With the introduction of various online tools, calculating income tax has become hassle-free. Here is a five step guide to help you understand how to calculate it correctly –
1. Finding the gross income
If you are a salaried individual, then accumulate your total salaried income. It will include the HRA and travel and food allowances.
After that, eliminate the HRA and TA, but remember HRA deduction is only applicable if you live in a rented house.
Following that, deduct Rs.50,000 as standard deduction and arrive at the net salary income. Add this amount with the income from other sources to find your gross income.
2. Find net taxable income
To find net taxable income, first, subtract the standard deduction from your gross income. Then calculate any additional deductions that you are eligible for under Section 80.
Under Section 80C, you can avail a deduction of up to Rs.1.5 lakh on different investments and expenditures. Under Section 80D, you can claim a deduction against any insurance premium that you may have paid. Also, if you have a home loan, you are eligible to claim up to Rs.2 lakhs on interest under Section 24B.
3. Arrive at the net taxable income
Once you subtract income tax deductions from the gross amount, you will find your net taxable income. Use income tax slabs, to figure out the amount of tax you need to pay.
Read Also: How do I calculate my income tax in India, when I am new to all salary components?
4. Calculate tax
Calculate your Income Tax Return with assistance from the IT slab drafted by the Government of India.
5. Consolidate the net tax
Before filing Income Tax Returns, you should avail the tax incentive under Section 87A based on your total taxable income.
For a hassle-free e-filing of income tax, visit the official website of the Income Tax Department of India.
Additionally Read: How to compute your total taxable income
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