# Income Tax Calculator Last Updated : 24 Feb 2020

An Income tax calculator is an online tool designed to do help with basic tax calculations. Tax calculators make use of information related to your income, deductions and HRA exemption to provide approximate figures of income tax to be paid. Bear in mind that the results provided by these calculators will not be exact. Lets read further to understand in detail how these calculators work.

You can use the following income tax calculator to understand the amount of tax you will be required to pay.

## How to Calculate Income Tax on Salary with an Example

Let us first take a look at some important concepts you should know before you start calculating your income tax on salary.

Salary Earned During Financial Year (FY) Assessment Year (AY)
1 April 2019 – 31 March 2020 2019-2020 2020-2021

The easiest way to calculate your tax liability is through an online income tax calculator. However, it can be done manually as well.

Let us consider the example of Mr. Dutta whose earnings include a basic salary of Rs.37,500 per month (i.e., Rs.4.5 lakh per annum) in the financial year 2019-2020.

• His salary also includes House Rent Allowance (HRA) of Rs.20,000 per month or Rs.2.4 lakh per year.
• The Leave Travel Allowance (LTA) is Rs.15,000 on an annual basis.
• There is also a special allowance component of Rs.10,000 per month (i.e., Rs.1.2 lakh per year).
• Mr. Dutta stays in Kolkata and pays rent of Rs.15,000 per month, which amounts to Rs.1.80 lakh per year.
• There is also an EPF component (Mr.Dutta’s share) that is deducted from his salary per month. This is equivalent to 12% of his basic salary on a monthly basis, i.e., Rs.(37,500 * 0.12) = Rs.4,500. On an annual scale this will amount to Rs.54,000.

## Step 1: Calculation of Taxable HRA

The first step is to identify the HRA chargeable to tax. Mr. Dutta uses an online HRA Calculator tool to determine the taxable component of his HRA. The manual method of calculating the taxable HRA component is not very complicated either. In this case, it is calculated as shown below:

The lowest value among the following will be exempt from tax:

• 50% of Mr. Dutta’s annual basic salary = Rs.(4.5 lakh * 0.5) = Rs.2.25 lakh
• HRA received on an annual basis = Rs.2.4 lakh
• Rent that is paid in excess of 10% of annual basic salary = Rs.(1.8 lakh - (0.1 * 4.5 lakh)) = Rs.1.35 lakh

Hence, the total taxable HRA = Rs.2.4 lakh – Rs.1.35 lakh = Rs.1.05 lakh

## Step 2: Calculation of Taxable Income from Salary

The annual gross income from his salary is outlined in the table below:

Component Total Amount Exemption Taxable Amount
Basic Salary Rs.4.5 lakh - Rs.4.5 lakh (A)
HRA Rs.2.4 lakh Rs.1.35 lakh Rs.1.05 lakh (B)
Special Allowance Rs.1.2 lakh - Rs.1.2 lakh (C)
LTA Rs.15,000 Rs.10,000 (travel bills submitted) Rs.5,000 (D)
Standard Deduction* Rs.50,000 (E)
Gross Income from Salary Rs.8.25 lakh (sum of the above rows in this column) A + B + C + D - E = Rs.6.3 lakh

*Standard deduction was proposed to be Rs.40,000 in the Union Budget 2018. In the Interim Budget of 2019, it was increased to Rs.50,000.

## Step 3: Calculation of Total Deductions

Now let us take a look at the investments made by Mr. Dutta.

• On an annual basis, consider that he has earned interest of Rs.9,000 from a savings account.
• He has also made investments in Public Provident Fund (PPF) and Equity Linked Savings Scheme (ELSS) during the financial year 2019-20. These investments amount to Rs.50,000 for PPF and Rs.15,000 towards ELSS.
• He is also paying premium worth Rs.10,000 for a life insurance policy and Rs.12,500 for a health insurance policy.

