The income tax calculator is an easy to use online tool which provides you with an estimation of the taxable income and tax payable once you provide the necessary details. The income tax calculator considers factors like your income, age, housing loan payments, expenses, and investments to indicate the total tax payable on your income under the new or old Indian tax regime. The online tax calculator is free, easy to use, and generates error-free results quickly.
Income tax is certainly the most important source of revenue for the Indian government. It is established as an inevitable imposition on the citizens to raise funds for fulfilling the development and defence needs of the country. Taxes imposed on income, purchase, sale, and property help the government run different government embodiment and machinery.
In this article, you will learn how to use an income tax calculator and how to calculate your income tax. Read on for more understanding.
What is Income Tax?
Income tax refers to a type of tax that governments require on income generated by businesses and individuals within their jurisdiction. By law, taxpayers must file an income tax return annually to determine their tax obligations.
The money collected by the direct tax route is used by the government for infrastructural developments and to pay the employees of central and state government bodies. The Income Tax Act of India was passed in 1961. This Act governs the provisions for income tax as well as the various deductions that apply to it. However, since 1961, the law has been amended several times to take care of inflation and other socio-economic situations.
Income taxes are a source of revenue for governments and are used to finance public services, pay government obligations, and provide welfare for citizens.
How to Use the Income Tax Calculator for the Year 2021-2022
Below are steps to use the income tax calculator:
Step 1: Choose the financial year for which you want your taxes to be calculated.
Step 2: Select your age accordingly. Tax liability in India differs based on age groups.
Step 3: Click on ‘Go to Next Step.’
Step 4: To know your tax liability under the old tax slabs, enter your taxable salary i.e. salary after deducting various exemptions, such as the House Rent Allowance (HRA), LTA, standard deduction, and so on.
Or else, to know your tax liability under the new tax slabs, just enter your salary i.e. salary without availing yourself of exemptions like the HRA, LTA, standard deduction, professional tax, and so on.
Step 5: Along with taxable salary, you must also enter other details, such as interest income, rental income, interest paid on home loan for rent, and interest paid on loan for self-occupied property.
Step 6: Click on ‘Go to Next Step’ again.
Step 7: 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 (House Loan, Principal Repayment, ELSS funds, PPF, etc.), 80D, 80G (Donations to Charitable Institutions), 80E (Education Loan Interest Repayment), and 80TTA.
Step 8: 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).
Note: You can enter ‘0’ for any field that does not apply to you.
Successfully input all necessary details and you will see your tax payable under the old and new regimes for AY 2022-23 (FY 2021-22). You can also get your tax computation in your mail.
How Is Income Tax Calculated?
Income tax is calculated on your taxable income based on the tax slab applicable. Your taxable income is derived by adding income from all sources (i.e. salary, rent, capital gains, etc.) to get your gross total income and subtracting from this the deductions and exemptions you are eligible for. Taxes already paid in advance tax will be considered when calculating income tax.
How to Calculate Income Tax for the Old Regime
In the old tax regime, you benefit from standard deduction and can claim special allowances and tax exemptions on HRA and LTA to arrive at your income from salary. To this, add income from other sources, such as house property, capital gains, and business/ profession to get your gross total income. Next, you can claim deductions under Sections 80C, 80D, 80TTA, etc., to get your taxable income.
Your taxable income is taxed at the relevant tax slab rate and Cess is added to give you your total tax payment.
Note: Cess is a form of tax that is levied over the base tax liability of a taxpayer.
How to Calculate Income Tax for the New Regime
In the new tax regime, you forgo most exemptions and deductions like the LTC, HRA, standard deduction, deductions under Sections 80C, 80D, 80E, 80G, and so on. Add income from other sources to your income from salary to get your Gross Total Income.
This is taxed at the concessional tax slab rates and Cess is added to give you your total income tax payment.
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