Income Tax Calculator

The income from salary includes the basic salary, along with HRA, transport allowance, special allowance and any other allowance. Some of the components of salary like telephone bill allowance are exempt from income tax. Moreover, if you receive HRA and are paying rent, you can claim exemption on it. Over the various allowances, a standard deduction of Rs 50,000 has been allowed from the Union Budget 2019. Let us use an example for the better understanding of income tax under the old as well as the new regime. Let us assume that Mohan has a basic salary of Rs 1 lakh per month, HRA of Rs 50,000, special allowance of Rs 21,000 per month and leave travel allowance of Rs 20,000 annually. Mohan lives in Mumbai and pays Rs 40,000 in rent.

^*assuming Mohan is claiming Rs. 12,000/- against LTA.

Income from various sources have to be included to calculate the income tax.

• Income from salary paid by the employer
• Income from capital gains, which includes income from sale or purchase of shares or house
• Income from house property such as rental income
• Income from business/ profession
• Income from other sources which includes interest on savings account or fixed deposit

Mohan had earned some amount as interest on savings account and interest from fixed deposits. The interest earned on savings was Rs 8,000 in the year, while the fixed deposit led to an interest income of Rs 12,000. Rs.1,50,000 is claimed under Section 80 C of the Income Tax Act,1961

Calculation of gross taxable income (Old system)

Calculation of gross taxable income (new regime)

Under the new tax regime, the Indian government has increased the income tax slabs and reduced the tax rate for the lower slabs. Mohan’s tax liability was calculated as under:

Income tax rate and tax slabs under old tax regime (Less Than 60 Years Old)

Income tax rate and tax slabs under the new tax regime

Just like the old tax regime, individuals with an annual income below Rs 5 lakh will be able to get a rebate of Rs 12,500 under Section 87A in the new tax regime also. It effectively makes an income of less than or equal to Rs 5 lakh tax-free. Under the existing tax regime, the limit of basic exemption varies according to the residential status and age of the taxpayer. The basic exemption is higher for senior citizens and super senior citizens. The differential basic exemption limit is not available under the new tax regime. Hence, the basic exemption limit will remain Rs 2.5 lakh for all taxpayers under the new regime. However, with the rebate under Section 87A, income equal to or below Rs 5 lakh for individuals in all age groups is essentially tax-free. Moreover, salaried individuals can switch between the old and the new tax regimes as per their convenience.

Taxpayers have been categorised into three broad groups under the existing tax system. 

• Resident individuals below the age of 60 years
• Resident senior citizens above 60 years but below 80 years
• Resident super senior citizens above the age of 80 years

Here is the income tax slab for resident individuals below the age of 60 years

Income tax slab for resident individuals between 60 and 80 years

Income tax slab for resident individuals of 80 years and above

Above tax calculated will be increased by surcharge if applicable and Health and Education Cess @4%.

It is worth noting that a rebate of Rs 12,500 under Section 87A is available for individuals earning less than or equal to Rs 5 lakh per annum. It has made income upto Rs 5 lakh essentially tax-free for all taxpayers. Moreover, under the existing tax regime, a number of tax deductions and exemptions are available, which substantially reduce the tax liability.

Section 80C is one of the most popular and wide-ranging sections to avail deductions. Under the section, individuals as well as HUFs can reduce the tax outgo by Rs 1.5 lakhs. To avail the section, taxpayers can invest in a variety of instruments like ELSS, PPF, EPF, ULIPs and NPS.

Deduction is allowed under the section for any amount paid by an individual for an annuity plan from a life insurance company. However, the payment should be to a fund mentioned in Section 10 (23AAB). The proceeds from the annuity or the surrender amount is taxed. Any bonus or interest received too is taxed.

The section provides deduction for contribution to the pension fund.

It allows deduction for the employee contribution to the pension fund. The deduction allowed will be less than 10% of the salary if you are an employee or 20% of the gross income in the case of self-employed.

It allows an additional deduction of Rs 50,000 for contribution to the National Pension Scheme or the Atal Pension Yojana.

Additional deduction can be claimed for the employer’s contribution to the pension account up to a limit of 10% of the salary. 

The section allows tax deduction for premiums paid for health insurance. If you have taken a policy for yourself, spouse or dependent children, you can claim deduction of Rs 25,000 in a year. An additional deduction of Rs 25,000 can be claimed for parents under 60 years of age. For parents above 60, the deduction allowed is Rs 50,000. If both the taxpayer and parents are over 60, a total deduction of Rs 1 lakh can be claimed. Deduction of Rs 5000 can be claimed for health check-up of family members.

The section allows individuals and HUFs to claim deduction of up to Rs 10,000 for interest earned through a savings account. The account can be maintained with a bank, co-operative society or post office. To avail the deduction, do not forget to list the interest income under the head income from other sources. 

Deduction can be claimed for the interest on education loan taken for higher studies of yourself, spouse, children or legal ward. There is no monetary limit on the deduction but it should be less than 1) 8 years from the beginning of loan repayment 2) until the entire interest is paid off.

Deduction of up to Rs 50,000 can be claimed by senior citizens on income from deposits.