Income Tax Calculator - Calculate Income Tax Online for FY 2019-20

It is ideal for an assessee to calculate the income tax payable by him/her. This helps to avoid discrepancies at the time of filing the returns. They can use a number of online income tax calculators which are offered by various third-party websites.

How to Calculate Income Tax on Salary?

It is a nice feeling to get paid at the end of every month for all the effort you put in your work, but aren't you disappointed when the employer deducts higher tax? So how do you avoid the high tax deduction from your salary?

Any income received by an employee is taxed under the head Income from Salaries. It is only taxable when an employer-employee relationship exists. The first thing one needs to know is the salary slab they fall under. Then the employee needs to submit their declaration about their proposed investments so that the employer can take them under consideration before deducting the income tax from the employee's salary. By declaring the taxes in advance you do not have to go through the lengthy process of having to file for refunds from the Income Tax Department.

If you are an employee working for an organisation under a certain employer, the income that you receive will always be taxable. The primary thing to take into consideration here is the income tax slab that you fall under. Once that has been determined, you need to furnish proofs of your investments so that it is considered by your employer during the time of income tax deduction from your total salary. Once you have declared your investments in advance, you do not have to go through the hassle of claiming refunds at a later stage.

Salary includes your Gross salary, Provident Fund, Insurance, Leave pay, Gratuity, Employee State insurance and Labour Welfare Fund.

How to Calculate Income Tax from Salary with Example

Calculating Income Tax on Salary
How To Calculate Income Tax

Let's take the example of Mr. A who is a CA and his Gross Salary is Rs.80,450, which includes:

Basic= 50000 + HRA=20000 + Travel allowance=1000 + Child's educational allowance=200 + Medical allowance=1250 + other allowance=8000

The deductions allowed will be Travel allowance=1000 + Child's educational allowance=200 + Medical allowance=1250 provided that Mr. A submits medical bills worth Rs.1250. Mr. A has a house of his own so the HRA is not deducted. So his total exemption will be Rs.2,450.

The taxable annual gross income will be Rs. (80,450-2,450) x 12 which is Rs.9,36,000.

If Mr. A declares loss on House Property for the interest he is paying for the loan taken to buy his house worth Rs.1,00,000. The Gross total income will be Rs.8,36,000 (9,36,000-1,00,000).

Mr. A declares Rs.1,00,000 as investment under Section 80C and Rs.25,000 under Section 80D, the total taxable income will be Rs.7,11,000 (8,36,000-1,25,000). This is the net taxable income. And Mr. A's income tax rate would be:

For the first Rs,2,50,000 it is nil, for the next Rs.5,00,000 it will be 5% that is Rs.25,000. And on the balance of Rs,11,000, the tax rate is 20% amounting to Rs.2,200.

Mr. A's total annual tax is Rs.53,766 (Rs.52,200 plus the educational cess and higher education cess that is charged at 4% which is Rs.2088). The monthly tax that is levied on him will be Rs.4,480.50/-.

Computation of Tax

In the books of accounts the Computation of Tax will look like:

Particulars Amount Amount
Basic pay   XXXXX
+ Dearness allowance   XXX
+ Annuity   XXX
+ Bonus   XXX
+ Commission   XXX
+ Arrears of salary   XXX
+ House Rent allowance
  • Amount of HRA exempted
    + Leave travel allowance
  • Amount exempted on Leave travel allowance
    + Perquisites
    • Amount exempted
    + Other allowances
    • Amount exempted
    + VRS/ Retrenchment compensation
    • Amount exempted
    + Gratuity received
  • Exempted gratuity
    + Leave encashment
    • Exempted leave encashment
    + Pension
    • Amount exempted
    + Employers Contribution (in excess of 12% salary of employee)   XXX
    + Interest on PF in excess of the notified amount   XXX
    Gross Salary   XXXXX
    • Deductions under the Section 16:
    Entertainment allowance   XXX
    Professional Tax paid   XXX
    Income chargeable for tax under Salaries   XXXXX

    Always remember to declare your investments at the beginning of the tax year so that the employer can make the required deductions. If you have forgotten to declare at the beginning of the year, heavy taxes will be deducted throughout the year. If you have made any investments, you can show that and claim for refund at the end of the financial year.

    Holding on to more of your money is a key to building your wealth. So, it is important to know how much tax is being deducted from your salary and you must check if there are any other deductions that needs to be included.

