BAJAJ BROKING
July 25, 2024
8 mins read
Discover how our user-friendly income tax calculator helps you accurately estimate your tax liabilities. Learn how to use it, discover its benefits, and understand the factors influencing your taxes. From claiming deductions to choosing the right tax regime, simplify your tax calculations and enhance your financial planning.
It is the season for taxes! We understand how difficult it can be to calculate income tax, especially when there are investments, home loans and car loans involved. This is where a valuable tool comes in handy – an easy-to-use online income tax calculator!
With just a few clicks, you can now see how different types of income and expenses affect your tax liabilities, thereby enabling you to plan your finances better. This tool helps you estimate your tax liability accurately; whether you follow the old regime or the new regime.
The income tax calculator ensures that all relevant deductions and exemptions are factored in, saving time and effort on your part. In this blog, we will discuss what an income tax calculator is, how it can be used effectively, its advantages as well as other factors affecting personal finance. Let’s get started!
An Income Tax Calculator is a user-friendly online tool which helps you calculate income tax based on the taxable income earned during the financial year. All you need to do here is input certain details such as annual earnings, sources of income, investments made towards various schemes, applicable deductions, etc. And within seconds, you would know what amount of income tax you are liable to pay.
By using an online tax calculator, you can also take into consideration other aspects like exemptions available under various sections of the Income Tax Act. It also calculates the expected refunds, if any. To make the most out of it, let us see how you can effectively use it.
Here are some general steps that you should follow when using an income tax calculator for maximum effectiveness.
Step 1: Choose Your Occupation
For the most accurate estimation of taxes, determine if you are salaried or self-employed.
Step 2: Fill in Personal Details
If you are a salaried individual, provide information such as:
Annual Income – Include bonuses and allowances
HRA Received – Indicate how much you get as HRA annually
Basic Salary – Your basic yearly wage
Income from Other Sources – Any extra money earned (e.g., interest/dividends)
Rent Paid – Mention the yearly rent paid if applicable.
Step 3: Declare Your Investments
Calculate and declare your investment details:
Section 80C Investments (Mutual Funds, Life Insurance etc.)
Health Insurance Premiums (Under Section 80D)
Home Loan Interest (If applicable for deduction purposes)
Step 4: Opt for a Tax Regime
New or old tax regime? Select the one with higher deductions and slab rates.
Step 5: Review Inputs
Verify everything before moving forward. All information entered must be correct. Otherwise, the results will not be accurate.
Step 6: Calculate Tax Liability
Click on “Calculate/Compute” after filling required fields, whereupon your estimated tax liability will be displayed.
Now that you know how to effectively use the income tax calculator, let’s talk about what are its benefits.
Enhanced Accuracy
The most significant benefit of a tax calculator is its accuracy. Manual calculation may come with errors while online tax calculator ensures the correctness of your tax calculations.
Fast and Convenient
Tax computation becomes fast when using the online tax calculator since it can be done from anywhere. This method saves time compared to the traditional ways to calculate income tax.
Secure Data Handling
When you calculate taxes on paper, there is a risk that someone might inappropriately get access to your financial details. This calculator protects the privacy of your sensitive personal data, ensuring security.
Ease Of Use
The online income tax calculator is designed to be simple and easy to use. By entering basic personal, financial, and income details, you can quickly obtain an accurate estimate of your tax obligations, making the tool accessible to everyone.
Improved Expense Management
Knowing your tax liability in advance helps in better financial management. This foresight allows you to plan your other financial needs and expenses, and invest in tax-saving instruments like ELSS and PPF to reduce your tax liability.
Multiple factors determine the income tax liability of a person. The following is a brief overview of some factors that determine how much tax you pay.
Residential Status
Residential status significantly affects tax liability. If an individual qualifies as a ‘Resident and Ordinarily Resident’ (ROR), they are subject to taxes on global income. If someone is a ‘Resident but Not Ordinarily Resident’ (RNOR), only India-sourced income will attract taxation while for non-residents (NR), only income earned from within India shall be taxed.
