What is an Income Tax Calculator?

The Income Tax Act 1961 in India establishes the basis of laws and regulations that measure income for Indian residents and non-resident Indians who receive in any financial year from various sources and occupations. There are separate provisions under this Act that include multiple revenue sources and expenditure and their consideration to determine an assessee’s income tax. Besides, the Act provides multiple deductions and exemptions given to taxpayers in separate sections for tax relief. The laws of the Income Tax Act 1961 are long and tough, making it impossible for a common taxpayer to measure his income tax liabilities, which is why it is better to calculate his income tax liability. 

The income tax calculator is a basic online application that helps you set the values against the applicable fields and determine the financial year’s income tax. This income tax calculator has provided more transparency to the lager public.

How to use Income Tax Calculator for FY 2019-2020 (AY 2020-2021)?

Using the tax calculator, the step-by-step process is:

  • Choose the financial year that you intend to calculate the income tax on, first of all.
  • Choosing your gender and filling in your birth date, city/pin code, and email is the next step.
  • Only press ‘Next’.
  • Now, enter your minimum wage, and collect the real HRA.
  • In the next step, insert information such as real rent charged, the number of homes owned, other allowances earned, amount of rent received/receivable, interest and debt on housing, and, where applicable, municipal taxes.
  • Only press ‘Next’.
  • The next tab is for any money gained from various other outlets, such as lottery revenue, fee earned, interest from separate investments made, or any other source not previously named.
  • Tap on ‘Calculate’ after entering all of the deductions.

In compliance with the old income tax system and the current income tax regime, you can get a similar outcome from your tax obligation. Moreover, by entering your mobile number and checking it with the OTP, you can even get a thorough estimate of your income tax.

How to use Income Tax Calculator?

For individuals, self-employed workers and business people, the measurement of income tax are distinct. Besides, the measure often depends on an organisation’s disposition that may be a self-owned corporation, a joint business, or a company. The source of profits that may be wage or company income, rental income, lottery income, capital gains, securities revenue, and many other heads is another factor. The income tax is measured based on the individual’s gross income, which includes income from the following sources:

  • Income from Salary
  • Income from House Property
  • Income from Business and Profession
  • Income from Capital Gain
  • Income from Other Sources

The bulk of India’s income tax calculator is built to measure the tax payable to salaried people, who make up the largest proportion of the country’s overall taxpayers. You will use the online income tax calculator of Dialabank to measure the amount of tax a salaried taxpayer needs to pay based on his wage income, income from other sources and different allowances and exemptions applicable to him under the different provisions of the Income Tax Act.

How to calculate Income Tax for Salaried? – Example

Clubbing the amount earned as Basic Wage, Dearness Allowance, HRA, Travel Allowance, and every other allowance determine the revenue from salary. The Income Tax Act also exempts such salary items, such as telephone bill repayment, travel leave exemption, etc. Furthermore, if you live on rent and earn an HRA, a part of your HRA will also be excluded, which will be calculated by the HRA exemption estimate.

There is a mandatory allowance of 50,000, along with a maximum tax rebate of 12,500 for salaried persons.

Let us use an example to explain the existing income tax estimate and the proposed tax regime. Aashi gets a base wage of about 80,000 per month. Her HRA is about 40,000 a month, and she gets a separate allowance of about 15,000 per month. She gets an annual LTA of 15,000, pays a monthly rent of 30,000 and lives in Mumbai.

For the income tax calculator, you need to include income from all sources like:

  • Firstly, the pay money earned by the contractor is included.
  • Next, money received from house lands, such as rental income or interest charged on the home loan deduction.
  • Thirdly, capital benefit profits resulting from the selling of shares or properties such as house ownership.
  • Require earnings received by any company or occupation, such as freelancing or any other company or profession.
  • Finally, it requires earnings from other sources, such as deposit interest income, small income, etc.

Thus, Aashi also got around 5,000 from a fixed deposit as interest income. She has also made an investment of around 50,000 in PPF. The LIC premium charged by her is about 9,000, and the premium for medical benefits is about 8,000.

