Navigate the complexities of income tax calculations. Learn all about the uses of a salary tax calculator. Explore the process of calculating tax on salary and gain insights into filing tax returns.
Income Tax Calculating Tool 2023 – 24
Income Tax Calculation for FY 2023-24 – Overview
Income tax calculation for the financial year 2023-24 involves understanding various aspects such as taxable income, deductions, exemptions, tax slabs and return rates. The process of calculating income tax is crucial for individuals to ensure compliance with tax laws and to accurately determine their tax liability. You Can Try Using an Easy Tax Calculating Tool!
How to Use a Salary Tax Calculator?
Using a salary tax calculator involves the following steps:
Gross Salary: Enter your gross salary, which includes basic pay, allowances, and any bonuses or commissions.
Deductions: Input details of deductions such as provident fund contributions, professional tax, and any other applicable deductions.
Net Salary: The calculator will then compute the net salary after deducting taxes and other statutory deductions.
Federal and State Tax: The calculator will provide a breakdown of federal and state tax liabilities based on the entered salary details.
Example to Calculate the Income Tax
Let’s consider an example of income tax calculation for the financial year 2023-24 (FY 2023-24) for a taxpayer with a specific income level. In this example, we will assume an individual taxpayer with a gross annual income of ₹10,00,000.
Income Details:
- Gross Annual Income: ₹10,00,000
Tax Calculation under the Old Tax Regime:
Tax Slabs for Individuals Below 60 Years
- Up to ₹2,50,000: Nil
- ₹2,50,001 to ₹5,00,000: 5% of (Income – ₹2,50,000)
- ₹5,00,001 to ₹10,00,000: 20% of (Income – ₹5,00,000)
Calculation
- Income up to ₹2,50,000: Nil
- Income from ₹2,50,001 to ₹5,00,000: 5% of (₹10,00,000 – ₹2,50,000) = 5% of ₹7,50,000 = ₹37,500
- Income from ₹5,00,001 to ₹10,00,000: 20% of (₹10,00,000 – ₹5,00,000) = 20% of ₹5,00,000 = ₹1,00,000
- Total Tax Liability: ₹37,500 + ₹1,00,000 = ₹1,37,500
Tax Calculation under the New Tax Regime
Flat Tax Rates for Individuals Below 60 Years
- Up to ₹2,50,000: Nil
- ₹2,50,001 to ₹5,00,000: 5% of (Income – ₹2,50,000)
- ₹5,00,001 to ₹7,50,000: 10% of (Income – ₹5,00,000)
- ₹7,50,001 to ₹10,00,000: 15% of (Income – ₹7,50,000)
Calculation
- Income up to ₹2,50,000: Nil
- Income from ₹2,50,001 to ₹5,00,000: 5% of (₹10,00,000 – ₹2,50,000) = 5% of ₹7,50,000 = ₹37,500
- Income from ₹5,00,001 to ₹7,50,000: 10% of (₹7,50,000 – ₹5,00,000) = 10% of ₹2,50,000 = ₹25,000
- Income from ₹7,50,001 to ₹10,00,000: 15% of (₹10,00,000 – ₹7,50,000) = 15% of ₹2,50,000 = ₹37,500
- Total Tax Liability: ₹37,500 + ₹25,000 + ₹37,500 = ₹1,00,000
In this example, the taxpayer with a gross annual income of ₹10,00,000 would have a tax liability of ₹1,37,500 under the old tax regime and ₹1,00,000 under the new tax regime.
Non Taxable Income in India
Certain types of income are non-taxable in India, including gifts, inheritances, life insurance benefits, disability insurance payments, workers’ compensation, and municipal bond interest. Understanding these non-taxable income sources is essential for individuals to ensure accurate reporting and compliance with tax regulations.
Make tax season stress-free with our tax calculator 2024. Use our income tax calculator for precise calculations.
Who Can File ITR?
Individuals with an annual income exceeding specified thresholds, such as ₹2.5 lakh for individuals below 60 years, ₹3 lakh for individuals aged 60 to 79, and ₹5 lakh for individuals aged 80 and above, are required to file Income Tax Returns (ITR).