Mr. Dutta can claim tax deduction for each of these investments, as shown below:

Section Maximum Deduction Allowed Investments Eligible for Tax Deduction Deductions Claimed by Taxpayer
80C Rs.1.5 lakh PPF – Rs.50,000 (L) ELSS – Rs.15,000 (M) Life insurance – Rs.10,000 (N) EPF contribution deducted by employer – Rs.54,000 (O) L + M + N + O, up to a maximum limit of Rs.1.5 lakh = Rs.1.29 lakh
80D Rs.25,000 for self and Rs.50,000 for parents Health insurance – Rs.12,500 Rs.12,500
80TTA Rs.10,000 Interest from savings account – Rs.9,000 Rs.9,000

## Step 4: Calculation of Gross Income that is Taxable

The next step is the calculation of the gross taxable income for Mr. Dutta for the financial year 2019-20.

 Gross Taxable Income from Salary Rs.6.3 lakh Income from Other Sources Rs.9,000 (from savings account interest) Gross Total Income Rs.6.39 lakh Deductions under 80C Rs.1.29 lakh 80D Rs.12,500 80TTA Rs.9,000 Gross Taxable Income (Gross Total Income – Total Deductions) Rs.4,88,500

## Step 5: Calculation of Income Tax Liability

The final step is to analyse the income tax slabs and identify Mr. Dutta’s tax liability. The amount of tax he needs to pay is dependent on the tax slab that his income falls under. The tax slabs for the financial years 2019-2020 and 2018-2019 are as shown below. The amount due to be paid by Mr. Dutta is also indicated in the following table:

Income Slab Rate of Taxation Amount to be Paid
Below Rs.2.5 lakh No tax 0
Between Rs.2.5 lakh and Rs.5 lakh 5% 5% of (Rs.4,88,500 less Rs.2.5 lakh) = Rs.11,925
Between Rs.5 lakh and Rs.10 lakh 20% 0
Rs.10 lakh and above 30% 0
Cess 4% of total tax 11,925 * 0.04 = Rs.477
Total Income Tax Liability Rs.11,925 + Rs.477 Rs.12,402

*The above tax slabs are applicable to taxpayers below 60 years of age

Mr. Dutta is liable to pay the tax for the financial year 2019-2020 and will have to file the income tax returns during the assessment year 2020-2021.

Now that you have a clear idea of the income tax calculation on salary, here are some common income tax terms you may be interested in understanding:

## What is the difference between Exemption and Deduction?

Both exemption and deduction help reduce your tax liability, but these are availed under different sections of the Income Tax Act.

• Deduction is a reduction in the total taxable income based on Section 80 and Chapter VI-A. Specific kinds of spending such as investment in life insurance policies and payment of children’s tuition fee help you avail a tax deduction.
• Exemption is a specific amount that is excluded from the gross total income before calculating tax. Exemptions are available under Sections 10 and 54. Interest earned from tax-free bonds and salary components like LTA are examples of exemptions.

## News about Income Tax Calculator

• ### Online calculator to compare new vs old tax regime launched by income tax department

An online calculator to help taxpayers compare the old tax regime with the new tax regime and calculate their tax liability for each system has been launched by the income tax department. This will help them understand how much tax they would have to pay under the old regime, which has higher taxes but exemptions and deductions, versus how much they would have to pay in the new regime, which has lower taxes but a flat rate without any exemptions and deductions. This online calculator is available on the official e-filing website of the income tax department of the government of India. There will be a comparative table that will also be displayed that shows the difference in taxes between the two systems. To know the taxable income, taxpayers across all the income tax slabs can fill in their estimated income annually from all sources as well as all the deductions and exemptions that they are eligible for. This will help them understand which tax system may be better for them in the long run.

12 Feb 2020

• ### 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

## Disclaimer

Display of any trademarks, tradenames, logos and other subject matters of intellectual property belong to their respective intellectual property owners. Display of such IP along with the related product information does not imply BankBazaar's partnership with the owner of the Intellectual Property or issuer/manufacturer of such products.

reTH65gcmBgCJ7k