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    Income from Salary ?

    Under Section 15 of the Income Tax Act, income is considered as salary only if an employer-employee relationship exists between the payer and the payee. Income from salary could be in the form of wages, annuity or pension, gratuity, fee or commission, advances in salary, payment in lieu of unavailed leaves etc.

    Income from Other Sources ?

    Under Section 56 of the Income Tax Act, any income which is not exempt and is not earned from Salary, House Property, Profits or Gains from Business or Profession, or Capital Gains, must be charged under Income from Other Sources. This includes income earned from dividends, interest on deposits and bonds, winning lotteries, card games or any other form of betting, and gifts like immovable property or a sum of money.

    Exemption u/s 10 ?

    Section 10 of the Income Tax Act contains a list of exemptions which can significantly reduce your overall taxable income. Salaried employees can take the benefit of Leave Travel Allowance, Gratuity, House Rent Allowance, Leave Encashment, and payout from Provident Fund etc.

    Professional Tax ?

    Professional Tax is a tax imposed by State Governments on all individuals who earn over a certain limit. The tax varies from state to state, but the maximum limit is set to INR 2500 per year.

    EPF, PPF, Insurance premium, ELSS (u/s 80C) ?

    Under Section 80C of the Income Tax Act, you are exempt from paying tax on premiums or payments made towards eligible investment schemes like Employee’s Provident Fund, Public Provident Fund, Life Insurance, Equity-linked Savings Scheme, SSY, NSC, and SCSS. Additionally, payment made towards the principal amount of a Home Loan is also exempted.

    Pension Plans (u/s 80CCC) ?

    Investments made in specific pension funds that are offered by life insurance companies are exempt from tax up to INR 1.5 Lakhs (combined limit with Section 80 C).

    NPS (u/s 80CCD) ?

    Investments of up to INR 50,000 in National Pension System (NPS) are tax exempt under Section 80CCD of the Income Tax Act.

    Interest on Home Loan (u/s 24) ?

    Under Section 24 of the Income Tax Act, homeowners can claim a deduction up to INR 2 Lakhs on their home loan interest if the homeowner and his/her family are residing in the house.

    Interest on Savings Account (u/s 80TTA) ?

    Under Section 80TTA of the Income Tax Act, you are exempt from paying taxes on interest received from your Savings Account in any bank, post office or co-operative bank.

    Donations (u/s 80G) ?

    Under Section 80G of the Income Tax Act, donations up to 10% of your gross income that are made to eligible funds get a tax exemption.

    Interest on Education Loan (u/s 80E) ?

    Under Section 80E of the Income Tax Act, the interest paid in a year on an Education Loan taken from a bank or a financial institution, is tax exempt. There is no maximum limit that you can claim under this section in a year, but this deduction will apply only up to 8 years.

    Medical Insurance (u/s 80D) ?

    Payments made towards the premium of health insurance for yourself, your spouse, and your dependent children, are tax exempt up to INR 25,000. You can also get an additional deduction if you are paying for your parents’ health insurance premiums up to INR 25,000 if they are younger than 60 years and up to INR 50,000 if they are older than 60. If both you and your parents are older than 60, the tax exemption you can claim under this section goes up to INR 1 Lakh.

    Detailed breakdown of your income tax under old regime

    Particular Amount Entered Amount Considered
    Income from salary(A)
    Exemption u/s (B)
    Income from other sources (C)
    GROSS TOTAL INCOME (D) = (A) - (B) + (C )
    Professional Tax
    Standard Deduction ₹50,000
    EPF, PPF, Insurance Premium, ELSS (u/s 80C)
    Pension Plan (u/s 80CCC)
    NPS (u/s 80CCD)
    Medical Insurance (u/s 80D)
    Interest on education loan (u/s 80E)
    Eligible Donation (u/s 80G)
    Interest on Saving Account (u/s 80TTA)
    Interest on Home Loan (u/s 24)
    TOTAL DEDUCTION (E )
    NET TAXABLE AMOUNT (F) = (D) - (E )
    TAX ON TAXABLE AMOUNT (G)
    Surcharge @ % (H)
    Education Cess @4% (I)
    TOTAL TAX (J) = (G) + (H) + (I)

