Union budget 2021 | Income tax calculator


Without making any changes to the personal income tax slab, the 2021-22 Union budget granted relief to the elderly in the filing of computer returns; reduces the time taken for IT procedures; announced the establishment of a dispute resolution committee and anonymous income tax appeals tribunal proceedings; flexibilities provided for Non-Resident Indians (NRIs); offered an increase in the audit exemption limit; and taken into account the reduction of dividend income.

Last year, Ms. Sitharaman introduced a new personal income tax regime, where it is possible to pay less tax for those who forgo the reliefs and exemptions. The new ones are however optional.

Income (per year)

Proposed tax rate

Old tax rate

Up to ₹ 2.5 lakh

No taxes

No taxes

₹ 2.5 lakh- ₹ 5 lakh

No taxes

5%

₹ 5 lakh to ₹ 7.5 lakh

ten%

20%

₹ 7.5 lakh to ₹ 10 lakh

15%

20%

₹ 10 lakh to ₹ 12.5 lakh

20%

30%

₹ 12.5 lakh to ₹ 15 lakh

25%

30%

Above ₹ 15 lakh

30%

30%

Here we examine three taxable income scenarios for salaried persons.

Illustration 1 – Employee – Taxable income less than 10 lakhs

Details Old regime New regime
Salary income
Base salary 450,000 450,000
Rent allowance (HRA) 180,000 180,000
Travel Leave Assistance (LTA) 75,000 75,000
Special allowance 80,000 80,000
Employer contribution to NPS 45,000 45,000
Additional benefits
830,000 830,000
Derogations
HRA
LTA
Less: Standard deduction (50,000)
Less: Business tax (2,400) 777,600 830,000
Home ownership income
Income from other sources
Interest on savings bank account 10,000 10,000
Interest on term deposits 40,000 50,000 40,000 50,000
Total gross income 827,600 880,000
Deductions under Chapter VIA
Article 80C (54,000)
Employee contribution to the contingency fund 54,000
Contribution to the public provident fund
LIC premium
Tuition fees
ELSS
Article 80CCD (45,000) (45,000)
NPS – Employee Supplementary Contribution
NPS – Employer contribution 45,000 45,000
Article 80D – Health insurance premium
Article 80LTA – Interest from the savings bank (10,000)
Pre-tax income (total taxable income) 718,600 835,000
Income tax 56,220 50 250
Less: Refund under section 87A
Total tax payable after reimbursement 56,220 50 250
Supplement @ 10% / 15% / 25% / 37%
Total tax payable after surcharge 56,220 50 250
Health and education Cess @ 4% 2 249 2,010
Total tax, surcharge and school tax 58,470 52,260
Impact on tax payable (in ??) 6,210

Illustration 2 – Employee – Taxable income between ₹ 10 Lakh and ₹ 15 Lakh

Details Old regime New regime
Salary income
Base salary 850,000 850,000
Rent allowance (HRA) 150,000 150,000
Travel Leave Assistance (LTA) 75,000 75,000
Special allowance 500,000 500,000
Employer contribution to NPS 85,000 85,000
Additional benefits
1,660,000 1,660,000
Derogations
HRA (80,000)
LTA (75,000)
Less: Standard deduction (50,000)
Less: Business tax (2,400) 1,452,600 1,660,000
Home ownership income (200,000)
Income from other sources
Interest on savings bank account 30,000 30,000
Interest on term deposits 15,000 45,000 15,000 45,000
Total gross income 1,297,600 1,705,000
Deductions under Chapter VIA
Article 80C (150,000)
Employee contribution to the contingency fund 102,000
Contribution to the public provident fund 50,000
LIC premium
Tuition fees
ELSS
Article 80CCD (135,000) (85,000)
NPS – Employee Supplementary Contribution 100,000
NPS – Employer contribution 85,000 85,000
Article 80D – Health insurance premium (18,000)
Article 80LTA – Interest from the savings bank (10,000)
Pre-tax income (total taxable income) 984,600 1,620,000
Income tax 109,420 223,500
Less: Refund under section 87A
Total tax payable after reimbursement 109,420 223,500
Supplement @ 10% / 15% / 25% / 37%
Total tax payable after surcharge 109,420 223,500
Health and education Cess @ 4% 4.377 8 940
Total tax, surcharge and school tax 113,800 232,440
Impact on tax payable (in ??) (118,640)

Illustration 3 – Employee – Taxable income between ₹ 15 Lakh and ₹ 50 Lakh

Details Old regime New regime
Salary income
Base salary 1,150,000 1,150,000
Rent allowance (HRA) 500,000 500,000
Travel Leave Assistance (LTA) 150,000 150,000
Special allowance 700,000 700,000
Employer contribution to NPS 115,000 115,000
Additional benefits
2,615,000 2,615,000
Derogations
HRA (305,000)
LTA (75,000)
Less: Standard deduction (50,000)
Less: Business tax (2,400) 2 182 600 2,615,000
Home ownership income (200,000)
Income from other sources
Interest on savings bank account 50,000 50,000
Interest on term deposits 25,000 75,000 25,000 75,000
Total gross income 2,057,600 2,690,000
Deductions under Chapter VIA
Article 80C (150,000)
Employee contribution to the contingency fund 138,000
Contribution to the public provident fund 50,000
LIC premium
Tuition fees
ELSS
Article 80CCD (165,000) (115,000)
NPS – Employee Supplementary Contribution 100,000
NPS – Employer contribution 115,000 115,000
Article 80D – Health insurance premium (18,000)
Article 80LTA – Interest from the savings bank (10,000)
Pre-tax income (total taxable income) 1,714,600 2,575,000
Income tax 326,880 510,000
Less: Refund under section 87A
Total tax payable after reimbursement 326,880 510,000
Supplement @ 10% / 15% / 25% / 37%
Total tax payable after surcharge 326,880 510,000
Health and education Cess @ 4% 13,075 20,400
Total tax, surcharge and school tax 339 960 530,400
Impact on tax payable (in ??) (190,440)

These calculations are based on E&Y calculations. To try out different scenarios, download the Google Sheet from bit.ly/taxscenario

Disclaimer – This tax calculator works under certain assumptions to calculate the estimated tax payable; and may not provide accurate results in all circumstances. So your actual tax liability may be different. Readers are advised to seek appropriate professional tax advice and calculate their tax based on the applicable provisions of the Income Tax Act 1961 and Income Tax Rules 1962.


Esther L. Steinbach

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