Calculation of Gross Total Income from Salary

Component Amount (₹) Deduction/Exemption (₹) Taxable as per Old Regime (₹) Taxable as per New Regime (₹)
Basic Salary 9.60 Lakh 9.60 Lakh 9.60 Lakh
HRA 4.80 Lakh 2.64 Lakh 2.16 Lakh 4.80 Lakh
Special Allowance 1.80 Lakh 1.80 Lakh 1.80 Lakh
LTA 15,000 11,000 (worth bills submitted) 4,000 15,000
Standard Deduction 50,000 50,000
Gross Total Income From Salary 13.10 Lakh 16.35 Lakh

Investments Eligible for Deduction

Section Maximum Deduction Limit (₹) Eligible investments (₹) Deduction Claimed (₹)
Section 80C 1.50 Lakh Deposit in PPF of ₹ 50,000 , LIC Premium of ₹ 9,000 , Contribution in EPF by Aashi’s employer (80,000 *12%*12) = ₹ 1.15 Lakh 1.50 Lakh
Section 80D For self – ₹ 25,000 Medical Insurance Premium of ₹ 8,000 8,000
Section 80D For Parents – ₹ 50,000 Medical Insurance Premium of ₹ 8,000 8,000

Calculation of Gross Taxable Income as per Old Regime

Nature Amount (₹) Total (₹)
Salary 13.10 Lakh
Income from Other Sources (FD interest) 5,000
Gross Total Income 13.15 Lakh
Deductions
80C 1.50 Lakh
80D 8,000 1.58 Lakh
Gross Taxable Income 11.57 Lakh
Total Tax including Cess 1.66 Lakh

Calculation of Gross Taxable Income as per the New Regime

Nature Amount Total
Salary 16.35 Lakh
Income from Other Sources 5,000
Gross Taxable Income 16.40 Lakh
Total Tax including Cess

Calculation of Income tax for Aashi as per New Regime

Till ₹ 2.50 Lakh Exempt from Tax 0
From ₹ 2.50 Lakh to ₹ 5 Lakh 5% (₹ 5 Lakh – ₹ 2.50 Lakh) 12,500
From ₹ 5 Lakh to ₹ 7.50 Lakh 10% (₹ 7.50 Lakh – ₹ 5 Lakh) 25,000
From ₹ 7.50 Lakh to ₹ 10 Lakh 15% (₹ 10 Lakh – ₹ 7.50 Lakh) 37,500
From ₹ 10 Lakh to ₹ 12.50 Lakh 20% (₹ 12.50 Lakh – ₹ 10 Lakh) 50,000
From ₹ 12.50 Lakh to ₹ 15 Lakh 25% (₹ 15 Lakh – ₹ 12.50 Lakh) 62,500
Above ₹ 15 Lakh 30% (₹ 16.40 Lakh – ₹ 15 Lakh) 42,000
Cess 4% (₹ 12,500 + ₹ 25,000 + ₹ 37,500 + ₹ 50,000 + ₹ 62,500 + ₹ 42,000 ) 9,180
Total Income Tax ₹ 12,500 + ₹ 25,000 + ₹ 37,500 + ₹ 50,000 + ₹ 62,500 + ₹ 42,000 + ₹ 9,180 2.39 Lakh

Income Tax Calculation for Salaried

Salaried taxpayers may use an income tax calculator to measure their taxes. The amount of basic pay, HRA and all other deductions is revenue from salary. If you earn an income for house rent and remain on rent, you can claim an HRA exception. On top of these exemptions, a mandatory deduction of ~ 50,000 is available.
A new income tax system was launched in Budget 2020, in which taxpayers would have the option of deciding between the current income tax regime and the new tax regime. In the new tax regime, individuals are not entitled to claim many of the deductions offered under the existing scheme, but they would be paid significantly lower tax rates. The new tax regime applies to FY20-21.