    Calculating Income Tax:

    For an individual who pays tax, the knowledge about tax computation is a must. Not only do you get an idea of the amount of tax that you must pay, bust also you learn ways to save tax.

    How To Calculate Income Tax
    How To Calculate Income Tax

    Deductions on Income from Salary

    In the 2019 Union Budget, the tax deduction for salaried individuals has been raised from Rs.40,000 to Rs.50,000. Listed below are some of the deductions and allowances that can be availed to reduce the income tax liability: 

    • House Rent Allowance (HRA) exemption 
    • Leave Travel Allowance (LTA) 
    • Standard deduction 
    • Interest on home loan (under Section 80C and Section 24) 
    • Additional deduction for interest on home loan (under Section 80 EE and Section 80TTA) 
    • Deduction on medical insurance (under Section 80D) 
    • Deduction for donations (under Section 80G) 
    • Deduction for loan for higher studies (under Section 80E) 
    • Deduction on interest of savings account (under Section 80TTA) 
    • Section 80C, 80CCC, and 80CCD(1) 

    Note: The Standard Deduction from gross salary income is not allowable from the Financial Year 2005-2006.

    The total taxable income is after all the deductions are being made to the all the different heads of income.

    Computation of Tax Liability

    Once you have calculated your income tax, the next step in the process will be to calculate your total tax liability. Follow the below mentioned steps:

    • Your total income needs to be rounded off to the closest multiple of 10.
    • Next, classify the total amount into four parts: long-term capital gains, short-term capital gains, earnings from cardgames, lotteries etc., and the total amount that remains (that is ultimately rounded off).
    • Add up the computed tax.
    • Whatever the balance is, levy the surcharges.
    • Add education, secondary and higher education cess to the total calculated tax (including surcharges).
    • Check the rebates that are allowed after surcharges are added.
    • The remaining balance will be your total payable tax which is then rounded off to the closest multiple of 10.

    Computation of TDS on Salary

    Fundamentally, tax deducted at source is calculated on your existing CTC that includes multiple elements such as basic salary, medical allowance, special allowance, dearness allowance and more.

    Based on the wide array of investments that an individual might make for a certain financial year, the Indian government under Sections 80C and 80D of the Income tax Act, 1961, allows deductions that in turn helps the individual to opt for tax exemption.

    In order to get your tax exemption declarations approved, you will need to provide corresponding proofs and documents to your employer. Evaluate the following categories that are generally considered for exemption:

    • Travel Allowance
    • House Rent Allowance
    • Medical Allowance

    Gross Salary:

    You can invest under the Section 80C to a maximum of Rs.1,50,000. Or if you are in a higher tax bracket, you can save Rs.45,000 in tax.

    You can make the investment in Provident Fund, Life Insurance Premium, Equity Linked Savings Scheme, Home Loan monthly instalment, National Savings Certificate, Infrastructure Bond, Pension Funds, Tuition fees and Unit Linked Insurance Plan.

    Under Section 80D, a standard deduction of Rs.40,000 pertaining to the existing transport allowance and miscellaneous medical costs has been proposed by the Finance Minister. Despite that, transport allowances for differently-abled individuals will continue to be available at the same rate. This proposal will thereby lessen the tax liability of middle-class employees. This standard deduction allowance is expected to effectively benefit people who earn from pensions. The Government is said to have reserved an amount of Rs.8000 crore for this purpose.

    Under Section 80D, you can claim Rs.25,000 as medical expenses and Rs.30,000 can be claimed by senior citizens.

    As per Union Budget 2018, under Section 80D, the deduction limit for premiums paid on health insurances or other medical expenditures was increased from Rs.30,000 to Rs.50,000.

    Additionally, the deduction limit for expenses incurred on critical illnesses (pertaining to senior citizens) has been raised to Rs.1 lakh from an earlier amount of Rs.60,000 (for senior citizens) and Rs.80,000 (for super senior citizens), under Section 80DDB.

    These tax concessions are sure to provide an extra tax benefit of Rs.4,000 crore to senior and super senior citizens. In addition to these concessions, Finance Minister, Arun Jaitley has also proposed an extension of the Pradhan Mantri Vaya Vandana Yojana up until March 2020, under which an 8% tax return is guaranteed by the Life Insurance Corporation of India.