    Detailed breakdown of your income tax under new regime

    Particular Amount Entered Amount Considered
    Income from salary(A)
    Exemptions u/s 10 (B)
    Income from other sources (C)
    GROSS TOTAL INCOME (D) = (A) + (C )
    Professional Tax 0
    Standard Deduction ₹ 0
    Total deduction (E) 0
    NET TAXABLE AMOUNT (F) = (D) - (E )
    TAX ON TAXABLE AMOUNT (G)
    Surcharge @ % (H)
    Education Cess @4%(I)
    TOTAL TAX (J) = (G) + (H) + (I)

    Calculate Your Taxes using Online Income Tax Calculator

    As per the Income Tax Act, 1961, every person who earns has to pay a specific portion of their income as a tax to the government. The term ‘person’ includes salaried individuals, firms, businesses, companies, freelancers, professionals, and other bodies of people. 

    The tax owed by different persons depends on the tax bracket they fall under per the tax slabs rolled out by the government. Therefore, to calculate how much tax you owe, you must assess various earnings, exemptions, deductions, and other factors. You can do this either manually or through an online income tax calculator. 

    What is an Income Tax Calculator?

    An income tax calculator is an online tax calculating tool that helps compute taxable income. It assists you in arriving at the exact amount of income tax you are liable to pay. You only have to include details like your taxpayer category, income details, deductions, exemptions, etc. The calculator will calculate the income tax you need to pay based on these details. 

    How to Use the Income Tax Calculator?

    An income tax calculator is a convenient and quick tool that helps you compute the amount of tax you need to pay to the government. Using the income tax calculator is simple as all it takes is filling the entries step-by-step. 

    Here is how you can go about it:

    • Select the financial year you are filing the income tax returns for. Then, you can choose whether you want to calculate tax under the old regime or the new regime and accordingly use the income tax new regime calculator or the income tax calculator for the old regime. The old tax regime was introduced through Budget 2020 and was effective from April 2020.
    • Choose the taxpayer category – male, female, or senior citizen and mention your residential status.
    • Add your income details, including:
      •  The income you receive from salary.
      • Income received from house property.
      • Income received from capital gains (both short-term and long-term gains)
      • Income from other sources like interest paid on a home loan, profits from a business, and winnings from lotteries
    • Add any deductions you can claim from life insurance premiums, health insurance premiums, the interest paid towards home/ education loan, Unit-linked Insurance Plan (ULIP) investments, bank fixed deposits, NPF contributions, etc.
    • Submit your total taxable salary without or after deducting exemptions like House Rent Allowance (HRA), Leave Travel Allowance (LTA), etc., depending on the tax regime you choose. The old tax regime requires you to enter various salary exemptions. The new one does not.
    • Once you submit all the relevant details, click on calculate to know your income tax computation.

    How to Calculate Income Tax?

    The income tax on your taxable income is based on the tax slabs applicable for the current fiscal year. So, firstly, you have to add income from all sources, including income received from salary, income received from house property, income received from short-term and long-term capital gains, and income from other sources like interest paid on a home loan, profits from business, and winnings from lotteries. 

    After you have calculated your gross total income, you have to subtract any deductions you can claim from life insurance premiums, health insurance premiums, interest paid towards home/ education loan, ULIP investments, bank fixed deposits, PPF contributions, etc.

    You can also subtract exemptions like HRA, LTA, and the like depending on the tax regime you choose. The old tax regime requires you to enter various salary exemptions. The new one does not.

    The TDS that you have already paid and advance tax is also considered when calculating your income tax. 

    Income Tax Slabs Under New and Old Tax Regime

    The government introduced the new tax regime in 2020 and made it optional for taxpayers. That is why you can choose to pay your taxes under the regime you prefer. The newer tax regime has lower tax slab rates, and the highest tax rate is benchmarked to 30% for income above ₹15,00,000. 

