How much tax you should pay depends upon the tax slab applicable to your income. Income tax is calculated on the basis of these tax slabs.
| Income Slab | Tax Rate |
|---|---|
| Up to Rs.2,50,000 | No Tax |
| Rs.2,50,000 - Rs.5,00,000 | 5% |
| Rs.5,00,000 - Rs.10,00,000 | 20% |
| Rs.10,00,000 and beyond | 30% |
| Income Slab | Tax Rate |
|---|---|
| Up to Rs.2,00,000 | No Tax |
| Rs.2,00,000 - Rs.5,00,000 | 10% |
| Rs.5,00,000 - Rs.10,00,000 | 20% |
| Rs.10,00,000 and beyond | 30% |
| Income Slab | Tax Rate |
|---|---|
| Up to Rs.2,00,000 | No Tax |
| Rs.2,00,000 - Rs.5,00,000 | 10% |
| Rs.5,00,000 - Rs.10,00,000 | 20% |
| Rs.10,00,000 and beyond | 30% |
Click here to understand income tax slabs in detail.
Income tax calculation for the Salaried
Income from salary is the sum of Basic salary + HRA + Special Allowance + Transport Allowance + any other allowance. Some components of your salary are exempt from tax, such as telephone bills reimbursement, leave travel allowance. If you receive HRA and live on rent, you can claim exemption on HRA. Calculate exempt portion of HRA, by using this HRA Calculator.
On top of these exemptions, a standard deduction of Rs 40,000 was introduced in budget 2018. This has been increased to Rs 50,000 in budget 2019.
Let's understand income tax calculation by way of an example. Neha receives a Basic Salary of Rs 50,000 per month. HRA of Rs 25,000. Special Allowance of Rs 13,000 per month. LTA of Rs 20,000 annually. Neha pays a rent of Rs 20,000 and lives in Delhi.
| Nature | Amount | Exemption/Deduction | Taxable |
|---|---|---|---|
| Basic Salary | 6,00,000 | - | 6,00,000 |
| HRA | 3,00,000 | 1,80,000 | 1,20,000 |
| Special Allowance | 1,56,000 | - | 1,56,000 |
| LTA | 20,000 | 12,000 (bills submitted) | 8,000 |
| Standard Deduction | - | 50,000 | - |
| Gross Total Income from Salary | 8,34,000 |
To calculate income tax, include income from all sources. Include:
Neha has income from interest from savings account of Rs 8,400 and a fixed deposit interest income of Rs 10,000 during the year. Neha has made some investments to save income tax. PPF investment of Rs 50,000. ELSS purchase of Rs 20,000 during the year. LIC premium of Rs 8,000. Medical insurance paid of Rs 12,000. Here are the deductions Neha can claim.
| Nature | Maximum Deduction | Eligible investments/expenses | Amount claimed by Neha |
|---|---|---|---|
| Section 80C | Rs.1,50,000 | PPF deposit Rs 50,000, ELSS investment Rs 20,000, LIC premium Rs 8,000. EPF deducted by employer(Neha’s contribution) = Rs 50,000 *12% *12 = 72,000 | Rs 1,50,000 |
| Section 80D | Rs 25,000 for self Rs 50,000 for parents | Medical insurance premium Rs 12,000 | Rs 12,000 |
| Section 80TTA | 10,000 | Savings account interest 8,400 | Rs. 8,400 |
Calculation of gross taxable income in India
| Nature | Amount | Total |
|---|---|---|
| Income from Salary | 8,34,000 | |
| Income from Other Sources | 18,400 | |
| Gross Total Income | 8,52,400 | |
| Deductions | ||
| 80C | 1,50,000 | |
| 80D | 12,000 | - |
| 80TTA | 8,400 | 1,70,400 |
| Gross Taxable Income | 6,82,000 |
How to calculate income tax in India for Neha
| Up to Rs 2,50,000 | Exempt from tax | 0 |
| Rs 2,50,000 to Rs 5,00,000 | 5% (5% of Rs 5,00,000 less Rs 2,50,000) | 12,500 |
| Rs 5,00,000 to Rs 10,00,000 | 20% (20% of Rs 6,82,000 less Rs 5,00,000) | 36,400 |
| More than Rs Rs 10,00,000 | 30% (nil) | 0 |
| Cess | 4% of total tax (4% of Rs 12,500 + Rs 36,400) | 1,956 |
| Total Income Tax | Rs 12,500 + Rs 36,400 + 1,956 | Rs 50,856 |
© 2019 Defmacro Software Pvt. Ltd.
ISO 27001
SSL Certified Site