How can you calculate your income tax?

Income tax is a critical point. It requires a precise calculation. It is important to realize what percentage of your income is being taxed and how you can save money. To know better, let’s start our blog on how you can calculate your taxable income and its benefits.

Step 1: Calculate your total income.

The first step is to sum up your income from all sources. It includes gross income generated by salary and other sources like dividends. It is divided into five sources of income:

• Salaried income
• House property
• Business or Possession
• Capital gain
• Other sources of income

The taxpayer can claim exemptions while calculating the income under each of these aspects. The amount on which you arrive at is your total gross income.

Step 2: Calculate the net taxable income.

The tax deductions enable taxpayers to reduce the taxable income through saving and investing in certain items. There is a standard deduction of Rs 50,000 available to every taxpayer without any criteria. Now you have to reduce investment eligible under Section 80.

Under the same Section 80, a taxpayer can claim up to Rs 1.5 lakhs of deduction for many investments and expenses. Some of the most popular ways to claim this deduction are as follows:

• Investments in PPF
• ELSS Investments
• Sukanya Smriddhi
• Mutual Funds
• Investments in EPF
• Sukanya Smriddh Yojanana etc.

To know more, taxpayers can refer to their respective official website or contact experts like InsideTax Consultants.

Step 3: Calculate your net taxable income 

Taxable income:

The taxable income can be defined as a person’s income minus the applicable tax liberties, deductions, and rebate.

It will include all the components of your salary, such as

• House Rent Allowance (HRA)
• Leave Travel Allowance (LTA)
• Special allowances, like food coupons and mobile reimbursements, etc.
• Standard Deduction
• Housing Loan (interest Principal)
• Mediclaim Deduction

After reducing the eligible deductions from the total taxable income, you will get the total income that is eligible for tax & basis tax slab.

Step 4: Calculate Your Taxes

An individual taxpayer has to pay tax on their taxable income. Certain limits have to be applied on the basis of annual income.

• The initial Rs. 2.5 lakh of your taxable income the amount deduction is zero
• For the next Rs. 2.5 lakhs, the taxpayer has to pay 5%, i.e., Rs 12,500
• Following 5 lakhs, it requires to pay 20% i.e. Rs 1,00,000
• If the taxable income exceeds Rs. 10 lakhs, it requires a huge share of 30% on the full amount.

Step 5: Merge Your Net Tax

Under Sec 87A Tax, a rebate is a type of tax incentive. It’s available for every individual who’s having an income below a defined limit. Suppose the total taxable income doesn’t exceed the 5 lakhs limit after deductions. A person can claim a rebate under Sec 87A of Rs 12,500.

Now, if your taxable income exceeds this limit of Rs 5 lakh, the taxpayer can claim on education and health expenses up to 4 percent into the tax amount to conclude the final amount to be paid.

Surcharges Applicable:-

The higher the income bracket, the higher the income tax percentage. People with 50 lakh to 1 crore income bracket have to pay 10 percent surcharge while exceeding the limit from 1 crore to 2 crores, and the charges will be 20 percent surcharge.

For better tax assistance, contact InsideTax consultants, the best income tax consultants in Delhi. A one-stop solution for your income tax assistance and financial plannings.