A term dreaded and evaded by some, income tax is usually covered in a mist of ambiguity for others. The high-sounding jargon associated with it, such as tax rebate, exemption, saving, deduction, etc. makes it complicated. We also comprehend that it is equally challenging for you to make sense of what part of your income is taxable and how you can save as much money as possible. A tax calculator comes handy in such situations to help you have a better understanding of how much tax you might have to pay. But before we move on to a tax calculator, let us first have a fair idea about what is an income tax.
What Is Income Tax?
It is an amount of tax paid to the government based on your earnings or gains during a financial year. The government also decides these tax slabs based on one’s age and income.
How To Calculate Income Tax?
Income tax is a set of complex calculations, which is why we will help you with the process of calculating tax from your taxable income. Follow the steps mentioned below to be able to do the math without a tax calculator.
- Calculating your gross income
The first step towards knowing how much tax you have to pay is calculating your gross income, including your House Rent Allowance (HRA), special allowances, Leave Travel Allowance (LTA) etc. You also need to add the amount of extra income such as rents, interest earned from deposits, capital gains you received, etc. The addition of all these earnings will give you your gross income.
- Removing all deductions from your income
You can further reduce your taxable income with the help of tax deductions. These deductions can be in the form of investments, savings, or spending on certain items.
- Arrive at your taxable income
After subtracting tax deductions, you will attain the income you will have to pay your taxes, depending on the category of tax slab you fall.
- Calculating your taxes
You will have to pay tax on your net taxable income. We have added a tax calculator below, based on which you can figure out the tax amount you are entitled to.
- You have to pay 0 tax for the first 2.5 lakh of your taxable income
- Then you will have to pay 5%, that is 12,500, for every 2.5 lakhs
- 20%, that is, 1,00,000 is what you will pay for the next five lakhs
- And you are entitled to pay 30% on the entire amount which exceeds ten lakhs
- Consolidating your net tax
You are entitled to tax incentives in the form of tax rebates offered by the government if your taxable income does not surpass a specified limit after deductions.
Conclusions
Income tax is not a nightmare if understood and aided with a proper tax calculator. Every citizen has to pay the government a certain amount of tax for the country’s various developments. You can always consult an expert on reducing the amount of tax you will be entitled to pay by taking up correct measures. Even an accurate tax calculator will help you know to do the math without leaving any doubts behind.