Income Tax Calculator
Various Components for Income Tax Calculation
House rent allowance (HRA)
Under Section 10 (13A) of the Income Tax Act, 1961, there is a provision for HRA (House Rent Allowance) exemption. This tax benefit is available to the salaried employees who are not staying in their homes and have to pay rent for their accommodation. By claiming the HRA, they diminish the amount of their taxes- partially or wholly. But those who are not living in rented accommodation should pay the requisite tax on HRA.
Leave travel allowance (LTA)
Under the Income Tax Act 1961, there is a provision for Leave Travel Allowance Tax (LTA). According to this provision, if the salaried class employee receives a travel allowance from his/her employer for travelling on leave, then, that travel allowance will not be included in the taxable salary income. LTA exemption is only applicable on the actual costs i.e. rail fare, bus fare, etc. The other travel expenses i.e. hotel accommodation, restaurant, local transportation, etc. are not eligible for LTA exemption.
Standard deduction
Salaried employees, irrespective of any category, get the benefit of standard deduction while filing their income tax returns. It is a flat deduction of INR 50,000 from the total salary received by an employee in a financial year. A change in jobs doesn’t impact the amount of standard deduction as this is a fixed exemption that is given to each salaried employee.
Deduction against loan (home loan, personal loan, car loan)
Under Section 80C of the Income Tax, a home loan is considered eligible for a tax deduction while filing an income tax return. Salaried employees don’t get tax benefits on car loans as this is an expenditure on comfort. However, businessmen and self-employed individuals can get tax deductions against car loans as the car is considered essential for their business purposes. In most cases, there aren’t any tax benefits on the personal loan, but when taken for construction of the residential property or business expansion or buying assets, taxpayers can enjoy exemptions.
Assessment year
The assessment year comes after the financial year. Whatever income is earned by the individuals in the financial year is assessed and taxed in the assessment year. Both financial year and assessment year begin on April 1 and end on March 31. But the assessment year is the next year of the financial year. If the financial year is 2022-23, then the assessment year will be 2023-24.
Salary break up
Salary break up includes the following components:
- Basic salary
- CTC (Cost to Company)
- Gross salary
- Provident Fund (PF)
- Public Provident Fund (PPF)
- Insurance
- Reimbursements
- Allowances i.e. HRA, LTA, Conveyance allowance, dearness allowance and other allowances
- Gratuity
Income from interest
Under Section 80TTA of the Income Tax act, if the interest income on a savings bank account is INR 10,000 or less than INR 10,000, then, the tax deduction can be claimed by the taxpayer. But if the interest income exceeds the amount of INR 10,000, then, the tax is imposed as per the slab rates. Under Section 80TTB, senior citizens can claim a tax deduction of INR 50000 on the income from interest.
Rental income
If the taxpayer is earning rental income on the self-occupied house property, then, the rental income is considered income from the house property. The rental income is included in the taxable income of the taxpayer. The tax is imposed on the income from house property (rental income) as per the slab rates of income tax.
Capital gains
As per the Income Tax Act of 1961, the income earned from the capital assets i.e. bonds, mutual funds, and shares is called the capital gains. These capital gains differ on the basis of time periods but they are included in the taxpayer income and the tax amount is deducted according to the slab rates of income tax.
Income from digital assets
To discourage the transaction of digital assets like cryptocurrencies, a flat 30% tax has been imposed by the Finance Minister on the earned income from virtual assets regardless of short-term holding and long-term holding. There is no provision for a tax deduction and exemption in any way. If any taxpayer gifts digital assets to any person, then, the gifting will also be taxed at a TDS of 1%.
Taxable Income
The system of taxation is progressive in India. Income tax is levied on the taxpayers according to the slab rates. These slab rates are determined on the basis of different ranges of income. If the income of the taxpayer is increased, then, the taxable income will also be increased. These slab rates get changed in each financial year’s Union Budget. Hence, the taxable income also gets changed.
Deductions
Income Tax Department encourages the taxpayers to do the investments and savings. Under chapters VIA and section 80C, the taxpayers are given the tax benefits. Under Section 80C, the taxpayers are considered eligible to get the benefit of a tax deduction of INR 1.5 lakh every year from their gross income. In this way, these provisions help the taxpayers plan their future.
