given below are some of the examples of taxable income as stated in the Income Tax Act:

• Salary
• Wages
• Bonus
• Annuity
• Dividends
• Fees
• Income from interest
• Income from hobbies
• Employee awards

Income Tax Slab Rates

Not all taxpayers in India are charged the same rate of income tax. The income tax rate differs according to the status of the resident and what tax slab they fall under. Given below are income tax slabs for the financial year 2021-2022:

For Individuals and HUFs Under the Age of 60

For Individuals and HUFs Over the Age of 60