    The deductions on House Rent Allowance is the least of the following:

    • Either the actual HRA amount.
    • 50% of your basic pay if the employee is living in metro and 40% if the employee is living in a non-metro area.
    • Additional rent paid above 10% of his salary.

    While you have a house of your own, you cannot claim deductions for Home loan interest payment and rent. But some people do claim both while they are living in their own homes. If they are staying with their parents, they show that they are paying rent to their parents and claim the HRA. The other case is when you have your own house, but you stay in a rented accommodation, as the workplace is far from your home. You can then claim HRA as well as deduction for the home loan interest payment.

    Gross salary is the sum total of Basic pay + Dearness allowance + House Rent Allowance + transport allowance + special allowance + other allowance.

    Income Tax Calculator FAQ's

    1. What is an assessment year?
    2. The year that follows the financial year is known as the assessment year.

    3. How is assessment year different from previous year (the last fiscal year)?
    4. From the perspective of Income Tax, financial year is the year that you earn your income, whereas assessment year is the year that you compute the taxes on your previous year’s income and make subsequent payments.

    5. Difference between an NRI and a person of Indian origin?
    6. A Non-Resident Indian or Overseas Indian is essentially an individual who resides outside the Republic of India but belongs to the Indian descent. A person of Indian origin is fundamentally born in India and has lived here their entire lives.

      Long-Term Capital Gains and Losses: If you have an investment that you have had a possession for more than 12 months before it was sold, then the corresponding gains or losses pertaining to those investments will be termed as long-term capital gains or losses.

    7. If I have paid more tax while filing tax returns, will I get a refund?
    8. If your tax liability is comparatively less than the amount that you have already paid as Income Tax, then you will definitely are eligible for a tax rebate or refund. Additionally, in case you have missed out on your investment declaration, you are still eligible for a rebate which in turn will save you huge chunks of money.

    9. What are receipts? Can all receipts be considered income?
    10. A written validation that a certain sum of money has been transferred from one party to another.

      No, not all receipts can be used to claim taxes. Receipts pertaining to medical, childcare expenses, work expenses that have not been reimbursed etc., can still be used to claim due taxes.

    11. What is considered as Income?
    12. The amount of money that you receive every month for providing your services to a company or an individual is essentially what ‘’income’’ stands for. It is this amount of money that is finally computed for tax deductions and rebates.

    13. What is the meaning of Income Tax Return?
    14. A form that is essentially prescribed for an individual to furnish his/her details of income that he/she has earned from multiple sources (heads of income) and the amount of taxes he/she has paid for the concerned financial year to the Department of Income Tax is what income tax return stands for.

    15. Will I still be required to file income tax returns if my employer deducts and deposits TDS on my behalf?
    16. Yes, most definitely! If your income exceeds the amount of Rs.2.5 lakh, you will be required to file your tax returns even if the deduction and deposit of TDS is being made by your employer.

    17. Is E-filing a compulsory activity?
    18. In most cases, yes, e-filing is necessary. In case your annual income is more than Rs.5 lakh or you have a tax refund to claim, only in these cases e-filing becomes a mandatory task!

    19. Is filing income tax returns absolutely important?
    20. If, during a particular financial year, your income has exceeded Rs.2.5 lakh, it will be a mandate to file an income tax return.

    21. How do I verify my tax return making use of EVC?
      1. Log in to the website of the department
      2. Choose the option for e-filed returns or forms from the option ‘’My Account’’
      3. Select ‘’Click here to view your returns pending for e-verification’’
      4. Choose the appropriate assessment year that you want to verify and then select from three options that are given in order to verify returns
    22. What is Taxable Income?
    23. Incomes that are charged for taxation under the Income Tax Law is known as Taxable Income.

    24. What is Exempt Income?
    25. The kind of income that is not included in the total taxable income, or is basically exempted from tax and is thereby non-chargeable, is known as exempt income.

    26. Are any documents mandated with the income tax return?
    27. No, as such document attachment is not a mandate. If and only you get a summon from Income Tax Department to submit your documents, should you do the same.

    28. What does TDS mean?
    29. Tax deducted at source or TDS is basically an adjustment made with the ultimate payable tax when income tax return is calculated.

    30. What is Form 16?
    31. It is a certificate provided by an employer to his employee wherein details of TDS deduction, allowances, and more are provided.

