• Income Tax Calculator - Calculate Income Tax Online for FY 2018-19, 2017-18 & 2016-17

    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.

    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.

    Calculating Income Tax on Salary
    Income Tax Calculator

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

    Deductions on Income from Salary

    The deductions on Income from Salary falls under the Section 16 of the Income Tax Act. The deductions are:

    • Entertainment Allowance under Section 16(ii): Deduction is allowed by way of entertainment allowance given by an employer. This deduction is available only for the Government employees. The deduction is either the 1/5th of salary without including the benefits or perquisites or other allowances or Rs.5,000, whichever is lesser. The non-government employees can't avail this deduction.
    • Tax on Employment under Section 16(iii): The Professional Tax is allowed as a deduction while computing income from salaries.

    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.

    How to Calculate Income Tax from Salary with Example

    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 3% which is Rs.1,566). The monthly tax that is levied on him will be Rs.4,480.50/-.

    How To Calculate Income Tax
    How To Calculate Income Tax

    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
  • XXX (XXX) XXX
    + Leave travel allowance
  • Amount exempted on Leave travel allowance
  • XXX (XXX) XXX
    + Perquisites
    • Amount exempted
    XXX (XXX) XXX
    + Other allowances
    • Amount exempted
    XXX (XXX) XXX
    + VRS/ Retrenchment compensation
    • Amount exempted
    XXX (XXX) XXX
    + Gratuity received
  • Exempted gratuity
  • XXX (XXX) XXX
    + Leave encashment
    • Exempted leave encashment
    XXX (XXX) XXX
    + Pension
    • Amount exempted
    XXX (XXX) XXX
    + 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.

    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.

    Income Tax Slab Rates for Senior Citizens (more than 60 years but less than 80 years at any given time in the year)

    Taxable Income Rates
    0 to Rs.3,00,000 NIL
    Rs.3,00,000 to Rs.5,00,000 5%
    Rs.5,00,000 to Rs.10,00,000 20%
    More than Rs.10,00,000 30%

    Income Tax Slab Rates for Super Senior Citizens (a resident of India who is 80 years old or more at any given time in the year)

    Taxable Income Rates
    0 to Rs.5,00,000 NIL
    Rs.5,00,000 to Rs.10,00,000 20%
    More than Rs.10,00,000 30%

    To get a better understanding of TDS, let us take a look at its deduction rates for FY 2017-18

    Tax Rates for Indian Citizens below 60 years of age

    Total Income (Annual) Rates Education Cess Higher and Secondary Education Cess
    0 to Rs.2,50,000 NIL NIL NIL
    Rs.2,50,001 to Rs.5,00,000 5% 2% of the total Income tax 1% of the total Income tax
    Rs.5,00,001 to Rs.10,00,000 Rs.12,500 and an additional 20% 2% of the total Income tax 1% of the total Income tax
    More than Rs.10,00,000 Rs.1,12,500 and an additional 30% 2% of the total income tax 1% of the total income tax

    Tax Rates for Indian Citizens who are below 80 years in age but above 60 years

    Total Income (Annual) Rates Education Cess Higher and Secondary Education Cess
    0 to Rs.3,00,000 NIL NIL NIL
    Rs.3,00,001 to Rs.5,00,000 5% 2% of the total income tax 1% of the total income tax
    Rs.5,00,001 to Rs.10,00,000 Rs.1000 and an additional 20% 2% of the total income tax 1% of the total income tax
    More than Rs.10,00,000 Rs.1,10,000 and additional 30% 2% of the total income tax 1% of the total income tax

    Tax Rates for super senior residents of India

    Total Income (Annual) Rates Education Cess Higher and Secondary Education Cess
    0 to Rs.5,00,000 NIL NIL NIL
    Rs.5,00,001 to Rs.10,00,000 20% 2% of the total income tax 1% of the total income tax
    More than Rs.10,00,000 Rs.1,00,000 and an additional 30% 2% of the total income tax 1% of the total income tax

