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Income tax is a type of tax that is imposed on the income of working individuals in a country. Governments need money to function. From employee salaries to public spending, governments have a variety of expenses. The income tax collected from eligible individuals forms one of the primary sources of the government’s revenue. Most of the governments levy income tax on the individuals earning within their jurisdiction. The income tax charged depends on a host of factors like the amount of income, type of income, age and investments. Certain investments are eligible for tax deductions and exemptions and help in reducing the income tax liability. All businesses and individuals have to file an income tax return every year to know their tax liability or to get a tax refund if any.
An income tax calculator is a free online tool that helps in determining the tax outgo in a year based on your income. Generally, income tax laws are tweaked with every Union Budget. The algorithm of online tax calculators is updated regularly, which ensures that you get the information as per the latest changes. To provide the income tax liability, the new tax calculator asks for certain information like the income and the various investments. With the number of income tax provisions increasing, it is better to calculate the income tax outgo online before filing the returns. Income tax calculator provides the exact information of the available deductions and exemptions. One can modify his/her investments as per the tax projection generated by the income tax calculator.
Tax planning has become an important part of financial planning. Making the right investments to achieve life goals, while simultaneously reducing tax liability is the core of tax planning. Bajaj Allianz Life’s Income Tax Calculator is an efficient tool for tax planning. With the income tax calculator, you do not have to worry about missing any of the tax deductions or exemptions. The online tax calculator from Bajaj Allianz Life is easy to use and has a simple user interface. Here is how you can use it.
Certain changes have been introduced in the income tax regime in the recent past. A new income tax regime was introduced in the Union Budget 2020. The new system has lower tax rates, but it comes with some conditions. Individuals, who opt for the new tax system, will have to forego all the deductions available under the existing tax regime. Let us look at how to calculate tax on income and understand how much one will have to pay under each regime.
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.
Nature |
Amount |
Exemption/Deduction |
Taxable Income (Old Regime) |
Taxable Income (New Regime) |
---|---|---|---|---|
Basic salary |
12,00,000 |
- |
12,00,000 |
12,00,000 |
HRA |
6,00,000 |
3,60,000 |
2,40,000 |
6,00,000 |
Special allowance |
2,52,000 |
- |
2,52,000 | 2,52,000 |
LTA |
20,000 | 12,000* |
8,000 |
20,000 |
Standard deduction |
|
50,000 |
50,000 |
- |
Gross total income from salary |
|
|
16,50,000 |
20,72,000 |
*assuming Mohan is claiming Rs. 12,000/- against LTA.
Income from various sources have to be included to calculate the income tax.
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
Nature |
Maximum deduction |
Eligible investments |
Amount claimed by Mohan |
---|---|---|---|
Section 80C |
Rs 150,000 |
PPF deposit of Rs 50,000, ELSS investment of Rs 20,000, life insurance premium of Rs 12,000 and EPF deducted by employer (Mohan’s contribution) =1,00,000*12%*12=1,44,000 |
Rs 1,50,000 |
Section 80D |
Rs 25,000 for self and Rs 50,000 for parents |
Health insurance premium of Rs 12,000 |
Rs 12,000 |
Section 80TTA |
Rs 10,000 |
Savings account interest Rs 8000 |
Rs 8000 |
Calculation of gross taxable income (Old system)
Nature |
Amount |
Total |
---|---|---|
Income from salary |
16,50,000 |
|
Income from other sources |
20,000 |
|
Gross total income |
|
16,70,000 |
Deductions |
|
|
80C |
1,50,000 |
|
80D |
12,000 |
|
80D |
12,000 |
|
80TTA |
8,000 |
1,70,000 |
Gross taxable income |
|
15,00,000 |
Total tax (including cess) |
|
2,73,000 |
Calculation of gross taxable income (new regime)
Nature |
Amount |
Total |
---|---|---|
Income from salary |
20,72,000 |
|
Income from other sources |
20,000 |
|
Gross total income |
|
20,92,000 |
Total tax (including cess) |
|
3,79,704 |
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:
Upto Rs 2,50,000 | Exempt from tax |
|
---|---|---|
Rs 2,50,000 to Rs 5,00,000 |
5% of (Rs 5,00,000 - Rs 2,50,000) |
Rs 12,500 |
Rs 5,00,000 to Rs 7,50,000 |
10% of (Rs 7,50,000 - Rs 5,00,000) |
Rs 25,000 |
Rs 7,50,000 to Rs 10,00,000 |
15% of (Rs 10,00,000 - Rs 7,50,000) |
Rs 37,500 |
Rs 10,00,000 to Rs 12,50,000 |
20% (Rs 12,50,000 - Rs 10,00,000) |
Rs 50,000 |
Rs 12,50,000 to Rs 15,00,000 |
25% (Rs 15,00,000 - Rs 12,50,000) | Rs 62,500 |
More than Rs 15,00,000 |
30% (20,92,000 - Rs 15,00,000) | Rs 1,77,600 |
Cess |
4% of total tax | Rs 14,604 |
Total income tax |
Rs 3,79,704 |
Income tax returns have to be compulsorily filed by every earning individual of the country. However, a number of terms are associated with income tax filings, which may be confusing for many people. Here are some of the most commonly used income tax terms.