    News about Income Tax Calculator

    • No angel tax if startups comply with DPPIT February notification

      The Central Board of Direct Taxes (CBDT) has stated that startups which have received notices of assessment under Section 56(2)(viib) of the Income Tax Act will not have to pay angel tax if they are compliant with the notice sent out in February by the Department of Promotion for Industry and Internal Trade (DPPIT). The DPPIT had taken measures for safeguarding startups from this particular section of the I-T Act. The section would have considered any excess of capital that was raised by startups as income which would then be taxable. Now the definition of startup has been amended by the DPPIT. There is now a relaxation in the procedures and conditions in which startups can avail exemption from angel tax. They can now avail exemption from this section of the I-T A, if they have previously received such notices. This does not apply to the issue of shares which exceeds the face value of the shares and which fulfill the DPIIT conditions. The notification states that all startups will receive exemption of angel tax irrespective of the share premium values if the aggregate amount of the share premium after issue or the proposed issue of the share and the paid-up share capital does not exceed Rs.25 crore.

      7 March 2019

    • Bhubaneswar Municipal Corporation Hands Out Hand-Held Devices to North Zone Tax Collectors

      The Bhubaneswar Municipal Corporation, in an effort to digitally manage collections, has distributed to the North Zone tax collectors 13 hand-held devices. The collectors can now give citizens system-generated payment receipts at their homes. The Corporation Hall had organised a meeting where tax collectors received the devices from Mayor Ananta Narayan Jena, saying that it was the first step that the state had taken towards digitising the management of collections as the devices are GPRS-enabled. They work with SIM cards in the same manner as other smart devices.

      26 September 2018

    • Indian Residents as well as NRIs can make the most of ELSS Tax Benefits

      Tax savings can be done under Section 80C of the Income Tax Act through equity-linked saving schemes. Investments in these schemes to the extent of Rs.1.5 lakh can be claimed as deductions, and these benefits can be claimed by Indian residents as well as non-resident Indians. In case you earn taxable income from other sources or a house property in India, it makes sense to invest in mutual funds. The taxation structure for mutual funds in India are such that capital gains from ELSSs are charged 15% tax if the units are redeemed within a year, and the tax rate applicable to them is 10% in case redemptions are made after a year. Moreover, long-term capital gains to the extent of Rs.1 lakh in a particular fiscal year are exempt from tax. However, short-term capital gains are added to the overall income of an individual and taxed at a marginal tax rate.

      31 August 2018

    • More Than Half of Property Tax Payments Made Online

      More than 50% of the property tax collections in PCMC limits have been made online. According to the additional commissioner and head of the property tax department, Dilip Gawde, the collections made by the department amount to Rs.223.90 crore. These collections were made from more than two lakh property holders until the 8th of August. Out of the aforementioned amount, Rs.119.34 crore was collected from 1.08 lakh property holders online. The total number of property holders in the city is approximately four lakh. The facility to make tax payments only was made available only recently through the BHIM app launched by the Union Government, and has turned into quite a successful venture so far.

      27 August 2018

    • The industry ministry targets ease of doing business at the district level

      An extensive action plan has been proposed by the commerce and industry ministry. This action plan includes the digitisation of land records and online publication of water tariff rates for users of all types. This decision has been taken to promote the ease of doing business at the district level. The recommendations are for different departments and offices at the district level. This includes the urban local bodies, district magistrate, sub registrar officer, stamps and registration department, Office of Collector, and municipal corporations. This decision has been taken as per the drafted plan that has been put in the public domain for stakeholders’ comments. At the district level, all the concerned offices and departments have been suggested by the ministry to put the primary focus on putting up all the relevant information on the websites and promote paperless transactions and digitisation of documents alongside.

      As per the recommendations, the designing and implementation of a system that enables the online submission of application, payment, tracking, and monitoring without the need for a point of touch would help in improving the ease of doing business. The DIPP also suggested that adding land and property tax payment records of the last 2 years also need to be digitised. The areas where the department has recommended reforms include starting a business, land record enabler, urban local body services, registration, paying taxes, obtaining the approval for construction, and paperless courts and law and order.

