What is an Income Tax Calculator?
An income tax calculator is a tool that will help calculate taxes one is liable to pay under the old and new tax regimes. The calculator uses necessary basic information like annual salary, rent paid, tuition fees, interest on child’s education loan, and any other savings to calculate the tax liability of an individual.
It gives the total tax payable under the old and new scheme. Also, it suggests investment opportunities for the individual based on the tax liability. The online income tax calculator is a convenient tool and is free to use. It is simple to understand and can be used by anyone to calculate their tax liability.
How to Calculate the Total Income Tax Liability?
Individuals can determine the total tax expenses through an online income tax calculator. Such tools take into account the following pointers to reflect the actual tax liability of a resident or non-resident Indian at the end of a financial year –
- Annual income from salary/profits.
- Income from other sources such as investments, rental income, etc.
- Tax exemptions applicable, if any.
- House rent and transport allowance.
Entering accurate data regarding the above-mentioned pointers will demonstrate the total tax liability of individuals. Minus the taxes already paid through TDS, the remaining can be deposited directly online through the official portal Challan 280. If, in any event, the taxes paid exceed the total liability, the difference is reimbursed by the government within 30 days of filing for the same.
Taxpayers who file their return after the due date will have to pay interest under 234A and penalty under section 234F. Hence, remembering the due date of filing income tax returns is indispensable. However, keep in mind that the due date varies according to the category of taxpayers. For instance, if you are a salaried individual, usually you must file your income tax returns by the 31st of July of the assessment year.
How to Understand Income Tax Slabs?
The Indian Income-tax works on the basis of a slab system and the tax is levied accordingly on individual taxpayers. Slab implies the different tax rates charged for different income ranges. In other words, the more your income, the more tax you have to pay. These slabs of income tax are revised every year during the budget announcement. Again, These slab rates are segregated for different categories of taxpayers. As per the Income-tax of India, there are three categories of “individual “taxpayers such as:
- Individuals below 60 years of age, including residents and non-residents
- Resident Senior citizens – 60 to 80 years of age
- Resident Super senior citizens – more than 80 years of age
How to Calculate Income Tax of a salaried employee?
The Government of India mandatorily deducts income tax from both salaried and self-employed individuals. As a salaried individual, your monthly salary comprises different components such as basic salary, HRA, transport allowance, and other special allowances. Few of these allowances are tax-exempt. Thus, you need an online income tax calculator to calculate your gross taxable income and available tax-deductibles. Without knowing how to calculate income tax, you may end up overpaying income tax.
Step 1: Calculate Gross Income
Write down your total income, including the allowances in the income tax calculator window. Significant exemptions that you receive on different salary components include House Rent Allowance (HRA) and Leave Travel Allowance (LTA). Remove these components from your gross annual salary.
House Rent Allowance is generally considered the lowest of the following values:
- House rent allowance received from the employer
- Actual rent paid less 10 percent of basic+DA monthly salary
- For a metro city, 50% of the basic salary
- For a non-metro city, 40% of the basic salary
Choose the option having the least value of all, and update in the income tax calculator online. Also, you can claim a Standard Deduction of Rs. 50,000 from your annual income for the financial year 2021-22 and FY 2022-23. You can use an income tax calculator to calculate and deduct the HRA and Standard deduction amounts.
After making all necessary deductions with the help of an income tax calculator, you must declare income received from different other sources, such as capital gains, and deposits. The resulting value is your total gross income.
Step 2: Calculate Net Taxable Income
Various instruments offer tax-saving benefits to further lower your taxable income under Section 80C of the Income Tax Act 1961. The income tax calculator helps you enumerate and compile the details of these tax-saving investment options. Standard tax-saving instruments include:
House Rent Allowance is generally considered the lowest of the following values:
- Life insurance
- Unit Linked Insurance Plans (or ULIPs)
- Mutual funds
- Equity Linked Savings Schemes (or ELSS)
- Public Provident Fund (or PPF)
- National Pension System (or NPS)
Let us take a look at different tax saving sections, as appearing in an online income tax calculator.
Section 80C
Both individuals and HUF members can avail of tax deductions up to Rs. 1.5 lakh under Section 80C. Popular tax-saving instruments under this Section include Public Provident Fund (PPF), Life Insurance policies, Employee Provident Fund (EPF), Home Loan repayment, National Saving Certificates (NSC), and Equity Linked Savings Scheme (ELSS).
An online income tax calculator incorporates all such deductions to help you calculate your total taxable income with ease.
