About Income Tax Calculator
An Income-tax calculator is a tool available online that helps you calculate the amount of taxes you need to pay based on your income.
It becomes useful once the Union Budget for the year is announced. If your income falls within the taxable bracket, you are required to pay a certain portion of your annual earnings as tax.
There are two ways to pay income tax: either through tax deduction at source from your monthly salary or by using the income tax returns portal managed by the Central Board of Direct Taxes (CBDT).
The option to pay taxes online is provided to ensure that individuals fulfill their obligations by paying the required taxes on any income they earn from other sources.
The IT calculator provided on this page has been updated according to the changes announced in the Union Budget for the financial year 2023-24 and assessment year 2024-25.
How to Understand Income Tax Slabs?
Income tax in India follows a slab system, where taxes are applied based on different income ranges for individual taxpayers.
Slab refers to the various tax rates imposed on different levels of income. To put it simply, the more you earn, the higher your tax payment will be.
These income tax slabs are updated annually when the budget is announced. Furthermore, these slab rates differ depending on the category of the taxpayer.
In India, there are three categories of individual taxpayers as per the Income-tax regulations:
- Individuals below 60 years of age, including both residents and non-residents.
- Resident senior citizens – individuals aged between 60 and 80 years.
- Resident super senior citizens – individuals above 80 years of age.
How to Calcuate the Total Income Tax
Income from salary includes various components such as Basic salary, HRA (House Rent Allowance), Special Allowance, Transport Allowance, and other allowances.
Certain parts of your salary are not taxable, such as reimbursement for telephone bills and leave travel allowance.
If you receive HRA and live on rent, you can claim exemption on HRA. You can calculate the exempt portion of HRA using an HRA Calculator.
In addition to these exemptions, there is a standard deduction. In the 2018 budget, it was set at Rs 40,000. In the 2019 budget, it was increased to Rs 50,000.
And in the 2023 budget, a standard deduction of Rs 50,000 is available even in the new tax regime.
However, if you choose the new tax regime, these exemptions will not be applicable to you.
To better understand how income tax is calculated under the current tax slabs and the new tax slabs (optional), let’s consider an example.
Surabhi receives a Basic Salary of Rs 1,00,000 per month, HRA of Rs 50,000, Special Allowance of Rs 21,000 per month, and LTA of Rs 20,000 annually. Kritika pays a rent of Rs 40,000 and resides in Delhi.
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Here is a simple guide to help you calculate your income tax:
Figure out your total income: Add up all the money you earned in the financial year, including salary, rent, business profits, interest, and other sources.
Identify deductions: Deductions are expenses or investments that can be subtracted from your total income. They lower the amount of income that is subject to tax.
Common deductions include contributions to savings funds, insurance premiums, and certain investments like PPF or NSC.
Calculate your taxable income: Subtract the deductions from your total income. This gives you the amount on which you will be taxed.
Find the tax rate: Look at the income tax slab rates for the current financial year.
These rates vary based on income ranges and taxpayer categories. Identify the applicable tax rate for your taxable income.
Calculate your tax liability: Multiply your taxable income by the tax rate determined in the previous step.
This will give you the amount of tax you owe.
Consider additional taxes and surcharges: Sometimes, there may be extra taxes or surcharges that apply.
For example, there could be a health and education cess added to your calculated tax amount.
Apply any eligible tax credits: Tax credits are deductions for taxes already paid or relief under specific sections of the income tax act.
Subtract these credits from your tax liability to reduce the final amount you owe.
Calculate the final tax payable: Subtract the eligible tax credits from your tax liability to find the final amount you need to pay in taxes.
It’s important to remember that income tax calculations can be complex.
It is recommended to seek professional advice or use reliable income tax calculators to ensure accuracy.