Sources of Income
Different types of incomes have varying tax rates applicable to them. Salary attracts taxes within slabs whereas business/professional gains are taxed based on the profits made. Capital gains can be short-term or long-term based on the type of asset involved.
Allowances and Exemptions
There are various deductions which can be claimed to reduce the taxable income. These deductions are provided under sections like 80C and 80D, among others. Furthermore, exemptions such as House Rent Allowance (HRA) and Leave Travel Allowance (LTA) also help in reducing one's overall taxable income.
Tax Regime
Tax rates differ depending on the tax regime chosen by the taxpayer. For AY 2024-25, the old regime has prescribed these brackets for charging tax: no tax up to ₹2.5 lakh, 5% between ₹2.5-₹5 lakhs, 20% between ₹5-₹10 lakhs, and 30% beyond ₹10 lakhs.
Under the new regime, there is no tax until ₹3 lakh; 5% tax between ₹3-₹6 lakhs; 10% between ₹6-₹9 lakhs; 15% between ₹9 lakh-₹12 lakhs; 20% between ₹12 -₹15 lakhs, and 30% beyond ₹15 lakhs.
Surcharge and Cess
High earners may have to pay more in taxes because of a surcharge or cess. A surcharge is an additional fee levied on individuals with higher incomes, while health and education cess at 4% is charged on the total tax plus any applicable surcharges.
Investments and Savings
Some investments can help you save on taxes. For example, you can invest in PPF or ELSS and avail tax deduction benefits under Section 80C. Furthermore, under section 24(b), interest paid on home loans is deductible from your taxable income, thereby reducing the tax liability.
Section 80C
In India, Section 80C is among the most popular means of saving income tax. By saving or spending on specified tax-saving instruments, you can claim a deduction of up to ₹1.5 lakh. Here are some investments that qualify for exemption under Section 80C:
Premium paid for life insurance
National Savings Certificate
Pension schemes
Employee Provident Fund
Equity Linked Savings Scheme
Sukanya Samriddhi Account
Home loan principal repayment
Tuition fees for children
Medical Insurance Premium (Sec 80D)
Under section 80D, you can claim deductions on health insurance premiums paid for yourself, family members and dependent parents. The deduction is subject to the following limits:
₹25,000 for premiums paid for self and family
₹50,000 for premiums paid for senior citizen parents
₹5,000 for health check-ups
For senior citizens, a maximum deduction of ₹50,000 is available towards medical expenses if not covered under the health insurance policy.
Interest on Home Loan (Sec 80C and Sec 24)
For self-occupied properties, homeowners can claim a deduction of up to ₹2 lakh towards interest on home loans. In the case of let-out properties, the entire interest can be claimed as a deduction. This is over and above the principal repayment deductible under section 80C.
Deduction for Loan for Higher Studies (Sec 80E)
As per this section, interest on loans taken for higher studies can be deducted. This benefit can be availed for up to 8 years starting from the year when the repayment begins or till the entire loan is repaid, whichever comes earlier. Such loans may be taken by the individual, his spouse, children or even a legal guardian.
Donations (Sec 80G)
Tax deductions for donations made to charitable organisations are provided under section 80G. Depending on the organisation, the deduction allowed is either 50% or 100% of the donation, subject to any restrictions, if applicable.
Interest from Savings Accounts (Sec 80TTA)
Interest from any savings account is eligible for a deduction of up to ₹10,000 as per Sec 80TTA. However, for senior citizens, this limit is ₹50,000; which also includes interest from recurring deposits and fixed deposits.
Let’s assume you have a gross total income of ₹10 lakhs for the FY 2023-24. Here’s how the calculation of income tax is done under the old tax regime.