Section 80CCD (1)
The contribution towards NPS is eligible for tax deduction under this Section. If you want to know the values beforehand, an income tax calculator is the perfect online tool.
For a salaried employee, it is 10% of the gross salary with a given limit of Rs 1.5 lakh under section 80 CCE.
Section 80CCD (1B)
Both salaried and self-employed individuals can avail of an additional tax deduction of Rs 50,000 under this Section, over and above that provided under Section 80C. Together, thus, you can save up to Rs. 2 lakhs under Section 80C and Section 80CCD (1B). You can easily declare your NPS contributions on an income tax calculator while calculating your tax liability.
Section 80D
The premium amount paid towards health insurance is tax-deductible underSection 80D for both individuals and HUF members. The maximum amount of deductions claimable is calculated as per the following criteria:
- Rs 25,000 deduction on self-medical insurance, spouse and children’s medical insurance
- Additional Rs 25,000 deduction on the insurance of parents ageing below 60 years
- Additional Deduction of Rs 50,000 when the individual and parents, both are above 60 years of age
Usually, an online mode of payment is accepted under this Section. You can declare the total amount of health insurance premiums in a year while estimating your tax payable on an income tax calculator. Total deduction in total cannot exceed Rs 1 lakh.
Section 80DD
BThis Section is also applicable to individuals and HUF, who can make deductions for the medical expenditures of a dependent disabled member of the family. You can get deductions up to Rs 1.25 Lakh depending upon the disability of the person
You can provide details of your expenses under this Section on an income tax calculator.
Section 80E
The Section applied to only individuals includes deduction on the interest paid towards education loan. The deduction in section 80E can be enjoyed 8 years only.
Step 3: Tax Slab Based on Net Taxable Income
In the Union Budget 2022-2023, the tax slabs under both the New Tax Regime and the Old Tax Regime have remained the same as FY 2021-22. While the tax filing process has become easier under the new tax regime, the calculation of income tax liability has become hassle-free, too – thanks to the availability of various online income tax calculators.
After subtracting all qualifying deductions from your total annual income using an online income tax calculator, you will get the value of your net taxable income. As per existing tax slab rates, you will have to pay taxes according to the category your income falls in. You can also take help from an online income tax calculator to do the calculations as per the applicable tax slab.
Step 4: Calculate Taxe
You may consider tax calculation to be cumbersome. To make the process smooth, therefore, you can use an online income tax calculator available on the Income Tax India site.
Step 5: Consolidate Net Taxes
The last step is to consolidate the net tax payable by deducting all applicable deductions and exemptions based on the tax saving investments made by you. In this step you also need to consider if you qualify for the rebate under Section 87A.
Section 87A Rebate:
Tax rebate is a type of benefit offered by the Government of India to individuals whose net taxable income does not exceed Rs. 5 lakhs. Thus, if your total taxable income is less than Rs. 5 lakhs, you can claim an additional rebate of up to Rs. 12,500 on the total tax payable (before adding health and education cess of 4% into the tax calculated in the previous step).
Since you have calculated net taxable income with the help of an income tax calculator, you can deduct the aforementioned tax rebate, if applicable.
In another case, if the net taxable income exceeds Rs 5 lakhs, you will not be able to avail of the tax rebate under this Section.
With the help of an online income tax calculator, you can calculate your net taxable income on which you have to pay tax. Although the process may seem complicated, using an online income tax calculator can make it easier for you to get accurate values.
The main objective of an income tax calculator is to get proper methods of saving tax through various deductions to reduce tax liabilities.
Income Tax Slab Rates for New and Old Regime
Currently two different Income Tax regimes co-exist in India and individuals can opt to pay taxes under either of the new income tax regime old the old tax regime. In the case of the new tax regime, lower rates of taxation are applicable to higher income groups.
Although you can get an idea of all the tax rates by using an income tax calculator, it is essential to know that the tax slab rates depend upon your age and income group as well as the tax regime you have chosen. After knowing all such details, you can calculate to know the details of your tax liabilities.