    However, many of the deductions available under the old tax regime, which were beneficial in saving tax, are removed in the new tax regime. These include HRA, LTA, housing loan interest, and up to 70 other tax-saving deductions. 

    The income tax slabs per the old and new tax regime for people below 60 years of age. 

    Income level (in INR) Old tax regime New tax regime
    Up to ₹2,50,000 Nil / 0% Nil / 0%
    Between ₹2,50,001 and ₹5,00,000 5% 5%
    Between ₹5,00,001 and ₹7,50,000 20% 10%
    Between ₹7,50,001 and ₹10,00,000 20% 15%
    Between ₹10,00,001 to ₹12,50,000 30% 20%
    Above ₹15,00,000 30% 30%

    Sources of Income (Salary, House Property, Capital Gains)

    Any individual who earns income from any source is liable to pay income tax in India. The sources of income include:

    • Income from salary and pension.
    • Income earned from renting an immovable house property or interest paid on a home loan.
    • Income earned from the sale of long-term capital assets and short-term capital gains. Long-term capital gains come from regular assets held for more than 3 years and stocks for more than one year. Short-term capital gains come from regular assets held for less three years and stocks held for less than one year.  Capital investments like mutual funds, immovable property, stocks and bonds investments, and others.
    • Income earned from a business or profession - such as freelancer, contractor, agent, chartered accountants, lawyers, doctors, tuition teachers, or anyone who has professional practice.
    • Income earned from other sources like savings, bank account interest, fixed deposits, profits of lotteries.

    Frequently Asked Questions

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    How is income tax calculated?

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    You can calculate your income tax on salary through an online income tax calculator. First, select the financial year you file the income tax returns for. Then, choose your taxpayer category – male, female, or senior citizen as the tax slabs for individuals below and above 60 years of age differs. Add your income details, including any:

    • Income you receive from salary
    • Income you receive from house property
    • Income you receive from short-term and long-term capital gains  
    • Income from other sources like interest paid on a home loan, profits made from a business, etc.

    Subtract any deductions you can claim and submit other relevant details to find your tax liability.

    How much tax should I pay on my salary?

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    You have to pay income tax based on the level of income earned in INR under the respective tax slabs fixed by the government and income tax department. You can use a salary income tax calculator to get the exact amount. But first, refer to the tax slabs as per the old and new income tax regimes. 

    Income level (in INR) Old tax regime New tax regime
    Up to ₹2,50,000 Nil / 0% Nil / 0%
    Between ₹2,50,001 and ₹5,00,000 5% 5%
    Between ₹5,00,001 and ₹7,50,000 20% 10%
    Between ₹7,50,001 and ₹10,00,000 20% 15%
    Between ₹10,00,001 to ₹12,50,000 30% 20%
    Above ₹15,00,000 30% 30%

    Which income is not taxable in India?

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    Every earning individual is liable to pay income tax in India whether they receive their income from salary, capital gain investments, house properties, business/ profession, or other sources. However, certain income types are exempt from tax in India. These include:

    • Money received from a provident fund.
    • Any educational scholarship or award funds received.
    • Agricultural income provided it is lesser than ₹5,000 in a year.  
    • Any gratuities received by a government employee due to death or retirement.
    • Up to ten months of leave salary for a government or private sector employee at the time of retirement.
    • Other non-taxable income specified under the applicable provisions of the Income Tax Act, 1961.

    What is the maximum non-taxable income limit?

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    The maximum non-taxable income limit is ₹2,50,000 per annum. The non-taxable income limit is the same in the new and old tax regime and is applicable for persons up to 60 years of age and Hindu Undivided Family (HUF). 

    The non-taxable income limit for senior citizens above 60 years and up to 80 years of age is ₹3,00,000, and for super senior citizens above 80 years of age is ₹5,00,000. 

    However, even individuals earning up to ₹5,00,000 in a year are eligible to claim tax rebates/ refunds after filing their income tax returns, ultimately making their tax liability also nil.  