The period of 12 months (April to March), immediately succeeding the year of which the income is being taxed is known as the assessment year. The assessment year is the 12-month period following the financial year.
A financial year for filing your income tax is the year in which you earn an income. Individuals have to pay the income tax for all the earnings within a 12-month period i.e. from 1 April to 31 March.
Employees must be familiar with the term. House rent allowance is the allowance provided to employees by employers to cover the expense of renting an accommodation. The HRA is exempt from income tax subject to limits specified in the tax laws.
It is an allowance provided to employees by employers to cover travel expenses within the country. LTA does not include the expenses incurred on boarding and lodging. LTA is exempted from income tax, but the exemption is allowed twice in the block of 4 calendar years. Current block of LTA is of Calendar year 2018-2021.
All taxes paid to any municipal entity is known as municipal taxes. All taxes paid to municipal authorities are eligible for deduction from income from house property.
The interest paid on loans taken to buy or construct a house. The interest on loan is eligible for deduction from income from house property. Additionally, if you are incurring a loss from the property, the interest on loan can be adjusted against income from salary up to Rs 2 lakhs.
The premiums paid to keep the life insurance policy active is known as life insurance premium. Premium paid for life insurance up to Rs 1.5 lakh in a year is allowed deduction under Section 80C of the Income Tax Act.
The tuition fees paid in any school, college or university of India for a full time course for children or spouse is eligible for deduction of up to Rs 1.5 lakh under Section 80C of the income tax laws.
Tax deduction of up to Rs 1.5 lakh can be claimed under Section 80C of the income tax act for investment in equity-linked savings scheme of mutual funds.
The income that will be taxed after all the exemptions and deductions provided under the law.
The Finance Bill 2018 introduced the standard deduction in the place of transport allowance and medical reimbursement. The Finance Bill 2019 increased the standard deduction limit to Rs 50,000.
The salary received from an employer along with the tax prerequisites make the income from salary. The form 16 and form 12BA issued every year contains all the details of the salary, alliances and the tax prerequisites offered in a year.
It is one of the heads taken into account to calculate the gross income of an individual in a year.
It is one of the five heads of income. Any profit or gain accrued by the conversion of capital assets such as property, shares, securities, etc. is considered as income from capital gains for the computation of gross income of an individual. Income from capital gain can be further classified into short term and long term gains depending on the holding period.
Any income not part of income from salary, profession/business, capital gains and house property falls under the income from other sources category. It generally includes interest earned through savings accounts and deposits and dividends.
The government promotes certain expenditures and investments for a variety of reasons like financial security and social security. As per the income tax act, if an individual incurs these expenditures or makes the specified investments, he/she is allowed deductions from the gross income for the computation of the taxable income. Some of the common deductions available to taxpayers are under Section 80C, Section 80D, Section 80CCC, Section 80CCD, Section 80CCE, Section 80E, and Section 80G amongst others.
Just like deductions, the income tax act also has a provision for several exemptions. Few of the common exemptions allowed under the law are house rent allowance, leave travel allowance, gratuity and withdrawal from the National Pension Scheme.
If the income of the assesse is more than Rs 50 lakh per year but less than Rs 1 crore, a surcharge of 10% of the income tax amount is levied. If the annual income exceeds Rs 1 crore, a surcharge of 15% of the amount of the income tax is levied. Additionally, a health and education cess of 4% is levied on the amount of income tax plus surcharge, if any.
While filing income tax returns, Form 26 AS finds multiple mentions. Form 26 AS is the tax credit statement that details all the credit available to an individual to be valid while filing the ITR. The credit detailed in Form 26 AS consists of the Tax Deducted at Source (TDS) by the employer and the Tax Collected at Source (TCS). It also includes the self-assessment tax.
It is a certificate issued by the employer detailing the gross salary paid along with the breakup of the salary into taxable and exempt income along with the Tax Deducted at Source.
The government introduced a new tax system with a higher number of income tax slabs and lower tax rates in the Union Budget 2020. The new tax regime is optional and people opting for the new tax system will have to forego the various deductions and exemptions available under the existing tax regime. The new tax rates have come into effect from April 1 2020, for the financial year 2020-21.
