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

    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.

    Union Budget 2018

    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.

    Example for Calculating Income Tax from Salary:

    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/-.

    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

    What is an assessment year?

    The year that follows the financial year is known as the assessment year.

    How is assessment year different from previous year (the last fiscal year)?

    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.

    Difference between an NRI and a person of Indian origin?

    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.

    If I have paid more tax while filing tax returns, will I get a refund?

    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.

    What are receipts? Can all receipts be considered income?

    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.

    What is considered as Income?

    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.

    News about Income Tax Calculator

    • GST Electronic Way Bill All Set to Make its Entry After a Much Anticipated Interlude

      Owing to multiple technical glitches in its system, the GST e-way bill’s launch date was pushed back by almost a month. After a much anticipated holdup, officials have at long last, announced its launch by the end of February.

      However, the trial phase of the e-way bill will continue to exist as it gradually enables the fast movement of goods using a hassle-free payment portal. This seamless payment portal is expected to reduce the waiting time of lorry drivers at state borders.

      The Indian Government’s trusted IT backbone, the National Informatics Center (NIC) is expected to present a tried and tested version of the electronic way bill framework by the end of this month.

      9 February 2018

    • GST Collections Could Increase Thanks To Increasing Tax Base

      Arun Jaitley, the Finance Minister of India, recently said that the financial math for FY 2017-18 has been affected as GST will only be collected for 12 months while expenditure will be recorded for 12 months. However, Mr Jaitley also said that there is an increase with regard to the number of taxpayers with each passing day, and that it will lead to greater compliance, which in turn could result in higher GST revenue. The Goods and Services Tax was implemented on July 1, 2017, and although there were initial hiccups due to which collections were affected, things are looking up as we head into FY 2018-19.

      8 February 2018

    • Retailers Concerned by Revisions to Goods and Services Tax

      Retailers were expecting some relaxation so far as the tax slabs for several different product categories were concerned. When asked about what they expected from Budget 2018, a good number of retailers said that their business was dipping and that they were hoping to find some relief through the latest Budget. In fact, one of the few changes that they sought from the Budget was the reduction in the GST rate on footwear. It is currently set at 18%, and retailers were hoping that the rate would be lowered in the Budget. Another major concern they faced was the regarding the filing of returns, which they expect to be made easier.

      7 February 2018

    • Interest on Government Savings Bond Up To Rs.10,000 Will Not Be Subject To TDS

      Arun Jaitley, the Finance Minister of India, in his budget speech said that there will be no TDS on the interest accrued on the newly introduced 7.75% government savings bonds, provided the interest accrued is under Rs.10,000 during a particular financial year. In case the proposal made by the Finance Minister is passed, the amendment shall come into effect on April 1. Individuals who wish to invest in these instruments are pleased to hear the news.

      7 February 2018

    • Budget 2018: Tax Changes in Mutual Funds

      There are two significant changes so far as Equity Mutual Funds are concerned. Arun Jaitley, the Finance Minister of India, announced in Budget 2018 on February 1 that profits made through equity mutual funds shall attract 10% tax. Any long term capital gain that exceeds Rs.1 lakh per annum on equity mutual funds shall attract 10% tax. Every single gain accrued until January 31 shall be ‘grandfathered’. The new cost to hold equity mutual funds can now be assumed as the closing value on January 31, 2018. Even dividends on equity mutual funds shall not attract tax at 10%. Every dividend in equity oriented funds and equity shall attract a tax of 10%.

      6 February 2018

    • India Getting Used To GST Implementation, Oil Price Remains Risky - S&P Global Ratings

      The Indian economy is doing well to adjust under the new tax regime and shaking off some of the woes that surfaced after the implementation of the Goods and Services Tax. However, there are concerns regarding oil prices. S&P Global Ratings recently revealed that the overall economic risks in the country are low and that bank credit and industrial output is picking up.

      The point of concern is that oil prices round the world have been increasing, which has contributed to an increase in diesel and petrol prices in India too. Most of the country's import bill reflects purchases of crude oil. The implementation of the Goods and Services Tax took place on July 1, 2017, and as a result, a number of local taxes have been subsumed.

      2 February 2018

    • Last Date For Filing of IT Returns Set At March 31, 2018

      Individuals who earned an income above the exempted limit over the course of FY 2016-17 are expected to file their income tax returns by March 31, 2018. Failure to file your returns by the specified timeframe can result in consequences. For instance, penalties will become applicable and interest will be charged on the tax amount due. According to a CA, the penalty can be up to Rs.5,000 under Section 271 of the Income Tax Act. Interest can also be charged on the tax amount due. If an individual has dues, interest payment can become applicable under Section 234A, 234B and 234C of the Income Tax Act. Apart from these disadvantages, failure to file your returns on time could also mean that your capital losses cannot be carried forward. The losses you make on your profession or business and the sale of long-term capital assets cannot be carried forward.

      31 January 2018

    • An Improved GST Filing Pattern

      For the new tax law of 2018, the GST Council has pondered over a few major changes that is bound to render the process of GST filing smoother, easier and more convenient. The new and improved system was discussed in a GST Council meeting recently.

      According to the proposed changes, from now on, the seller will have the complete liability to operate on a real-time basis. From sellers uploading invoices to buyers being able to view them on the window, the improved scenario imparts a more strategic yet easy approach to the existing GST filing norms.

      Upon accepting the invoices in order to claim credits, the seller henceforth will be able to disclose his/her liabilities on the portal GSTR 3B. This will be dependent on the invoices uploaded. However, it is also important to note that if any invoice has not been uploaded on the portal by the seller, the buyer will not be able to make a claim on the same.

      GST, as a tax regime will garner a lot of fondness, for the new and improved changes in its filing will amount to a substantial reduction in the number of returns filed on a regular basis.

      30 January 2018

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