Tax Computation in India

Tax Computation in IndiaTax Computation

Tax computation in India is the process of working out the amount of tax, payable for different persons. As predetermined by the Income Tax Act, 1961, the salary of both private and public sector employees is chargeable.

Tax computation in India is conceded out on the basis of the income of an individual under various income heads (as prescribed in Chapter 4 of the Income Tax Act, 1961, u/s 14). These different income heads are mentioned below:

  • Earnings from business or profession
  • Earnings from salary
  • Earnings from capital gains
  • Earnings from housing property
  • Earnings from additional sources

Tax Calculation

The Income Tax Rates for the fiscal year 2010-2011 is issued by the Income-tax department. Given below are the income tax rates for women, men, and senior citizens for the fiscal year 2010-2011:

For Women

  • Rs. 0 to Rs. 1, 90,000 – Nil
  • Rs. 1, 90,001 to Rs. 5, 00,000 – 10 %
  • Rs. 5, 00,001 to Rs. 8, 00,000 – 20 %
  • Greater than Rs. 8, 00,000 – 30 %

For Men

  • Rs. 0 to Rs. 1, 60,000 – Nil
  • Rs. 1, 60,001 to Rs. 5, 00,000 – 10 %
  • Rs. 5, 00,001 to Rs. 8, 00,000 – 20 %
  • Greater than Rs.8, 00, 000 – 30 %

For Senior Citizens or Resident Individuals of Age 65 Years Or Above

  • Rs. 0 to Rs. 2, 40,000 – Nil
  • Rs. 2, 40,001 to Rs. 5, 00,000 – 10 %
  • Rs. 5, 00,001 to Rs. 8, 00,000 – 20 %
  • Greater than Rs.8, 00, 000 – 30 %

According to the budget listed on February 26, 2010, Union Finance Minister Pranab Mukherjee recommended amendments for tax rate slabs as mentioned above. Now, extra Rs. 20, 000 will be exempted other than the existing investment amount of Rs.1 Lakh, if the same sum of the amount has been invested in enduring infrastructure bonds.

Indian Tax Calculation In Seven Easy Steps:

You can compute your tax by following the easy steps mentioned below:

1.      Calculate your Gross Income

Gross earnings = 12 x Monthly Income

2.      Determine your Charity or Donation amount (if any)

Charities here refer to the sum of the amount contributed to any association(s) in the form of donation, which should be in agreement with the Income Tax rules and regulations.

3.      Work Out your investments

It takes into account all your investments and savings that are incorporated in the sections under I-T Rebates.

4.      Calculate your Taxable Income

Taxable earnings = Gross Income – (Savings + Donations/Charity)

5.      Work Out the Income Tax

Now that, you have calculated your taxable earnings/income, you may see the tax slabs for computing the amount of tax.

6.      Incorporate Surcharge

You need to incorporate a surcharge of 10 percent of your annual income to the total amount of tax that you have calculated in the previous step. This will be the value of your new tax. (Note: This step is not applicable if the annual income is lower than Rs. 10 Lakhs)

7.      Incorporate the Education Cess

You should add 3 percent of your taxable income (as education cess) with the newly calculated tax amount that you have figured out in the previous step.

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