Income tax rate and tax slabs under old tax regime (Less Than 60 Years Old)
Income Tax Slab |
Tax Rate |
---|---|
Income up to ` 2,50,000 |
No Tax |
Income from ` 2,50,001 - ` 5,00,000 |
5% |
Income from ` 5,00,001 - ` 10,00,000 |
20% |
Income more than ` 10,00,001 |
30% |
Income tax rate and tax slabs under the new tax regime
Total income (Rs) |
Tax rate |
---|---|
Up to `2,50,000 |
Nil |
`2,50,001 to `5,00,000 |
5% |
`5,00,001 to `7,50,000 |
10% |
`7,50,001 to `10,00,000 |
15% |
`10,00,001 to `12,50,000 |
20% |
`12,50,001 to `15,00,000 |
25% |
Above `15,00,000 |
30% |
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.
The Union Budget 2020 had introduced a new tax regime with major modifications in the income tax slabs and tax rates. However, the new tax regime is optional and taxpayers can still use the existing tax system. The various tax deductions and exemptions available under the existing tax regime is not available under the new tax system. Under the existing tax system, the basic exemption limit depends on the residential status and the age of the taxpayer.
Taxpayers have been categorised into three broad groups under the existing tax system.
Here is the income tax slab for resident individuals below the age of 60 years
Taxable income slabs |
Income tax rate + cess |
---|---|
Up to Rs 2.5 lakh |
Nil |
Rs 2,50,001-Rs 5,00,000 |
5% of (total income - Rs 2,50,000) + 4% cess |
Rs 5,00,001-Rs 10,00,000 |
Rs 12,500 + 20% of (total income - Rs 5,00,000) + 4% cess |
Rs 10,00,000 and above |
Rs 1,12,500 + 30% of (total income - Rs 10,00,000) + 4% cess |
Income tax slab for resident individuals between 60 and 80 years
Taxable income slabs |
Income tax rate + cess |
---|---|
Up to Rs 3 lakh |
Nil |
Rs 3,00,001 - Rs 5,00,000 |
5% of (total income - Rs 3,00,000) + 4% cess |
Rs 5,00,001 - Rs 10,00,000 |
Rs 10,000 + 20% of (total income - Rs 5,00,000) + 4% cess |
Rs 10,00,001 and above |
Rs 1,10,000 + 30% of (total income - Rs 10,00,000) + 4% cess |
Income tax slab for resident individuals of 80 years and above
Taxable income slabs |
Income tax rate + cess |
---|---|
Up to Rs 5 lakhs |
Nil |
Rs 5,00,000 to Rs 10,00,000 |
20% of (total income - Rs 5,00,000) + 4% cess |
Rs 10,00,000 and above |
Rs 1,00,000 + 30% 0f (total income - Rs 10,00,000) + 4% cess |
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.
Every working individual earning above a certain threshold has to pay income tax diligently. One can reduce the income tax liability through certain deductions. A taxpayer can avail a number of deductions to reduce his/her taxable income and hence the tax outgo every year. While one can manually calculate the maximum deduction allowed as per his/her investments and expenditures, the new income tax calculator can execute the task smoothly without any hassles. Here are the key deductions available under the income tax laws in India.
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.
Just like deductions under various sections of the Income Tax Act, you can also utilize exemptions to reduce your tax liabilities. Income tax exemptions are largely dealt by Section 10 of the tax law. Here are some of the key tax exemptions available in India.
One should understand the HRA calculation clearly to enjoy income tax exemption. The exemption received for HRA will be a minimum of
A maximum of Rs 100 per month for two children can be availed as exemption on child education allowance.
Subsidies on hostels are exempt up to Rs 300 per month for a maximum of two children.
An income tax exemption of up to Rs 2 lakh on the interest paid for home loan can be availed on the condition that the house is constructed or acquired within 5 years from the end of financial year in which home loan is taken.
Filing income tax returns is mandatory for people with income more than the limit allowed for exemption. It is also compulsory to file the returns online. However, there are certain exceptions.
If you have a digital signature press ‘yes’ and if not, then click ‘no’
Income-Tax Department-CPC,
Post Bag No. 1,
Electronic City Post Office,
Bangalore - 560 100. Karnataka.
With the risks to life rising, life insurance has become a necessity. The financial benefits of life insurance ensures that your loved ones lead a comfortable life even in your absence. Life insurance provides the much-needed financial buffer, but it is not all. Investing in a life insurance plan also offers a host of tax benefits.
Investing in life insurance reduces the tax liability substantially. However, tax benefits are a supplementary advantage of investing in life insurance. There are a number of life insurance products available in the market and there are multiple benefits of life insurance. Let us take a look at some of the benefits of life insurance plans.