Additionally, individuals with specific types of income, such as NRI income, are also mandated to file ITR. The availability of Form 16, income exceeding ₹50 lakhs, and residency status are also factors determining the requirement to file ITR.
Benefits of Filing ITR Early
Filing ITR early offers several benefits, including:
Tax Refunds: Early filers may receive tax refunds sooner, providing access to funds for various financial needs.
Avoiding Penalties: Timely filing helps individuals avoid penalties and legal repercussions associated with late or non-filing of ITR.
Loan Processing: Early filing of ITR facilitates smoother loan processing, as it provides evidence of income and tax compliance to financial institutions.
Financial Planning: Early filing allows individuals to plan their finances effectively based on their tax liabilities and refunds.
Availing Tax Benefits: Early filers can avail of tax benefits and deductions in a timely manner, optimising their tax planning strategies.
Income Tax Notice: Early filers reduce the risk of receiving income tax notices and unnecessary audits, ensuring peace of mind and compliance with tax laws.
Tax Saving Calculation for Yearly Income -50 lakhs
| Gross Salary | 5000000 |
| Less: Exemptions | |
| HRA | 320000 |
| LTA | 80,000 |
| Reimbursements | 52,000 |
| Children education and hostel allowance | 9,600 |
| Standard Deduction | 50,000 |
| Professional Tax | 2400 |
| Taxable Salary Income | 44,86,000 |
| Less: Deductions | |
| 80C (Refer Note below) | 1,50,000 |
| 80D | 50,000 |
| 80E | 22,000 |
| Net Taxable Income | 42,64,000 |
| Tax on the above income | 11,35,368 |
| Rebate u/s 87A | Not applicable |
| Total Tax | 11,35,368 |
| Individuals can also claim these deductions: | |
| Interest on home loan deduction u/s 24b | -2,00,000 |
| Home loan 80EEA | -1,50,000 |
| Investments in National Pension Scheme (NPS) u/s 80CCD(1B) | -50,000 |
Who Has to File ITR?
If your income is less than the basic exemption limit, then yo
u are not required to pay income tax. However, if you have an income of less than ₹2.5 lakh and want to claim a refund, you will have to do so by filing your ITR. Otherwise, filing ITR is mandatory.
The easiest way to get your income tax filing online done is through Vakilsearch. You don’t have to worry about keeping up to date with all the changes or get confused as to which mechanism to pick. Reach out to us and our experts will guide you and file the returns for you.
Frequently Asked Questions
Which tax regime is better for salaried employees?
Choosing the better tax regime for salaried employees depends on individual circumstances. The new tax regime introduced in 2020 offers lower tax rates but removes most deductions and exemptions. The old regime allows deductions under various sections of the Income Tax Act, 1961 potentially reducing tax liability. Employees should assess their specific financial situation and consult tax advisors to determine which regime suits them best.
Is tax calculated on fixed pay?
Tax on fixed pay, such as salary, is calculated based on applicable tax rates and deductions. In India, income tax is computed considering various components like basic salary, allowances, bonuses, and other benefits. The tax slab rates determine the percentage of income subject to tax, with deductions and exemptions reducing taxable income.
Which assessment year to select for ITR?
When filing Income Tax Returns (ITR), the assessment year (AY) refers to the year following the financial year (FY) for which taxes are being filed. For instance, if you're filing for income earned during FY 2023-24, the corresponding AY would be 2024-25. Ensure you select the correct AY when filing ITR to avoid processing delays or penalties.
How much salary is non-taxable in India?
In India, a portion of an individual's salary is non-taxable based on specified exemptions and deductions. For salaried employees, components like House Rent Allowance (HRA), Leave Travel Allowance (LTA), and reimbursements for medical expenses are non-taxable up to certain limits specified under the Income Tax Act, 1961. Additionally, deductions under Section 80C for investments in instruments like Provident Fund (PF), Public Provident Fund (PPF), and Life Insurance Premiums also contribute to reducing taxable income.
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