      23 August 2018

    • GST on cement, ACs, and TVs likely to be cut: Arun Jaitley

      In a recent Facebook post, Union Minister Arun Jaitley wrote that the taxes have not been increased for any product under GST. He also added that GST Council is working on phasing out the highest tax slab under the GST system, i.e. 28%, gradually. The 28% tax slab will be levied only on luxury goods and sin goods once the revenues are stabilised. Other goods which are present in the highest tax slab other than the luxury goods and sin goods are cement, air conditioners, large screen televisions, and a few other goods.

      Jaitley said that earlier complicated indirect tax system was a “Congress legacy tax”. He also added that after taking the excise duty, Value Added Tax (VAT), and the central sales tax along with the cascading effect of the taxes, the tax rate worked out to 31%. The Union Minister concluded that the NDA government has successfully reduced the cost to the consumers of goods and also boosted the purchasing capacity and thus, added to the consumption in the Indian economy.

      20 August 2018

    • Income Tax Department clears Rs.7,000 crore GST refunds of exporters

      The Income Tax Department (ITD) has refunded half of the pending Goods and Services Tax (GST) refunds of exporters within the first nine days of the ongoing special refund fortnight. The Central Board of Indirect Taxes and Customs (CBIC) tweeted that more than Rs.7,000 crore of IGST/ITC refunds has been already sanctioned in the ongoing Special Refund Fortnight.

      Exporters and traders were asked to visit their respective jurisdictional GST office or Customs House/Port during the time period from 31 May 2018 to 14 June 2018 and settle the pending claims. Due to various mismatches, refunds worth Rs.14,000 crore (approximately) were stuck. The CBIC had organised the special drive for fast track clearances. The refunds which were held up due to mismatches in the GSTIN mentioned in the shipping bills and the return forms were also allowed for clearance by the CBIC. However, these GST refunds were initiated and were based on the PAN of the exporters.

      15 June 2018

    • No GST on free services banks offer, clarifies government

      The Central Board of Indirect Taxes and Customs (CBIC) has recently issued a 32-page document which covers all the frequently asked questions (FAQs). These FAQs are based on the topic of applicability of the Goods and Services Tax (GST) on the banking sector, the insurance sector, and the stock broking services.

      The month of April saw a lot of chaotic reactions when CBIC had sent service tax notices to the banks. These notices were issued to notifying the banks about the non-payment of service tax, interest, and penalty on some of the free services that are extended by the banks towards their customers. Following this incident, the Department of Financial Services had approached CBIC asking for a clarification on the subject. The recently issued FAQs are in relation to this. The FAQs have clearly stated that free services provided by the bank like ATM withdrawals, cheque book issuance, etc. will not be counted under the GST regime. However, the FAQ document also mentions that any “related activity” which attracts a separate charge will come under the Goods and Services Tax limits “if other elements of taxability” are present.

      7 June 2018

    • Finance Secretary says that the fall in GST collection is not a matter to worry about

      After the fall in the amount of GST collection from Rs.1.03 lakh crore in April to Rs.94,016 crore in May, the Indian Finance Secretary Hasmukh Adhia said that there is nothing to be worried about. In a series of tweets published by him, Adhia said that April is traditionally the month of lowest collection. Thus, the comparison between the GST collection of April and May is not justified.

      Adhia tweeted, “As per the experience of last 5 years, the average collection of taxes on goods and services during April is approx 7.1 per cent of the annual taxes as against 11 per cent for March.”

      Revenue proceeds collected from Goods and Services Tax (GST) returns filed in April was a record amount of Rs.1.03 lakh crore, while the same for the month of May was Rs.94,016 crore. The returns filed in April were in regards to the business activities for the month of March and the returns filed in May were in regards to the business activities of April.

      6 June 2018

    • BJP’s Sushil Modi deflates Centre’s GST way to bring down fuel prices

      The Deputy Chief Minister of Bihar, Sushil Kumar Modi told the press that it is a misconception that bringing petroleum products under the Goods and Services Tax (GST) regime, will lower the prices of fuel. This statement contradicted the claims of the central ministers who stated that bringing the fuel prices under GST will be a probable solution to control the rising prices of fuel.

      Recently, the fuel prices have hit record high rates and that has invited strong criticism from the opposition parties. The main reason behind the price rise is the surge in the global crude oil prices. However, fuel is heavily taxed by the central and state governments and that accounts for around 50% of the retail price of petrol and diesel.

      31 May 2018

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