ULIPs or unit-linked insurance plans offer dual benefit of insurance coverage along with capital growth.
If you are not comfortable with market-linked products and just want insurance coverage for your family, term insurance plans would be a suitable product. Term insurance plans are the simplest types of life insurance plans.
The annual tax outgo depends on the income tax slab you belong to. Refer tax slabs under old regime and new regime.
The maximum non-taxable limit for an individual is Rs 2.5 lakh in a year. However, a rebate of Rs 12,500 under Section 87A is provided for an income less than or equal to Rs 5 lakh, technically making an annual income of up to Rs 5 lakh tax-free. The rebate was increased to the current level from FY 20-21. Additionally, if you have made investments that qualify for tax deduction under Section 80C, you can claim a maximum deduction of Rs 1.5 lakh in a year, making an income of Rs 6.5 lakh tax-free.
Every earning person in the country has to pay income tax to the government. There are two types of taxes in India--direct and indirect. Income tax is a direct tax and individuals need to directly pay the tax to the concerned authority on income earned during financial year. Income Tax Return (ITR) is a form which a person is supposed to submit to the Income Tax Department of India.
People earning less than Rs 2.5 lakh per year are below the basic exemption limit and do not have to mandatorily file income tax. However, if they want to claim a refund, even people with income below exemption will have to file returns. People earning more than Rs 2.5 lakh have to mandatorily file income tax.
Filing income tax returns is not a very complicated process. One just needs to provide basic information such as PAN, Aadhaar Card details, and current address. Additionally, details of all the bank accounts held in a financial year along with income earned like current salary and income from investments has to be provided. All the deductions claimed under Section 80 or Chapter VI-A and tax payments such as TDS and advance tax are also needed.
Normally the due date for filing ITR is 31st July of that particular financial year.
Both deductions and exemptions reduce the tax burden but are not the same. Income tax deductions are claimed on gross total income. One becomes eligible for tax deduction only after making certain specified investments and expenditures. The value of investments is deducted from the gross total income, resulting in a lower taxable income. One the other hand, exemptions are provided on certain components of the salary, making them tax-free. Tax-exempt income is not included in taxable income, reducing the tax liability.
All deductions under Chapter VIA other than employers contribution to Pension Fund under Section 80CCD(2), LTA , HRA, Standard deduction and professional tax payment and interest payment on self-occupied housing property are not allowed under new tax regime.
Taxpayers are free to switch between the old and the new tax regime every year. However, there are certain conditions for switching. Taxpayers with business income will not be able to switch between the old and the new tax regime as per their convenience. If you do not have business income, you are free to switch between the tax systems as per your convenience.
The taxation process in India works as per the financial year, which is a period of 12 months between April 1 and March 31. The financial year is the period when you earn salaries and income. The assessment year is the 12 months that follow a financial year. In the assessment year, the income earned in the financial year is assessed and taxed.
The gross total income is the income earned by an individual under the various heads of income in a financial year. To compute gross total income, one just has to add the income from various sources. It includes all the income from house rent, business, salary or capital gains. The taxable income can be computed by deducting the applicable income tax deductions from the gross total income. If you have made certain investments that qualify for income tax deductions, just subtract the permissible limit of deduction from the gross total income to get the taxable income.
Standard deduction is a flat amount that can be deducted from the gross salary as exemption. Currently, one can avail a standard deduction of Rs 50,000. The standard deduction has replaced the transport allowance and medical reimbursement that was allowed earlier.
Advance tax has to be paid on income that is not subject to TDS. Self-employed people and businesses have to pay advance tax as their liabilities can be substantial due to their business income.
Tax benefits as per prevailing Section 10(10D) and Section 80C of the Income Tax Act shall apply. You are requested to consult your tax consultant and obtain independent advice for eligibility before claiming any benefit under the policy.
The output generated through calculator are on the basis of the data filled in by you and is being provided to you solely for your reference purpose and not to be construed as investment advice. Please seek independent advice from your insurance consultant before making any investment decisions. While proper caution has been taken in designing this calculator, Bajaj Allianz Life Insurance Co. Ltd. assumes no liability for the accuracy of the information and data provided in this tool.
This calculation is only for less than 60 years of age and generated on the basis of the information provided and is for illustrative purpose only and therefore is not specific advice in regard to your personal tax and investment matters. Please note that Tax laws are subject to amendments from time to time. Further, income tax calculation is a subject matter of expert opinion and it is recommended to consult with your tax advisor for details, before acting on above.
The Tax write-up above is provided only for user’s continence and information purpose.
The user will have to verify the facts, law and content with the prevailing tax laws and seek appropriate professional advice before acting on the basis of the above information. Note that tax laws are subject to amendments from time to time.
Last updated: 2021-05-20