    Who is eligible to file their income tax returns?

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    According to the Income Tax Act, 1961, every earning person has to pay income tax to the government. The term person includes salaried individuals, firms, businesses, companies, freelancers, self-employed professionals, and other bodies of persons. 

    The tax owed by different persons depends on the tax bracket they fall under and the tax slabs rolled out by the government. The tax rates differ for individuals below 60 years of age, between 60 and 80 years (senior citizens), and above 80 years (super senior citizens). To calculate how much tax you owe, you must assess various earnings, exemptions, deductions, and other factors.

    When can you file your income tax returns?

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    In India, the fiscal year starts on the 1st of April and finishes on the 31st of March next year. However, the government and income tax department always extend the income tax filing dates to provide time and relief to the taxpayers. For example, in FY 2021, the tax filing deadline was extended to the 31st of December. You can keep up with the dates on the income tax portal.  

    What is the difference between exemption and deduction?

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    A deduction is the reduction of an amount from the sum of gross total income under different income heads. On the other hand, income exemption means the entire income itself is exempt from tax. However, only some sources of income are exempt from tax, like agricultural income up to a certain amount, for instance. Income tax deductions are a specific percentage of money claimable on the gross total income.

    What are the major tax provisions introduced in the budget for Individual taxation?

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    The Union Budget 2022 did not bring any major changes in the income tax slabs for the financial year 2022-23. Accordingly, there is no direct lowering of tax rates for individual taxpayers, but there is a new provision that will enable taxpayers to update their past returns within two years from the end of an assessment year.

    What are the different tax slabs and tax rates under the new tax regime?

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    There are two core differences between the tax slabs of the new tax regime and the old tax regime. The first difference is in the reduction of income tax payable for different income limits. The second is the removal of up to 70 deductions in the new tax regime. Here is a comparison of the tax slabs for individuals below 60 years of age. 

    Income level (in INR) New tax regime
    Up to ₹2,50,000 Nil / 0%
    Between ₹2,50,001 and ₹5,00,000 5%
    Between ₹5,00,001 and ₹7,50,000 10%
    Between ₹7,50,001 and ₹10,00,000 15%
    Between ₹10,00,001 to ₹12,50,000 20%
    Above ₹15,00,000 30%

    Which are the deductions/ exemptions not available under the new tax regime?

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    The new tax regime reduced the liability of tax payments and removed several deductions and exemptions that benefited taxpayers. It removed up to 70 deductions and exemptions. These include:

    • House rent allowance
    • Leave travel allowance
    • Child education allowance
    • Professional tax deduction
    • Interest/ principal on a home loan
    • Payment towards life insurance premiums
    • Payment towards health insurance policy premiums

    How will the new tax regime work for an individual?

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    The new tax regime introduced in 2020 reduces the tax liability of individual taxpayers. The new tax slab rates have lowered the percentage of tax payable for different income limits, which can be beneficial. However, it has also removed up to 70 profitable tax deductions and exemptions in force under the old tax regime. There is no final judgement on which tax regime is better, and taxpayers will have to compare the two tax regimes and see which one works best for them.

    Does investment in insurance and pension still be eligible for tax benefit?

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    Yes, investing in pension funds and insurance plans will be eligible for tax deductions under the relevant provisions of the Income Tax Act, 1961. However, they are not available under the new tax regime. But, on the other hand, you can get it under the old tax regime.

    How to use an income tax calculator for FY 2022-23?

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    To use an income tax return calculator, you first need to choose the financial year for which you are filing the income tax returns. Then, pick your taxpayer category – male, female, or senior citizen as the tax slabs for individuals below and above 60 years of age differs. Add your income details, including any:

    • Income you receive from salary
    • Income you receive from house property
    • Income you receive from short-term and long-term capital gains
    • Any other income

    Add any deductions you can claim (if you are using the income tax calculator old regime) and submit any other relevant details to calculate your tax liability.

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