    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

    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

    • Agriculture Income Tax Law May Not Change

      The Central Government, in a response to a petition that sought the exclusion of rich farmers from the advantages of tax exemption, has said that agricultural income tax is covered under the ambit of state governments. As such, only state governments could enact laws that impose tax on such an income. A number of political leaders from Punjab filed affidavits saying that there were affluent political leaders who had other businesses that gave them a good income, and still benefitted from the exemption on agricultural income tax. These leaders include Bhupinder Singh Hooda, Prakash Singh Badal, Kuljit Singh Nagra, Manpreet Singh Badal, Rana Gurjit Singh, and Sukhbir Singh Badal.

      23 April 2018

    • Government Tweaks Tax Concession Norms for Startups

      In order for startups to be able to easily attract investments from multiple sources, the Central Government recently allowed a tax concession for the sector. This however came with its own set of terms and conditions.

      Startups must have an investment (which includes angel investors’ funding), that does not go above the amount of Rs.10 crore, only then will they be able to avail the tax concession. According to a Commerce and Industry Ministry official, any angel investor that picks up stakes off of startups must have a Rs.2 crore net worth or must have a Rs.25 lakh average returned income for the last three fiscal years.

      19 April 2018

    • What You Should Do To Get Early Tax Refunds

      FY 2018-19 has kicked off and individuals across the country have the obligation to file their income tax returns for the previous financial year after having invested in tax-saving instruments in FY 2017-18. The start of a financial year is the best possible time to file your ITR, especially if you wish to get a tax refund. A refund will be given to you by the income tax authorities in case you have excess TDS deducted from your salary, or in case your investments were not taken into consideration when calculating TDS.

      It is important to note that a large number of tax refunds are not given to individuals as they were filed incorrectly or there was a mismatch in the details provided. Taxspanner.com’s co-founder and Chief Financial Officer, Sudhir Kaushik, has said that it is the taxpayer who is mainly responsible to get an early refund. He added that it takes two to three months on average for tax refunds to be processed in India, and sometimes they are processed sooner. However, it is not new for refunds to be delayed, and Mr Kaushik says that taxpayers are usually the ones responsible for these delays as they may have provided incorrect details.

      It is therefore essential to ensure that every bit of information entered in your ITR form is accurate, as doing so will enable the Income Tax Department to process your refunds sooner rather than later.

      Incorrect Details Causing Delay in Refunds

      There are instances wherein individuals have filed their income tax returns with a claim for a refund, but the refund is not given to the person. The reasons for this could be as follow:

        • After your verified income tax returns have been assessed by the Income Tax Department, and it finds that you are not eligible for a refund, a notice will be sent to you under Section 143 (1) of the Income Tax Act, 1961. This notice will be sent you once your returns have been processed. In case the notice shows that you are due a refund, the department will issue the same to you. However, if the notice says ‘nil’, then your claim was probably rejected by the department due to mismatch in calculations.

        • In case your refunds are processed by the department, but you still haven’t got it, it could be possible that you have entered incorrect bank details or address details in your ITR form.

      In case you haven’t received your refund because you had provided incorrect details in your ITR form, the department can be requested to re-issue the refund once you have provided the right bank details. To do so, you will have to visit the income tax e-filing website, sign in, and make a request by clicking on ‘service request’ under the tab that says ‘My Account’.

      Once your income tax returns have been filed and verified, you can check its status in case you have claimed a refund. Doing so not only helps in tracking the processing of your refunds, but it also aids in checking if any errors were made when filing your returns.

      18 April 2018

    • GST Applicable on Food Services Provided to Employees

      The Authority for Advance Ruling recently stated that all food and canteen expenses incurred will attract the Goods and Services Tax, the newly established indirect tax regime of India.

      The AAR branch that is based out of Kerala explained that food recovery expenses provided by a company to its employees pertaining to canteen services will henceforth be taxable as a kind of service which is included under the Goods and Services Tax.