Here is how the new income tax slab rates are different from the slab rates of the old regime:
| Net Taxable Income (Rs.) | New Tax Regime Slab Rate | Old Tax Regime Slab Rate |
|---|---|---|
| 0 – 2.5 lakh | Exempt | Exempt |
| 250,001 – 5 lakh | 5% over Rs. 2.5 lakh | 5% over Rs. 2.5 lakh |
| 500,001 – 7.5 lakh | Rs. 12,500 + 10% over Rs. 5 lakh | Rs. 12,500 + 20% over Rs. 5 lakh |
| 750,001 – 10 lakh | Rs. 37,500 + 15% over Rs. 7.5 lakh | Rs. 12,500 + 20% over Rs. 5 lakh |
| 10,00,001 – 12.5 lakh | Rs. 75,000 + 20% over Rs. 10 lakh | Rs. 1,12,500 + 30% over Rs. 10 lakh |
| 12,50,001 – 15 lakh | Rs. 1.25 lakh + 25% over Rs. 12.5 lakh | Rs. 1,12,500 + 30% over Rs. 10 lakh |
| Over 15 Lakh | Rs. 1,87,500 + 30% over Rs. 15 lakh | Rs. 1,12,500 + 30% over Rs. 10 lakh |
As you can see, in the case of individuals with net taxable income between Rs. 5 lakh and Rs. 15 lakh, the income tax slab rates under the new regimes are lower and this can reduce the tax burden for these individuals.
Tax slab rates for senior citizens between 60 to 80 years:
| Net Taxable Income (Rs.) | New Tax Regime Slab Rate | Old Tax Regime Slab Rate |
|---|---|---|
| 0 – 2.5 lakh | Exempt | Exempt |
| 250,001 – 3 lakh | 5% over Rs. 2.5 lakh | Exempt |
| 300,001 – 5 lakh | 5% over Rs. 2.5 lakh | 5% above Rs. 3 lakh |
| 500,001 – 7.5 lakh | Rs. 12,500 + 10% over Rs. 5 lakh | Rs. 10,000 + 20% over Rs. 5 lakh |
| 750,001 – 10 lakh | Rs. 37,500 + 15% over Rs. 7.5 lakh | Rs. 10,000 + 20% over Rs. 5 lakh |
| 10,00,001 – 12.5 lakh | Rs. 75,000 + 20% over Rs. 10 lakh | Rs. 10,000 + 20% over Rs. 5 lakh |
| 12,50,001 – 15 lakh | Rs. 1.25 lakh + 25% over Rs. 12.5 lakh | Rs. 1,10,000 + 30% over Rs. 10 lakh |
| Over 15 Lakh | Rs. 1,87,500 + 30% over Rs. 15 lakh | Rs. 1,10,000 + 30% over Rs. 10 lakh |
As you can see, senior citizen tax payers get a higher exemption limit of Rs. 3 lakh under the old tax regime as compared to the Rs. 2.5 lakh exemption limit offered under the new tax regime.
Income Tax Slabs for Super Senior Citizens above 80 years:
| Net Taxable Income (Rs.) | New Tax Regime Slab Rate | Old Tax Regime Slab Rate |
|---|---|---|
| 0 – 2.5 lakh | Exempt | Exempt |
| 250,001 – 5 lakh | 5% over Rs. 2.5 lakh | Exempt |
| 500,001 – 7.5 lakh | Rs. 12,500 + 10% over Rs. 5 lakh | 20% over Rs. 5 lakh |
| 750,001 – 10 lakh | Rs. 37,500 + 15% over Rs. 7.5 lakh | 20% over Rs. 5 lakh |
| 10,00,001 – 12.5 lakh | Rs. 75,000 + 20% over Rs. 10 lakh | 20% over Rs. 5 lakh |
| 12,50,001 – 15 lakh | Rs. 1.25 lakh + 25% over Rs. 12.5 lakh | Rs. 1,00,000 + 30% over Rs. 10 lakh |
| Over 15 Lakh | Rs. 1,87,500 + 30% over Rs. 15 lakh | Rs. 1,00,000 + 30% over Rs. 10 lakh |
So you see, the old tax regime offers super senior citizens a higher exemption limit of up to Rs. 5 lakh as compared to the new tax regime that offers a flat income tax exemption limit of Rs. 2.5 lakh irrespective of the age of the tax payer.
What are the Eligibility Criteria to File Income Tax?
Income tax must be filed by an individual whose taxable income exceeds the maximum exemption limit. In other words, any individual whose income falls within the tax slabs has to file income tax. The exemption limit for individuals aged less than 60 years for FY 2022-2023 is Rs 2.5 lakh in a financial year. For senior citizens i.e. individuals aged 60 years and up to 80 years, the exemption limit is Rs. 3 lakh. While, super-senior citizens aged 80 years or above are exempt from income tax for income up to Rs. 5 lakh for FY 2022-23.
