Income Tax Calculator

Compute your tax every year with an income tax calculator

"…nothing is certain except death and taxes." – Benjamin Franklin

In India, individuals or corporations who earn a particular amount in a year are liable to pay a tax known as income tax. The funds collected by the government as income tax is used for developing healthcare, education, infrastructure projects, subsidies and welfare programs.

The legislature enacted the Income Tax Act of 1961. 

These rules were enforced and applied in 1962. The income tax rule only applies in conjunction with the Income Tax Act of 1961. 

In India, the tax year is calculated from 1st April of one year to 31st March of the next year. There are two types of taxes in our country, direct taxes and indirect taxes. Income tax is a form of direct tax. The calculation of income tax is based on multiple income tax slab rates.

Types of income

In order to gain a better understanding of how tax calculation is done on individuals and corporations, it's good to know a bit about the types of income. In India, there are five broad categories of income as follows:

1. Property income

If you rent out a property and receive income from tenants, this income is taxable.

2. Salary income

This is the most common source of income wherein you get remuneration from the company you work for as salary or pension, which is also taxable.

3. Business or professional income

If you are self-employed, whatever income you receive over a particular amount is taxable. Doctors, tuition teachers, chartered accountants, lawyers, and insurance agents are examples of professionals who might have to pay income tax under the heading of business or professional income.

4. Capital gain income

If you sell a house or car or receive money through mutual funds or stocks and shares, this income is also taxable under Capital Gain Income Tax laws.

5. Income from other sources

There are many other sources through which you may receive income, such as fixed deposits, winning a lottery, or interest from bank accounts.

Income tax rules in India

If you are under the age of 60 and earn over Rs. 2.5 lakhs per annum, you have to pay income tax. For ages 60 and above, the tax slabs are slightly different. 

Even if you earn less than 2.5 lakhs, although you don't have to pay income tax, you still have to file your income tax returns every year.

PAN explained

The Permanent Account Number (PAN) is a unique number that the income tax department assigns to each Indian taxpayer. Your PAN is linked to various tax-related transactions. Every PAN account holder receives a card displaying this ten-digit alphanumeric number.

PAN cards also serve as proof of identity and photo identity. When you pay your tax, you must necessarily include your PAN. Your PAN is also an important detail that banks and other financial institutions can ask you to present for completing transactions.

Your PAN provides the income tax department with all the details of your financial transactions because it is quoted in all such transactions.

Income tax rates in India

The income tax you pay is a percentage of your income. Currently, 30% is the maximum rate of tax payable today, excluding additional charges that might be applicable.

Details of respective income tax slabs with rates

Notes:

• If your 60th or 80th birthday falls during a fiscal year, your income will be taxed at the senior or super-senior tax slab.
• Any income exceeding Rs. 1 crore in a particular fiscal year will be additionally taxed with an extra 10% surcharge.
• The rate of educational cess is 2%, and higher secondary cess is 1%.

How to calculate income tax in india?

As an individual, you need to calculate your income tax according to the type of earnings you have. There are exclusions and allowances that you can make use of.

An individual or Hindu Undivided Family (HUF) can take advantage of Section 80C to get tax exemptions. Further, you should take into account any advance payment, like advance tax paid and tax deducted at source (TDS).

There are also further provisions for tax relief under sections 89, 90 and 91 of the Income Tax Act.

Tips to file your income tax accurately

• Report every source of income on your tax return form;
• Some income heads, like dividends and listed equity shares within the permissible limits, need not be included;
• You need not report legally exempt income;
• Ensure to include all appropriate deductions in the respective sections. For example, you can claim up to Rs. 50,000 of your salary by showing rental receipts, property tax receipts, business-related costs, etc;
• Put all eligible exemptions in the appropriate categories based on the type of income to avoid the rejection of your application;
• You must also add deductions from sections 80C, 80D, 80TTA, and 80TTB;

Once you have added your income and deducted exemptions, you can calculate your final tax payable to the income tax department. As you can see, the calculation of Indian income tax is rather complex.

While you may rely on a tax consultant to file your returns, it would be imprudent to trust their judgement blindly. A good way of ensuring that your income tax is filed appropriately and accurately is by using an income tax calculator.

Income tax calculators

An income tax calculator is an online tool that helps you easily estimate the income tax you have to pay. It features the results of your annual income. 

Typically, the tax calculation software of these online tools will be updated with the latest amendments according to the Union Budget that gets released each year.

How to use an income tax calculator?

