Tax Calculator

Once the Union Budget for the year is made public, an online application called an income-tax calculator can assist with calculating taxes depending on an individual's income. People in the taxable income bracket are required to pay a certain percentage of their net annual income in taxes. Income tax can be paid either through the Central Board of Direct Taxes (CBDT)'s income tax returns site or as tax deducted at source when a monthly salary is given out. To guarantee that people pay their required taxes on any income derived from other sources, the IRS has allowed for online tax payment.

How can I use the FY 2023–24 (AY 2024–25) income tax calculator?

The steps to utilise the tax calculator are as follows:

1. Choose your age appropriately. In India, the different age groups have different tax obligations.
2. Enter your taxable pay, which is your income less any applicable exemptions like HRA, LTA, etc. (If you want to see how much tax you owe based on the previous tax slabs)
   Otherwise, simply input your pay, that is, your income without taking advantage of any exemptions like HRA, LTA, professional tax, etc. (If you're interested in learning what your tax obligation is under the new tax slabs)
3. In addition to your taxable income, you must include information on your interest income, rental income, house loan interest paid for properties that are rented out, and self-occupied property loan interest paid.
4. Enter the net income (sale consideration minus acquisition cost) for revenue from digital assets. This income is subject to a 30% tax plus any relevant surcharge and cess.
5. Select 'Go to Next Step' once again.
6. You must input your tax-saving investments under sections 80C, 80D, 80G, 80E, and 80TTA if you want to compute your taxes using the old tax slabs.
7. To calculate your tax liability, select 'Calculate.' A comparison of your pre-budget and post-budget tax liabilities (old tax slabs and new tax slabs) will also be available.

Note: You can enter '0' in any field that is not applicable.

How do income tax slabs work?

The Indian income tax is based on a slab system, and each individual taxpayer is assessed the appropriate amount of tax. The term 'slab' alludes to the various tax rates applied to various income levels. In other words, you have to pay more tax if your income is higher. Every year, changes to these income tax slabs are announced during the budget process. Once more, these slab rates are divided for several taxable types. According to India's Income Tax, there are three types of 'individual' taxpayers, including:

• Individuals who are having an age below 60 years, including residents and non-residents
• Resident Senior Citizens with age between 60 to 80 years.
• Resident Super Senior Citizens with age more than 80 years.

How is income tax calculated?

Calculation of income taxes for Salaried:
The total of the basic wage, the HRA, the special allowance, the transport allowance, and any other benefits is income from salary. Your income may include tax-free benefits such leave travel expenses and phone bill reimbursement. Renters who receive HRA are eligible to make an HRA exemption claim. By using our HRA Calculator, you can determine the HRA's exempt portion.

In addition to these exemptions, the 2018 budget also included a standard deduction of Rs 40,000. This was raised to Rs 50,000 in the budget for 2019 and to Rs 50,000 more in the budget for 2023. A standard deduction of Rs 50,000 is also available in the event of a new administration.

You won't be able to take use of these exemptions if you choose the new tax system.

Include all sources of income in the income tax calculation. Include:

• Income from wage (your employer pays your wage)
• Income from residential property (plus any rental income or mortgage interest)
• Gains from capital investments (profits from the selling of shares or a home)
• Income from a business or profession (including freelance work or other forms of employment)
• Income from various sources, including bond interest, fixed deposit interest, and interest from savings accounts

What are the exemptions/deductions that the new tax system forbids?

Individuals or HUFs that choose to be taxed under the Act's newly added section 115 BAC are not eligible for the following exemptions or deductions:

• Abandon the travel allowance described in section 10's clause (5);
• The house rent allowance described in section 10's clause (13A);
• A portion of the amount described in section 10's clause (14);
• The allowances for MPs and MLAs described in section 10's clause (17);
• The allowance for minors' income described in section 10's clause (32);
• Section 10AA's exemption for SEZ units;
• The section 16-required deduction for employment/professional tax and entertainment allowance;
• Interest under Section 24 in relation to empty or self-occupied property mentioned in Section 23's Subsection (2). (Loss under the heading 'Income from House Property' for the rented house shall not be permitted to be set off under any other heading and shall be permitted to be carried forward in accordance with the law currently in effect);
• Additional depreciation in accordance with Section 32's Subsection (1), Clause (iia);
• Deductions made pursuant to Sections 32AD, 33AB, and 33ABA;
• A variety of deductions for contributions to or expenditures for scientific research described in subparagraphs (ii), (iia), (iii), or (iii) of subparagraph (1) or (ii) of subparagraph (2AA) of section 35;
• A deduction made pursuant to sections 35AD or 35CCC;
• The family pension is deducted in accordance with section 57's paragraph (iia);
• Every chapter VIA deduction (such as those found in sections 80C, 80CCC, 80CCD, 80D, 80DD, 80DDB, 80E, 80EE, 80EEA, 80EEB, 80G, 80GG, 80GGA, 80GGC, 80IA, 80-IAB, 80-IAC, 80-IB, 80-IBA, etc.). Deductions under section 80CCD's subsection (2) (employer payment on behalf of the employee in a notified pension system) and section 80JJAA (for new employment) can be made, nevertheless.

The individual or HUF exercising their option under the proposed provision shall be granted the following allowances as provided for in section 10(14) of the Act:

• A transport allowance given to a divyang employee to cover the cost of travelling between their location of abode and their place of employment
• Conveyance Allowance, which is given to cover transportation costs incurred while carrying out official tasks;
• Any allowance given to cover travel expenses for tours or transfers;
• A daily allowance to cover any regular daily expenses incurred by an employee when away from his regular location of duty.

How to do income tax calculation? (example)

Breaking down income for salaried individuals

To figure out your taxable income from your salary, start by adding together your Basic salary, HRA (House Rent Allowance), Special Allowance, Transport Allowance, and any other extra allowances. It's worth noting that certain parts of your salary, like reimbursements for phone bills or your leave travel allowance, might be tax-free.

If you're receiving HRA and also paying rent, you might be eligible for some tax benefits on that HRA. To figure out how much of your HRA is exempt from tax, use an HRA Calculator.

Recent budget updates have also introduced a standard deduction. While it was Rs 40,000 in the 2018 budget, it got a boost to Rs 50,000 in 2019. As per the 2023 budget, this standard deduction remains at Rs 50,000 for those opting for the new tax regime.

However, if you choose the new tax regime, keep in mind that the exemptions mentioned above won't apply.

Now, let's make this clearer with a real-world scenario. Imagine Neha. She gets a monthly Basic Salary of Rs 1,00,000, an HRA of Rs 50,000, a Special Allowance of Rs 21,000, and an annual LTA of Rs 20,000. She also pays a monthly rent of Rs 40,000 while living in Delhi. Using these figures, you can estimate her taxable income by considering the allowances and potential exemptions.

Tax slabs under Old V/s New Tax regime

Example

Let's understand income tax calculation under the current tax slabs and new tax slabs (optional) by way of an example. Neha receives a Basic Salary of Rs 1,00,000 per month. HRA of Rs 50,000. Special Allowance of Rs 21,000 per month. LTA of Rs 20,000 annually. Neha pays a rent of Rs 40,000 and lives in Delhi.

Income Tax Calculator FAQs

How can I calculate my income tax?

Income tax can be calculated by using the formula: sum of Basic salary + HRA + Special Allowance + Transport Allowance + any other allowance.

Does everyone have to file their income tax returns?

No, filing income tax returns is not necessary if your income is below the basic exemption threshold. However, people who earn less than Rs 2.5L but still want to receive an income tax refund must file an ITR in order to do so. Otherwise, it is required to file income tax returns if it exceeds the basic exemption threshold.

Which tax slab is better?

The new system will be advantageous where total deductions are 1.5 lakhs or less. When total deductions exceed 3.75 lakhs, the old regime will be advantageous. When total deductions range from 1.5 lakhs to 3.75 lakhs: based on your level of income.

How can I reduce my income tax?

By performing the following actions, you can reduce your income taxes:

• Invest in items covered by section 80C.
• Purchase health insurance.
• Submit a deduction request for your housing allowance.
• Deduct the interest on your mortgage.
• Don't spend all of your savings.
• Donate to a good cause.