How to calculate income tax on salary with example
Old Regime
The income tax calculation formula is simple. As per the old regime, you need to
- Calculate the gross income you receive (including all the components of income)
- Calculate taxable income after considering the deductions available from the Gross Income
- Calculate tax liability on the taxable income
- Check out the rebates you can avail and this will be your final tax liability
New Regime
As per the new regime, you need to –
- Calculate your gross income and you may forego various deductions (as available in the old regime)
- Calculate taxable income after considering the deductions available in the new regime
Calculate tax liability on this taxable income at the concessional rate
Here's an example for you –
Lets calculate the income tax on the salary of Mr. Dinesh who lives in Mumbai –
|
Salary Components |
Per Month |
Per Year |
Deductions |
Taxable Amount (Old Regime) |
Taxable Amount (New Regime) |
|
Basic Salary |
₹90,000 |
₹10,80,000 |
|
₹10,80,000 |
₹10,80,000 |
|
Special Allowance |
₹20,000 |
₹2,40,000 |
|
₹2,40,000 |
₹2,40,000 |
|
HRA |
₹45,000 |
₹5,40,000 |
₹3,00,000 |
₹2,40,000 |
₹5,40,000 |
|
LTA |
|
₹18,000 |
₹10,000 |
₹8,000 |
₹18,000 |
|
Standard Deductions |
|
|
₹50,000 |
₹50,000 |
|
|
Gross Income |
|
|
|
₹15,80,000 |
₹18,78,000 |
Now, let's calculate the income tax on the gross total income as per the new regime-
|
Components |
Amount |
Total |
|
Taxable salary |
₹18,78,000 |
|
|
Income from other sources |
₹30,000 |
|
|
Gross total income |
|
₹19,08,000 |
|
Total income tax liability |
|
₹3,22,296 |
You can calculate total income tax charged as per the tax slab Dinesh falls in.
You may also calculate the income tax on the gross total income as per the old regime, like –
|
Components |
Amount |
Total |
|
Taxable salary |
₹15,80,000 |
|
|
Income from other sources |
₹30,000 |
|
|
Gross total income |
₹16,10,000 |
|
|
Total income tax liability |
₹2,92,500 |
Now consider another situation, where Reena has made several investments apart from receiving her salary.
She has invested in –
PPF – ₹40,000Let's see how she will be taxed –
|
Components |
Amount (per year) |
Deductions |
Total |
|
Salary |
₹14,80,000 |
|
|
|
Income from other sources |
₹32,000 |
|
|
|
Gross total income |
|
|
₹15,12,000 |
|
|
|
PPF- 1,50,000 |
|
|
|
|
ELSS- ₹10,000 |
|
|
|
|
Insurance Premium- ₹5,000 |
|
|
Total Deductions (Assuming only deductions under 80C) |
|
|
₹1,50,000 |
|
Gross Taxable Income (gross income-total deductions) |
|
|
₹13,47,000 |
|
Total tax payable (tax as per tax slab plus 4% cess) |
|
|
₹2,25,264 |
Income Tax Calculator - Frequently Asked Questions
The minimum value among the following three options is considered while HRA tax exemption in the income tax –
- The actual HRA received by the employee
- The actual rent amount paid minus 10% of the salary
- 40% of salary ( 50% of salary if house situated in Mumbai
- Salary for this purpose shall include basic salary and DA
Follow the steps given below to calculate the income tax on arrear salary –
- Step 1
Find out the difference between tax liability on total income (including arrear) and total income (excluding arrears) - Step 2
Now find out the difference between the tax liability on total income (including arrear) and total income (excluding arrear) of the year to which the arrear belongs - Step3
If the tax liability on arrear in step 2 is higher than step 1, there shall be no tax relief on arrear. However, if it is lower, the extra tax liability shown in step 1 will be relieved
Kisan Vikas Patra investment is taxable under the income from other sources. It offers no tax deductions and is taxable at normal rates. 10% TDS is charged on the interest received on the investment.
Senior citizens are those people who are above 60 years of age and less than 80 years. From 1st April of the financial year, the age is calculated.
If an investor makes short-term capital gains (STCG), the profit earned is taxable at 15% and for long-term capital gains (STCG), the profit is taxable at 10% irrespective of the tax slab one falls in.
At the central level, there is no taxation on agricultural income. However, at the state level, there is a tax imposed if the following conditions are fulfilled –
- When net agricultural income is above ₹5,000 in the past financial year
- If the total income (after removing agricultural income) is higher than the basic exemption level as per your income tax slab
- Tax on (non agricultural income + agricultural income), ₹3,00,000 + ₹5,00,000 = ₹8,00,000
- Tax on agricultural income + exemption as per tax slab, i.e., ₹5,50,000. As per the tax slab, the charged tax will be ₹22, 500
- Now, the difference between the two is the final tax, i.e., ₹72,500-22,500 = ₹50,000
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Source: https://www.incometax.gov.in/iec/foportal/help/individual/return-applicable-1
ADV/6/22-23/589
