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  • 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

    • 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

    • Congress demands to bring petrol and diesel under GST

      Congress blamed the Narendra Modi led BJP Government for the over-rising price of petrol-diesel in India and demanded to bring these two products under the Goods and Service Tax (GST) with immediate effect. Congress also want a reduction in the excise duties and VAT imposed by the Centre and the State government on the petroleum products.

      According to Congress leader Pawan Khera, since May 2014 when Modi came to the rule, the excise duty on the prices of petrol and diesel has unprecedentedly increased by 211.7% and 443.6% respectively. Khera also claimed that the Modi government has failed to meet the expectations of the Indian citizens and it is high time that the Government fulfill their simple demands like bringing petrol-diesel under the GST regime and reducing the Central Excise, VAT and other taxes on these products.

      30 May 2018

    • How does 100% tax on petrol affect you

      The prices of petrol and diesel have been skyrocketing. There is no sign of their moderation. Recently, the price of petrol had hit an all-time high of Rs.84.70 a litre in Mumbai. Delhi, on the other hand, clocked Rs.76.87 per litre. Although external factors are partly responsible for the price rise, the taxes that have been levied by the central and state governments have brought a significant effect on the retail fuel prices. Currently, the tax levied on petrol is slightly more than 100%, while the same for diesel is around 66.48%. These taxes are inclusive of excise duty and Value Added Tax (VAT).

      However, the price at which fuel is sold to dealers has gone down while the retail prices kept increasing. Fuel pump dealers used to pay Rs.47.18 per litre for petrol in the financial year 2014, whereas now they pay Rs.37.19 per litre. Similarly, diesel was charged at Rs.52.68 per litre in 2014, which has now come down to Rs.37.42 per litre in April 2018.

      29 May 2018

    • Maharashtra Contractors to meet on 30th May over lack of work, GST woes

      The Maharashtra State Contractors Association has called for a meeting in the Raigad district of Maharashtra on 30th May. The association has more than 2 lakh small contractors who are registered under the state government. The agenda of the meeting is to figure out a plan of action for their work as there is lack of government projects. In addition to that, they are also facing problems as their dues have not been cleared after the Goods and Services Act was implemented.

      Reportedly, the association has written a 4-page letter addressing the state government. The letter alleges the capital expenditure to be slashed. The letter also mentioned that the lack of contracts is also affecting the employment of 1.5 crore to 2 crore people who are dependent on these small contractors for their employment and livelihood.

      28 May 2018

    • Airline Chiefs to Discuss GST Issues with Jayant Sinha

      Jayant Sinha, the Minister for Civil Aviation, will be meeting with airline chiefs to discuss the implementation of GST and other taxation issues in the airline sector. The meeting is being held to discuss the proposal to bring aviation turbine fuel (ATF) under the GST. Doing so would allow airlines to claim input tax credit from the government.

      At present, receive credit only on VAT despite paying value-added tax (VAT), central sales tax, and excise duty on ATF. Implementing GST on airlines would mean a consolidation of all these taxes for which airlines can claim credit.

      Petroleum products do not fall under the scope of the GST and given the progressive increase in fuel prices, the Petroleum Minister has made an appeal to the GST council to include petroleum and diesel under the GST. It is believed that including ATF under the scope of the GST would benefit both the Centre and the State.

      With regard to claiming credit, including ATF under the GST and providing credit would be a far simpler process since the transactions are between airlines and oil companies and would be a B2B (business-to-business) transaction.

      25 May 2018

    • AAR Passes Order for 28% GST on e-rickshaw Tyres

      The Authority for Advance Rulings (AAR) in Maharastra has ordered a 28% GST on e-rickshaw tires since e-rickshaws are registered as ‘motor vehicles’ under the Motor Vehicles Act. The application was filed by Ceat Ltd to clarify whether e-rickshaws would be classified as three-wheeled powered cycle rickshaw.

      The AAR stated that e-rickshaws do not have a pedal and would have to be classified as motor vehicles and the same classification is registered with the transport authorities. Powered cycle rickshaw tyres attract a GST rate of 5% while the new pneumatic tyre attracts a GST rate of 28%. The 28% GST rate is the highest rate in the tax slab.

      24 May 2018

    • Income Tax Department cautions TDS deductors against quarterly filing default

      The Income Tax Department (ITD) has cautioned TDS (Tax Deducted at Source) deductors that a penalty of Rs.200 per day will be implemented on them in case of non-adherence to the deadline of filing their tax statements, i.e. 31 May 2018. The penalty will be charged for each day of default. The Central Board of Direct Taxes (CBDT) has recently issued an advertisement in leading national newspapers regarding the implementation of penalty. The advertisement also asked deductors who have deducted the tax but have not deposited the same, to do that immediately. Deductors are also asked to register themselves at the official website of the ITD and are advised to quote their TAN (tax deduction account number) and PAN (permanent account number) correctly.

      22 May 2018

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