Income Tax Calculator

Income Tax is a statute, authorized to lay the basis of tax payments in India. The Income Tax Act draws guidelines for the determination of tax liability in India. As per the Act, all citizens of India be it an individual, partnership firm or a company are subject to abide by the Income Tax laws and need to make payment of tax according to their respective Income Tax Slabs. After that, submit an annual Income Tax return, if income exceeds the amount of tax payment.

Who all are liable for making tax payments in India?

• Individuals
• Body of Individuals or Firms
• Hindu Undivided Family (HUF)
• Association of People
• Companies (irrespective of whether registered under the Companies Act)

How to do the computation of Gross Taxable Income?

• Income levied on received, deemed or accrued by resident India whether it is in India or living abroad during the previous year are subjected to pay tax in India.
• Non-resident Indians who received, deemed or accrued, or to be received or accrue income from India are also subjected to pay tax as per the provisions of Income Tax Act, 1961.

The income earned is classified under the following heads as per the Income Tax Act:

Income earned from salary: Income from salary includes any amount of salary given to an employee, whether paid or not. As per Section 17 of the Income Tax Act, salary defined as ‘any amount received as salary, perquisite, and profits instead of salary.

Income from House Property:  

Annual value of the property of which ‘assessee’ is the owner comes under the taxable slab under the head ‘House of property’. It does not include the self-occupied property. For other properties, the amount one is getting as an actual rent or expected amount to be received in form of rent is charged to tax subjected to deductions under Section 24. As per Section 24, it allows an assessee to claim deductions to the extent of 30% of the annual value or rent received. Also, the amount of interest paid on the loan borrowed for the purchase of property is allowed as a deduction up to Rs. 2,00,000.

Income from profits or gains of business or profession: Profits and Gains’ of any business or profession carried out by the assessee during the previous year is charged to tax under this head.

Income on Capital Gains:  Any profit earned due to the transfer or sale of any asset is liable to pay tax under the head ‘Income from Capital Gains’. The capital asset could be anything like securities, shares, property, jewellery or any form of art of work.

The income earned under this head is divided into two categories i.e. Long-term capital gains and short-term capital gains. Categories are defined based on tenure for which capital assets taken by the assessee.

Short term capital gain is considered as that profit which is earned from the sale of short-term capital asset. The tenure of these types of assets is not more than 36 months.

Long Term Capital Gain is the profit earned on the sale of a long-term capital asset, which is held for more than 36 months by the assessee.

 Income from other sources 

Any income received by the assessee and is also not chargeable for tax in any other head of income falls under the category of “Income from other sources’’. Thus, income from other sources would include but not limited to the following:

• Interest on fixed deposits or securities
• Dividend income

Family pension, subject to a deduction of one third or Rs. 15,000/- whichever is lower.

The income earned is thus bifurcated among various heads of income.

Gross total Income is arrived at by totaling the income earned under all the above heads of income.

Gross Total Income = Income from salary + Income from house property + Income from business/profession + Income from Capital Gains + Income from other sources.

What all incomes do not form part of gross taxable income?

Even after doing segregation of income under various income heads, it is wise to know that all income is not part of the computation of gross total income and hence not taxable as per the Income Tax Act.

Section 10 of the Income Tax Act has mentioned over 50 clauses specifying the type of income which is not being included in the computation of the total income. Some of the income not forming part of gross total income is as follows:

• Agricultural Income
• Amount received by an individual as a member of HUF
• Share of profit of a partner in a partnership firm
• Any amount declared, distributed or paid by way of dividends
• Amount received from a Provident Fund Account or ‘Sukanya Samriddhi’ Account
• Any payment which is received from the National Pension Scheme (NPS) Trust to an employee for making account closure or at the time of opting out of a pension scheme. It should not extend to 40% of the total amount payable to him at the time of such closure.
• Amount received in the form of death cum retirement gratuity received as per the Pension Rules of the Central Government.
• Sum received by an employee at the time of termination of service or opting for voluntarily retirement following a voluntary retirement scheme to the extent of Rs. 5 lakhs.
• Any gratuity received under the Payment of Gratuity Act, to the extent that it does not exceed the amount which is being calculated under the provisions of subsections (2) and (3) of Section 4 of that Act.
• As per section 10(38), long term capital gain comes from doing the transfer of equity shares or equity-oriented mutual funds that gets an exemption from paying tax.
  

What are permissible deductions from Gross Taxable Income?

Net Taxable income after making deductions in Gross total income. As per chapter VI-A of the Income Tax Act, it allows deductions to be made from Gross Total Income under Section 80C or 80U of the Income Tax Act.

Section 80 A states that when deductions made on such amount, it should not exceed the amount of Gross taxable income of the assessee.

Deductions applicable under Section 80C to 80U and are generally more relevant to the taxpayers. List of the same is mentioned below:

• Payment of Life Insurance policies and Public Provident fund
• Payment towards repayment of principal portion of a housing loan
• Payment of tuition fees to school, college or any university
• Stamp duty or registration fees paid for the transfer of house property
•  The amount of Fixed deposit which is opened for a tenure does not exceed 5 years with a scheduled bank or a Post Office.
• Any Investment in ELSS (Equity Linked Savings Scheme) of a Mutual Fund with a lock- in of 3 years.
• The maximum amount of deduction that can be claimed under section 80C is capped at Rs. 1, 50,000/-.

Section 80D: 

This section states about all deductions being made in respect of payments for premiums made under the health insurance policies.