Particulars | Sub Total | Total |
Gross Total Income | ₹10,00,000 | |
Less: Deductions | ||
Section 80C (Investments) | ₹1,50,000 | |
Section 80D (Medical Insurance) | ₹25,000 | |
Standard Deduction | ₹50,000 | |
Total Deductions | ₹2,25,000 | |
Net Taxable Income | ₹7,75,000 | |
Income Tax on Taxable Income | ||
Up to ₹2,50,000 | Nil | |
₹2,50,001 to ₹5,00,000 @ 5% | ₹12,500 | |
₹5,00,001 to ₹7,75,000 @ 20% | ₹55,000 | |
Gross Tax on Taxable Income | ₹67,500 | |
Cess (4% on Gross Tax) | ₹2,700 | |
Total Tax Liability | ₹70,200 |
Assuming the same gross total income of ₹10 lakhs, here’s how the calculation of income tax is done under the old tax regime for the FY 2023-24.
Particulars | Sub Total | Total |
Gross Total Income | ₹10,00,000 | |
Less: Deductions | Nil | |
Net Taxable Income | ₹10,00,000 | |
Income Tax on Taxable Income | ||
Up to ₹3,00,000 | Nil | |
₹3,00,001 to ₹6,00,000 @ 5% | ₹15,000 | |
₹6,00,001 to ₹9,00,000 @ 10% | ₹30,000 | |
₹9,00,001 to ₹10,00,000 @ 15% | ₹15,000 | |
Gross Tax on Taxable Income | ₹60,000 | |
Cess (4% on Gross Tax) | ₹2,400 | |
Total Tax Liability | ₹62,400 |
The income tax calculator is a tool that you can use to effectively calculate your income tax liability. To put it simply, you can easily figure out your tax payable by entering how much income you earned during the financial year, along with declaring investments and choosing the tax regime. Using an online income tax calculator saves time and prevents errors so that you can instantly get accurate data helpful for timely filing your ITR.
Disclaimer: Investments in the securities market are subject to market risk, read all related documents carefully before investing. This content is for educational purposes only. Securities quoted are exemplary and not recommendatory.
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Not everyone in India is required to file an income tax return (ITR). Generally, individuals below 60 must file if their annual income exceeds ₹2.5 lakhs (old regime) or ₹3 lakhs (new regime). For senior citizens (60-80 years), the threshold is ₹3 lakhs under both regimes. For super senior citizens (above 80 years), the threshold is ₹5 lakhs (old regime) or ₹3 lakhs (new regime).
Under Section 24 of the Income Tax Act, you can claim deductions on home loan interest. For self-occupied properties, the deduction limit is ₹2 lakh per year. For let-out properties, there is no upper limit on interest deductions.
For an annual salary of ₹10,00,000, the tax calculation under the new regime (FY 2023-24) is as follows: no tax on income up to ₹3,00,000; 5% on income from ₹3,00,001 to ₹6,00,000, resulting in ₹12,500; 10% on income from ₹6,00,001 to ₹9,00,000, resulting in ₹30,000; and 15% on income from ₹9,00,001 to ₹10,00,000, resulting in ₹15,000. The total tax liability is ₹60,000. Adding a 4% health and education cess (₹2,400) brings the total tax payable to ₹62,400.
The tax calculator primarily helps you calculate your total tax payable based on your taxable income, expenses, age, investments, and other deductions. It does not specifically calculate Tax Deducted at Source (TDS).
The amount of tax deducted from your salary depends on various factors such as your income, age, and chosen tax regime (old or new). Key points include a standard deduction of ₹50,000, HRA exemptions for those living in rented accommodations, LTA exemptions, and varying tax rates based on income slabs. Additionally, deductions up to ₹1.5 lakh can be claimed under Section 80C for investments in PPF, EPF, life insurance premiums, etc. To accurately calculate the tax, you must use our online income tax calculator.
The simplest way to calculate income tax is to use the income tax calculator. By entering details like your income, investments, tax regime, etc, you can instantly get a clear picture of your tax liability.
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