Exemptions and exemptions that are not part of the current income tax regime are set out below:

  1. Profits of the small exception alluded to in Section 10, clause (32).
  2. Chapter Through Income tax deductions, covering sections 80C, 80CCD, 80CCC, 80D, 80DD, 80EE, 80EEA, 80G, 80GG, 80GGA, 80IA, 80IAB, 80IB, 80EEB, 80GGC, etc.
  3. However, the exclusion available under section 80CCD (employer donation to the EPF) and section 80JJA (new employment) of sub-section (2) is available.
  4. Deductions in line with Parts 33ABA, 32AD, 33AB.
  5. Leave a travel concession according to section 10, provision (5).
  6. All of the allowances included in section 10 of clause (14) of the MPs/MLAs allowance are referred to in section 10 of clause (17). HRA in line with section 10 of clause (13A).
  7. Section 24, which provides interest on deductions from home loans
  8. Family pension deduction according to section 57 of clause (viii).
  9. Exemption from SEZ as per section 10AAA
  10. As per the rules, the conveyance allowance is now tax-free under the current tax regime.

The Income Tax Calculator offered by Dialabank is intended to help you make a smart choice when filing an Income Tax Return for the next year, to consider how the tax figure would adjust if you vote for the current tax regime. It would help if you also compared the tax due for this year under the existing tax system to the new tax system to consider which tax system could be best for you after it is enforced in the coming year.

FAQs for Income Tax Calculator

How is the income tax calculator utilised?

Income tax is calculated after adding the income from all sources like salary, house property, capital gain, and other sources to get Gross Total Income. After clubbing the income from all these sources, the investments and expenses, which are allowed as deductions and exemptions, are to be deducted from the Gross Total Income to arrive at Taxable Income. Then, the tax is calculated as per the applicable income tax slab.

In the case of income from business and profession, the income tax is calculated separately as the individual tax slab is not applicable.

What is the standard deduction for AY 2020 21?

The standard deduction for AY 2020-21 is ₹ 50,000, available to all salaried individuals irrespective of their total income.

How do I manually calculate income tax?

Calculating income tax manually may not be able to give you accurate results. Most of the time, income tax calculation involves numerous calculations of exemptions within it and provisions of multiple sections. All these things make the computation lengthy and complicated. Thus, it is best to use a taxable income calculator to get the right result with the least amount of time.

What is the net taxable income?

Net taxable income is the income calculated by clubbing the income from various sources after deducting the standard deduction from salary income and all available tax exemptions on allowances, income from investments and housing loan, etc. The final tax rates and tax slabs are applied on the Net Taxable Income to calculate the amount of tax a taxpayer needs to pay to the government.

How is income tax calculated for the salaried person?

Total taxable income for salaried is calculated after deducting all the applicable exemptions available of allowances such as HRA, LTA as well that available home loan interest, home loan repayment, deposits, savings, insurance, LIC, etc. are then deducted from the gross salary + income from other sources to arrive at total taxable income on which tax is calculated as per the applicable slab rates.

How much tax do I pay on ₹ 10 Lakh?

The exact amount of tax you would have to pay on the income of ₹ 10 Lakh will depend on the amount of your income you receive by way of exempted allowances, actual rent paid or not, and the number of investments done by the individual. As tax calculations are governed by multiple sections of the Income Tax Act, the best way to calculate the amount of tax you will pay on ₹ 10 Lakh are with an online income tax calculator, which has been programmed to do the calculations based on provisions of the Act.

What is the maximum limit of non-taxable income?

As per the Indian Income Tax Act, the maximum limit of income that is non-taxable is ₹ 2.50 Lakh. Further, from FY 2019-20, a rebate of ₹ 12,500 is also available on income up to ₹ 5 Lakh. This means that individuals with a taxable income of up to ₹ 5 Lakh would not be required to pay any income tax.

Can I calculate TDS from the income tax calculator?

No, income tax calculators do not calculate TDS. However, you can get your income tax liability after adjusting for the TDS for an assessment year using an ITR calculator.

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