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.
Income Tax Calculator
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
Your salary is inclusive of Transport Allowance, Special Allowance, House Rent Allowance (HRA), and Basic Salary. In the old regime, certain salary components such as leave travel allowance, telephone bill reimbursement, and a part of the HRA were exempt from tax. However, if you choose the new regime, these exemptions are not available.
Given below is an example of how tax calculation works under the new regime when compared to the old one:
Assumptions
Basis Salary: Rs.90,000 per month
HRA: Rs.45,000 per month
Special allowance: Rs.20,000 per month
Leave Travel Allowance: Rs.18,000 per year
Rent that is Paid: Rs.25,000 per month
| Components | Amount | Deductions | Taxable amount under the old scheme | Taxable amount under the new scheme |
|---|---|---|---|---|
| Basis Salary | Rs.10,80,000 | Rs.10,80,000 | Rs.10,80,000 | |
| Special Allowance | Rs.2,40,000 | Rs.2,40,000 | Rs.2,40,000 | |
| HRA | Rs.5,40,000 | Rs.3,00,000 | Rs.2,40,000 | Rs.5,40,000 |
| LTA | Rs.18,000 | Rs.10,000 (bills must be submitted) | Rs.8,000 | Rs.18,000 |
| Deductions (Standard) | - | Rs.50,000 | Rs.50,000 | - |
| Gross Income | Rs.15,80,000 | Rs.18,78,000 |
In order to calculate the income tax, the below-mentioned details must be included:
- Salary.
- Rental income or interest that is paid for a home loan.
- Income from your profession, business, or freelancing.
- Income that is generated from selling shares or a house.
- Interest that is generated from a fixed deposit account, savings account, or bonds.
Under the new regime, several exemptions such as telephone bill reimbursement, investments made in savings instruments such as PPF, NPS, EPF, etc., and HRA are not available. The calculation of the gross taxable income under the new regime and the old regime are mentioned below:
New Regime
Calculation of Gross Taxable Income
| Components | Amount | Total |
|---|---|---|
| Salary | Rs.18,78,000 | |
| Income that is generated from other sources | Rs.30,000 | |
| Gross Total Income | Rs.19,08,000 | |
| Total Income Tax | Rs.3,22,296 |
| Components | Percentage | Taxable Amount |
|---|---|---|
| Up to Rs.2,50,000 | No tax needs to be paid | 0 |
| Rs.2,50,000 – Rs.5,00,000 | 5% (Rs.5 lakh – Rs.2.5 lakh) | Rs.12,500 |
| Rs.5,00,000 – Rs.7,50,000 | 10% (Rs.7.5 lakh – Rs.5 lakh) | Rs.25,000 |
| Rs.7,50,000 – Rs.10,00,000 | 15% (Rs.10 lakh – Rs.7.5 lakh) | Rs.37,500 |
| Rs.10,00,000 – Rs.12,50,000 | 20% (Rs.12.5 lakh – Rs.10 lakh) | Rs.50,000 |
| Rs.12,50,000 – Rs.15,00,000 | 25% (Rs.15 lakh – Rs.12.5 lakh) | Rs.62,500 |
| Above Rs.15,00,000 | 30% (Rs.19.08 lakh – Rs.15 lakh) | 1,22,400 |
| Cess | 4% (Rs.12,500 + Rs.25,000 + Rs.37,500 + Rs.50,000 + Rs.62,500+ Rs.1,13,400) | Rs.12,396 |
| Total Income Tax | Rs.3,22,296 |
Old Regime
Assumptions
Interest generated from Savings Account: Rs.5,000
PPF: Rs.40,000
ELSS: Rs.10,000
LIC Premium: Rs.6,000
Medical Insurance: Rs.10,000
EPF Contribution: Rs.1,15,200 can be claimed in a year
| Type of Deduction | Maximum Deduction | Eligible Amount | Amount Claimed |
|---|---|---|---|
| Section 80C | Rs.1,50,000 | Rs.40,000 + Rs.10,000 + Rs.6,000 + Rs.1,15,200 | Rs.1,50,000 |
| Section 80D | Rs.25,000 (self) Rs.50,000 (parents) | Rs.10,000 | Rs.10,000 |
| Section 80TTA | Rs.10,000 | Rs.5,000 | Rs.5,000 |
| Total | Rs.1,65,000 |
Calculation of Gross Taxable Income
| Components | Amount | Total |
|---|---|---|
| Salary | Rs.15,80,000 | |
| Income that is generated from other sources | Rs.30,000 | |
| Gross Total Income | Rs.16,10,000 | |
| Deductions under Section 80C | Rs.1,50,000 | |
| Deductions under Section 80D | Rs.10,000 | |
| Deductions under Section 80TTA | Rs.5,0000 | Rs.1,65,000 |
| Gross Income that is Taxable | Rs.14,45,000 | |
| Payable Tax, inclusive of Cess | Rs.2,55,840 |
| Components | Percentage | Taxable Amount |
|---|---|---|
| Up to Rs.2,50,000 | No tax needs to be paid | 0 |
| Rs.2,50,000 – Rs.5,00,000 | 5% (Rs.5 lakh – Rs.2.5 lakh) | Rs.12,500 |
| Rs.5,00,000 – Rs.10,00,000 | 20% (Rs.10 lakh – Rs.5 lakh) | Rs.1,00,000 |
| Above Rs.10 lakh | 30% (Rs.14.45 lakh – Rs.10 lakh) | Rs.1,33,500 |
| Cess | 4% (Rs.12,500 + Rs.1,00,000 + Rs.1,33,500) | Rs.9,840 |
| Total Income Tax | Rs.2,55,840 |
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.
FAQs on Income Tax Calculator
- Can I avail the Income Tax Calculator facility on the official website of Income Tax Department India?
- Visit the official website of Income Tax Department
- Scroll down and under ‘Important Links’ you will be able to find ‘Tax Calculator’
- Click on tax calculator and you will be directed to a new page
- Enter the details as required, and you will be able to view the total tax liability
- For which assessment year can I calculate my tax liability?
- Who all can use this tax calculator?
- Do I have to pay anything to avail the Income Tax Calculator facility?
- Can firms and foreign companies use the Income Tax Calculator?
Yes, you can visit the official website of Income Tax Department and follow the steps to calculate your tax:
You can calculate your tax liability for year 2020-21 on the Income Tax Department of India.
All those who are eligible to pay their tax can use this calculator.
No, you can use the facility for free. You do not have to pay anything.
Yes, firms, companies, and foreign companies can also use the income tax calculator facility available on the Income Tax Department of India.