      This rule came as a result of an application that was filed by Caltech Polymers, a Malappuram based manufacturing unit!

      18 April 2018

    • Growth of Goods Export in India at Six-year High

      The growth of goods export in India during FY 2017-18 was recorded at 9.8%, which marked a 6-year high, and this, despite all the complaints by exporters regarding GST refunds. The merchandise export of India was recorded growing from 5.2% just a year ago to 9.8% in FY 2017-18. It was the highest recorded figure since FY 2012-13. Although the performance of goods export was quite good, the gap between imports and exports also saw an increase to $13.7 billion at 28.5% in March 2018, which took the annual deficit from $47.7 billion in FY 2016-17 to $87.2 billion in FY 2017-18.

      17 April 2018

    • Flipkart’s Response to Income Tax Department’s Tax Penalty

      In what came as a response to statements made by the IT department earlier, Flipkart stated that on incomes that are fictional in nature, taxes cannot be levied on them. The largest ecommerce major of India recently challenged the income tax department’s provisions and rules surrounding marketing expenditure and capital expenditure discounts!

      A Flipkart official recently quoted that the income tax act does not mandate the sale of a certain product at a certain cost, therefore the revenue that is not earned cannot essentially act as a capital expenditure.

      The total expense of revenue and capital expenditure has been an issue of discord between Flipkart and the IT department for quite some time now. The problem fundamentally lies in the deep discounts that platforms such as Flipkart offer to market their platform.

      17 April 2018

    • Overdraft Facility Backed by GST Launched by Yes Bank

      An overdraft facility called ‘Yes GST’ has been launched by Yes Bank for MSMEs. By making use of this facility, an MSME can get an overdraft of up to Rs.1 crore depending on its yearly turnover. There will be no need for any extra assessment of bank statements or balance sheets. MSMEs can avail this overdraft facility against mortgage of commercial or residential property, and they have the option to use the sanctioned amount either in tranches or fully. So far as FY 2018-19 is concerned, Yes Bank aims to disburse Rs.1,000 crore via the new overdraft facility.

      16 April 2018

    • Employees’ Canteen Services to Attract GST

      No more free lunches for anyone! This is all too literally under the Goods and Services Tax. The Authority for Advance Ruling has said that food expenses must be recovered from canteen services offered to employees, and as such, these services will attract GST. The Authority for Advance Ruling gave a ruling following an application that was filed by Caltech Polymers based in Malappuram. The Authority was approached by the company as it sought advance ruling on the recovery of expenses on food, and the verdict was that canteen services are defined as outward supplies and will therefore attract GST.

      14 April 2018

    • Healthcare Dominates Human Lives as People Await Tax Returns

      Tax and subsequent return filing is well on its way towards becoming the a mundane and monotonous activity.

      However, according to a survey conducted recently, people all over the country are despairingly awaiting their income tax returns to incur healthcare costs and cover their medical bills. Evidently, expenditure on healthcare goes up by a surprising 60% right after people receive their tax refunds. Post that, the expenses continued to elevate for the next 75 days at the most.

      In a report released later, it was computed that people who file their income tax returns early on tend to receive refunds and returns in lump sum amounts. Despite that, deferred care is a problem that has become prevalent over the past few years and it is one to worry about! The dynamic of people’s cash flow largely determines how much each individual ends up saving at the end of a financial year.

      Non-health expenditure, on the other hand, stood consistently at a 54%!

      13 April 2018

    • About 47,000 Entities Attract Trouble for GST Evasion

      Over 47,000 entities based in metropolitan cities such as Mumbai have attracted trouble for evading GST. The Anti-Tax Evasion Department commenced scrutiny of entities that did not comply with the filing norms of the Central Goods and Services Tax Act. Manpreet Arora, the CGST and Central Excise department’s additional commissioner said that the department gave about seven months for people to get used to the new law and even conducted a number of programmes in an effort to spread awareness, but despite these initiatives, there are a number of businesses that haven’t paid their taxes and now it is time for them to face the music.

      13 April 2018

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