• Select the applicable financial year for tax calculation purposes.
• Select your age.
• Click on the button that says "go to next step."
• Key in your taxable salary. Your taxable salary is the amount that is left over after you have considered exemptions like tax deductions, HRA, and particular investments that you might have made during the tax year.
• You can also enter your total salary. Ensure you enter all your sources of income, such as interest received from bank accounts and other investment vehicles, income from rent, and so on. You also have to add details of the interest you have paid for property loans.
• You need to add any income that you might have received from digital assets to the tax liability estimator. For example, after including deductions like the cost of acquisition, sale consideration and so on, this income will attract a 0% tax, excluding charges like cess and surcharge.
• There are some taxes you might want to calculate based on old slabs, in which case you need to provide your tax-saving investment information under sections 80C, 80D, 80G, 80E and 80TTA.
• Now, you will see a button that says, "Calculate."
• The amount that represents your tax liability will appear.

Using this online income tax calculator, you can also compare post-budget and pre-budget liability in old and new tax slabs.

Notes:

• If a field does not apply to you, simply enter zero.
• You can receive your tax computation through email.

How to use an income tax calculator?

• Select the applicable financial year for tax calculation purposes.
• Select your age.
• Click on the button that says "go to next step."
• Key in your taxable salary. Your taxable salary is the amount that is left over after you have considered exemptions like tax deductions, HRA, and particular investments that you might have made during the tax year.
• You can also enter your total salary. Ensure you enter all your sources of income, such as interest received from bank accounts and other investment vehicles, income from rent, and so on. You also have to add details of the interest you have paid for property loans.
• You need to add any income that you might have received from digital assets to the tax liability estimator. For example, after including deductions like the cost of acquisition, sale consideration and so on, this income will attract a 0% tax, excluding charges like cess and surcharge.
• There are some taxes you might want to calculate based on old slabs, in which case you need to provide your tax-saving investment information under sections 80C, 80D, 80G, 80E and 80TTA.
• Now, you will see a button that says, "Calculate."
• The amount that represents your tax liability will appear.

Using this online income tax calculator, you can also compare post-budget and pre-budget liability in old and new tax slabs.

Notes:

• If a field does not apply to you, simply enter zero.
• You can receive your tax computation through email.

Income tax saving tips

You may end up paying a considerable amount as income tax every year, especially if you fall under the higher income tax slab. However, it is possible to make the best use of tax exemptions by showing spending in the way of investments, insurance, and loans.

Here are some of the common allowances that can reduce your income tax liability regularly:

1. Unit linked insurance plans

A unit-linked insurance plan (ULIP) is an insurance plan that is linked to markets. When you buy such a plan, the money that you pay for premiums is invested in markets by investors. You can also show these investments for tax deductions as your money grows.

2. ELSS mutual funds

You can use equity-linked saving schemes (ELSS) to get some tax relief. An ELSS has a three-year lock-in period, a fairly short lock-in period as compared with other investment instruments. 

You not only get a tax benefit by showing investment in an ELSS, but also a decent return on your investment. However, they are risky since they are linked to the equity market. 

3. Post office time deposit

A post office time deposit is a payment that you make to a post office regularly. You can invest a minimum of Rs. 200 per month and get a fairly reasonable interest rate of up to 8.5% per annum. It has a five-year lock-in period, and you get an income tax exemption under 80C of the Income Tax Act.

Nowadays, post offices are offering more investment opportunities. Union finance minister Nirmala Sitharaman in her 2022 budget, announced increased access to post office accounts via mobile and other digital means.

4. Provident funds

A provident fund is a type of pension that is created for long-term benefit. You can claim the deposits you make in a provident fund under Section 80C of the Income Tax Act.

5. Life insurance

With a life insurance policy, you get life coverage and can also save on taxes. You can pay an annual premium and use these payments to claim an exemption under Section 80C.

6. Health insurance

Like life insurance, you can also use health insurance for income tax exemption. You can save up to Rs. 15,000 to Rs. 20,000 by showing your health insurance premiums. With the astronomical cost of medical treatment today, health insurance has become a basic requirement of any family.

7. Tax saving fixed deposits

Although you may not get much interest in returns from fixed deposits in banks, it is always prudent to move spare cash lying in a bank account into fixed deposits. The lock-in period is typically five years, and you can show the fixed deposit interest for tax savings.

8. National savings certificates

National savings certificates (NSCs) are available at post offices for as low as Rs. 100. Here again, the lock-in period is five years, but it can extend to ten years. You can show NSC investments for tax investments.

9. Loans

Although personal loans may not be eligible for tax relief, you can claim income tax exemption against home loans for construction, buying a home, or renovation. 

You can show the principal and interest for each year up to Rs. 100,000 and claim under Section 80C. Additionally, under the provisions outlined in Section 24, you can claim tax relief for interest up to Rs. 1.5 lakhs.