Understanding How to Calculate Take-Home Pay: Income Tax Calculator


One of the most hated annual jobs most workers have is filing income tax. And with the Ministry of Finance introducing new additions and exemptions to the Union budget in each fiscal year, the already hectic task makes it even more difficult for people to calculate taxable salary income and determine take-home pay.

However, an online tax calculator or income tax calculator simplifies the tedious process of assessing your tax payable by determining the tax rate you are subject to and how you can invest to achieve it. effective tax savings.

What is income tax?

In short, income tax is the tax that is levied on your income. If you fall under the income tax slab set by the government, you have to pay a specific portion of your net annual income as tax. You can pay your income tax as withholding tax (TDS) when paying your monthly salary or through the Central Commission for Direct Taxes (CBDT) income declaration portal.

What is an income tax calculator?

With deductions and exemptions, calculating your income tax can be quite a task. An income tax calculator is a practical and free online tool which will help you assess the taxes payable on your income on the basis of the guidelines set by the Union budget during a financial year.

To calculate income tax, the computer calculator needs to receive basic information, such as annual salary, fees, active loans, and other savings to determine your tax liability.

What are the advantages of the income tax calculator?

The income tax calculator has various advantages. Here is a list of the benefits of using an online income tax calculator.

HTaxes of the elps regime

A new tax regime was introduced by the 2020 Union budget of the Ministry of Finance, alongside the old one. Taxpayers are free to choose the regime they will follow. The tax calculator can help you decide which tax regime is best for you. It will not only help with tax planning. but also planning for your retirement and other financial plans.

User-friendly

The tax calculator is very easy to use. All you have to do is enter the details it asks for, including your income, expenses, insurance, savings, and investment information, and the calculator will do all the math for you.

Time saving

The online calculator will simplify the process of calculating taxes under old and new tax regimes, deciding which option is best for them, in minutes.

Free Tool

The online income tax calculator can be used as many times as you want for free.

How to use the income tax calculator?

As stated earlier, the income tax calculator will help taxpayers determine tax outflows for the fiscal year by collecting data regarding their income, savings, insurance, and other related expenses.

Here are the steps on how to use an online tax calculator.

Step 1: Annual income

Enter your annual monthly income in the box provided.

Step 2: Expenses

Now enter your monthly rent, rent allowance, loans and fees, if applicable, in the respective sections assigned to each.

Step 3: Savings

Here, you’ll be asked questions about your mutual funds, insurance, and investing questions. Enter the details in the respective boxes.

Step 4: Calculate

This is the last step where the total tax is calculated according to the new and old regimes. It also tells you how much to invest to save tax effectively by suggesting the best investment plans for saving tax. You can also change the values ​​entered at any step.

Tax calculation for the 2020-21 fiscal year

Income tax rates are determined by the Income Tax Act of India and are revised annually when the budget is announced. This categorization is based on an individual’s income and age.

  • Residents and non-residents under 30
  • Senior (residents) from 60 to 80 years old
  • Super seniors over 80

The old tax regime was largely focused on high earners, while the new tax regime benefits middle class taxpayers with taxable income of up to Rs. 15.

Slab tax rate

Annual revenue Under 60 Over 60 Over 80 years
Rs 0.0 to Rs 2.5 Lakhs NIL NIL NIL
Rs 2.5 lakhs to Rs 3.00 Lakhs 5% (u / s 87a tax reduction is available) 5% 5%
Rs. 3.00 lakhs to Rs 5.00 Lakhs 5% (u / s 87a tax reduction is available) 5% 5%
Rs. 5.00 lakhs to Rs 7.5 Lakhs 10.00% 10.00% 10.00%
Rs 7.5 lakhs to Rs 10.00 lakhs 15.00% 15.00% 15.00%
Rs 10.00 lakhs to Rs. 12.50 Lakhs 20.00% 20.00% 20.00%
Rs. 12.5 lakhs to Rs. 15.00 Lakhs 25.00% 25.00% 25.00%
Above Rs. 15 Lakhs 25.00% 25.00% 25.00%

Unauthorized exemptions under the new tax regime

Under Article 115BAC of the Income Tax Act, the following exemptions are not allowed in the new tax regime:

  • Rent allowance;
  • Allowance for the income of a minor;
  • Tax exemption for the SEZ unit;
  • Interest under Article 24 in respect of the independent or vacant property referred to in subsection (2) of Article 23. heads and would be allowed to be carried over in accordance with the law in force);
  • The standard allowance, the allowance for representation allowance and the employment / professional tax;
  • Additional depreciation;
  • Leave travel leave;
  • Allowances to deputies / deputies;
  • Deductions under Articles 32AD, 33AB, 33ABA as well as 35AD or 35CCC;
  • Deduction of family pension;
  • Some of the indemnities are contained in clause (14) of article 10


Exemptions authorized under the new tax regime

Under section 10 (14) of the Income Tax Act, the following allowance is granted:

  • Cost of travel by transfer or tour;
  • Transportation allowance ;
  • Daily allowance;
  • Transportation allowance.

Final words

An income tax calculator can help you assess your taxes in minutes. Apart from that, it also shows an effective tax saving plan based on the information you provided.

Faq

  1. How do I calculate my income tax?

Income tax rates are determined by the Income Tax Act of India and are revised annually when the budget is announced. This categorization is based on an individual’s income and age.

  • Residents and non-residents under 30
  • Senior (residents) from 60 to 80 years old
  • Super seniors over 80

The old tax regime was largely focused on high earners, while the new tax regime benefits middle class taxpayers with taxable income of up to Rs. 15.

  1. How much tax do I have to pay on 10 lakhs?

If the taxpayer’s income is 10 lakhs, he must declare his income tax at 15%.

  1. How much tax do I have to pay on Rs. 5 lakhs?

If the taxpayer’s income is 5 lakhs, he must declare his income tax at 5%.

  1. Does everyone have to pay taxes?

In India, if the income of an individual under the age of 60 is over Rs. 2.5 lakhs, they have to file tax returns.

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Esther L. Steinbach

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