An income tax calculator is a tool that can help you find out the amount of tax you have to pay on your income. In order to calculate taxes, this calculator will require information like your income, deductions, and exemptions.
In this article, we will explain the steps to use an online income tax calculator.
Income tax is a direct tax levied on an individual’s annual income. Income tax is based on various factors such as the taxpayer’s age, income and its sources, exemptions, and deductions. Read on to know more about these factors.
There are five income categories, such as-
- Income from Salary
The monthly income that a person receives from the employer falls under this category.
- Income from House Property
Any income that a person earns by putting his/her residential or commercial property on rent falls under this category.
- Income from Business or Profession
The income that an individual earns via a business or profession belongs to this category.
- Income from Capital Gains
Any income generated by selling or transferring capital assets like real estate, mutual funds, stocks, etc. is taxable under this category.
- Income from Other Sources
Any income that can’t be categorised in the other four sources falls under this category.
- HRA Exemptions
Individuals who live in a rented home can claim tax exemption under Section 10.
- Standard Exemption
Every individual can avail a standard exemption of Rs. 50,000 irrespective of their income.
By filing for tax deductions, an individual can save taxes. Below are some of the sections under which a person can claim tax deductions-
- Section 80D
The premium paid for a health insurance policy can be claimed as a tax deduction under Section 80D.
- Section 80C
Under Section 80C, investments made in tax saving fixed deposits, ELSS mutual funds, etc. can be claimed as tax deductions.
Old Income Tax Slabs vs New Income Tax Slabs
|Tax Slab||Old Tax Rates||New Tax Rates|
|Below Rs. 2.5 Lakhs||0%||0%|
|Between Rs. 2.5 Lakhs and Rs. 5 Lakhs||5%||5%|
|Between Rs. 5 Lakhs and Rs. 7.5 Lakhs||20%||10%|
|Between Rs. 7.5 Lakhs and Rs. 10 Lakhs||20%||15%|
|Between Rs. 10 Lakhs and Rs. 12.5 Lakhs||30%||20%|
|Between Rs. 12.5 Lakhs and Rs. 15 Lakhs||30%||25%|
|Above Rs. 15 Lakhs||30%||30%|
You need to keep in mind that if you choose to pay tax as per the new tax rates, then you will have to forgo exemptions and deductions. Some of the exemptions and deductions that you will have to let go are HRA exemption, housing loan interest deduction, Section 80C deductions, medical insurance premium deduction, standard deduction, and leave travel allowance (LTA).
Now that you know various income tax factors, let’s take a look at steps to use an income tax calculator to find out an estimate tax amount that you will have to pay-
- First, you need to enter your birth details.
- Then, you will have to enter your income details such as basic salary, HRA, profits from profession, interest income, etc.
- You need to enter your income from house property details.
- Next, you need to provide information about your Section 80C deductions.
- Then, you must enter details of your Section 80D deductions.
- You need to provide information about other deductions that you might have.
- Finally, the calculator will calculate your income tax.