Legal entities with income in India are also required to pay income tax. Such legal entities include Hindu Undivided Family, Artificial Judicial Persons, (HUF), Association of Persons (AOP), Body of Individuals (BOI), companies, local firms, and local authorities.
What are the Benefits of Filing Income Tax Return?
An income tax return is an official statement that you submit to tax authorities as proof of income earned and income tax paid for the applicable financial year. Filing income tax return can offer numerous benefits to taxpayers and few of these are:
- Quick Loan Approval:
Getting a loan approved is not a quick and easy process. But it can get quicker if you file your income tax return. This is to say, filing income tax can aid individuals to apply for loans. It is mandatory as almost all the banks require an individual to show a copy of tax returns.
- Visa Applications:
For individuals planning to emigrate or work abroad, immigration authorities often require proof of income tax payment and filing of past returns. This is done by immigration authorities to assess the tax compliance as well as verify income level of the applicant.
- You Can Claim a Tax Refund:
Taxpayers can get a refund if they have a refund due from the Income Tax Department. However, this can only be done if you file your Income Tax returns.
- Eligibility to Offset Losses
If you have sold an investment at a loss, you can offset this loss against present as well as future investment gains. However, to receive this benefit of offsetting losses against gains, you need to mandatorily file your income tax return.
Incomes That Are Exempt From Income Tax Under The New Tax Regime
Even though the new tax regime offers lower income tax slab rates, many of the deductions under the old tax regime cannot be availed under the new tax regime. Notable among these are the 80C and 80D tax deductions that can only be availed if you are opting for the old tax regime.
But a few types of income are exempt from tax under the new tax regime. These include:
- Interest received from post office savings accounts up to Rs. 3, 500 in a FY for single account and up to Rs. 7,000 in a FY for joint account.
- Gratuity payout obtained from employer. Maximum up to Rs. 20 lakh during lifetime.
- Maturity proceeds of Life Insurance policy
- Contributions made into EPS/NPS account by the employer up to Rs. 7.5 lakh in a FY
- nterest received on Employee Provident Fund (EPF) account balance for annual contribution of up to Rs. 2.5 lakh
- Interest earned and maturity amount received from Public Provident Fund (PPF), but without 80C tax deduction benefit on investments
- Interest earned and maturity amount received from Sukanya Sammriddhi Yojana account, but without 80C tax deduction benefit on investments
- Gifts up to Rs. 5000 in a FY received from employer
- Allowances such as food coupons, travel cost, tour allowance, etc. provided to employee for performance of official duties
- Allowances such as food coupons, travel cost, tour allowance, etc. provided to employee for performance of official duties
Frequently Asked Questions
How much tax will be deducted from my salary?
The tax will be levied based on the income slab you belong to. You can refer to the income tax slabs and rates table given in the article to get more clarity on this.
How can I calculate my Income tax?
The salary income is comprised of the Basic salary + HRA + Special Allowance + Transport Allowance + any other allowance. Some of the components of the salary are exempt from tax, like reimbursement of the telephone bills, leave travel allowance, etc. If you have rented a place and received HRA, you can also claim an exemption on HRA.
Apart from these deductions, there is a standard deduction of Rs 40,000 which was introduced in the budget 2018 which was later increased to Rs 50,000 in the budget 2019.
Does everyone have to file their income tax returns?
No, if your income is below the basic exemption limit then you are not required to file income tax returns. However, those with an income less than Rs 2.5L and who still want to claim an income tax refund can only claim the refund by filing an ITR. Otherwise, if it’s above the basic exemption limit, it is mandatory to file income tax returns.
What are the details required when while e-filing the income tax returns?
What are the details required when while e-filing the income tax returns?
What are the details required when while e-filing the income tax returns?
How much of the amount in the bank is tax-free?
There is no tax on the balance amount in the bank. However, if you earn interest on the savings account balance from the bank then such interest is taxable. Furthermore, if the total interest during the financial year is less than Rs 10000, it is exempt from tax.
What is the late fee for ITR Filing?
A late fee of Rs. 5,000 is applicable for the late filing penalty. However, the late fee will be restricted to just Rs 1000 if the total income is less than Rs. 500,000. Moreover, if tax is payable then interest will be applicable till the date of payment.
Is section 80C exemption removed?
No, section 80C exemption is not removed. If the taxpayer is opting for the new tax regime, deductions under section 80C cannot be claimed. The Section 80C deduction is not removed. The claim has been restricted for taxpayers opting for a new tax regime.