The deduction is available to individuals and HUFs. The amount of deductions permissible is as follows:

•  The Amount paid for the Health Insurance policy of the assessee or for family which is capped at a maximum of Rs 25000/-.
• Amount paid towards the health insurance policy of assessee or his parents, being senior citizens capped at a maximum of Rs 30,000-.
• ‘Senior Citizen’ would mean an individual resident of India aged at 60 years and above anytime during the previous year.

Section 80DD:

Expenditure which is incurred by an individual or HUF for medical treatment or maintenance of a person with a disability is allowed as a deduction in the context of actual expenses but limited to Rs 75000.

Section 80DDB: 

Amount of expenditure incurred for medical treatment to cure specified diseases for himself or a dependent can make a deduction to the extent of actual amount paid but capped at Rs.40,000/-. The limit is enhanced to Rs. 80,000/- in the case of senior citizens.

Section 80 G:  

This section offers deductions in the context of contribution made for charitable institutions. Amount of deduction claimed to be 100% of the amount paid to certain funds specified under the act which includes funds like Prime Minister National Relief fund etc. 

In case of payment to other charitable institutions, 50% of the amount paid is allowed as a deduction.

Thus, by reducing the Gross Total Income and the deductions allowed under Chapter VI-A of the Income Tax Act, we arrive at the Net Taxable Income of the assessee.

What are the exempt limits and rates of taxes which apply to the net taxable income?

Net Taxable Income:  Gross Total Income – Permitted Deductions 

Income Tax Act provides the rates of taxes that are to be paid on the taxable Income. The rates and the brackets are subject to revision each year.

The Income Tax rates applicable for the financial year 2020-21

Budget 2020 has given an option to choose between the existing income tax regime and a new regime for the coming financial year 2020-21.

The new tax regime offers lower tax rates and new tax slabs and simultaneously removes tax exemptions and will result in lower tax outgo for the taxpayer, according to the finance minister.

New Tax slab regime of budget 2020( optional)

Existing Tax slab

Tax rate applicable to resident individual below 60 years of age

Tax is further subject to Education Cess of 2% on Income Tax and Secondary and Higher Education Cess of 1%.

Senior Citizen

In case of senior citizens (Age 60 years and above) the amount exempt limit is Rs. 3, 00,000/- instead of Rs. 2, 50,000/. The same is tabled below:

In the case of Super Senior Citizen

Tax is further subject to Education Cess of 2% on Income Tax and Secondary and Higher Education Cess of 1%. 

In the case of Super Senior Citizens (Above 80 years and above) the amount exempt limit is    Rs. 5, 00,00 0/-. The same is tabled below:

Rebate

Further, Rebate under Section 87A is available for assessee having a taxable income below Rs. 5 Lakhs. The amount of rebate is 100% of Income Tax or Rs.5, 000/-, whichever is lower.

Special Rates of Income Tax

In addition to the above please note that special rates are prescribed in some of the cases:

Section 111A:

• Short Term Capital Gain is taxed @15%
• Tax on Long term capital gain is @20% with indexation benefit and @10% without indexation benefit.

Senior Citizens:

There is ‘No Change’ in the exempt limit for senior citizens which is fixed at Rs.3,00,000 and Super senior citizens at Rs. 5,00,000/-

Rebate

Further, Rebate under Section 87A is now available for assessee having a taxable income below Rs. 3, 50,000/-. The amount of rebate is reduced to 100% of Income Tax or Rs.2,500/-, whichever is lower. With all the above information we can easily calculate the tax payable by an Individual resident under the Income Tax Act.

Note

Additional components( applicable for both old and new tax regime)

• Surcharge: In case, income exceeds Rs 50 Lakhs less than 1 Crore, surcharge applicable is 10% of the Income Tax. For Income more than 1 crore, surcharge will be 15 % of the Income Tax.
• 2% applicable on Education Cess on the amount of Income Tax plus surcharge applicable for all taxpayers.
• 1% applicable in the form of Higher Secondary and Higher Education Cess plus surcharge applicable for all the taxpayers.
  

Learn here the process to calculate Income Tax

Income tax is calculated on the basis of tax slab. Your taxable income is worked out after making relevant deductions, other taxes that you may have already paid (Advance Tax) and tax deducted at source (TDS), the resultant taxable income will be taxed at the slab rate that is applicable.

The Income Tax Calculator will allow you to calculate your income tax for FY2020-21 (AY2021-22).

All you need to click on the link mentioned below and fill the required details https://www.incometaxindia.gov.in/pages/tools/tax-calculator.aspx

Step to follow after clicking the link are as follows:

• Choose the financial year 2020-21 for which you want your taxes to be calculated.
• Select your age accordingly. Tax liability in India differs based on the age groups.
• Click on 'Go to Next Step'
• Enter your taxable salary i.e. salary after deducting various exemptions such as HRA, LTA, standard deduction, and so on. (if you want to know your tax liability under the old tax slabs). Or else, just enter your salary i.e salary without availing exemptions such as HRA, LTA, standard deduction, professional tax and so on. (if you want to know your tax liability under the new tax slabs)
• Along with taxable salary, you must enter other details such as interest income, rental income, interest paid on home loan for rented, and interest paid on loan for self occupied property.
  
• Click on 'Go to Next Step' again.
• In case, you want to calculate your taxes under the old tax slabs,you will have to enter your tax saving investments under section 80C, 80D, 80G, 80E and 80TTA.
• Click on 'Calculate' to get your tax liability. You will also be able to see a comparison of your pre-budget and post-budget tax liability (old tax slabs and new tax slabs).