How to Calculate Income Tax on Salary for Salaried Individuals

What is an Income Tax Calculator?

An Income Tax Calculator is a tool designed to help individuals calculate the income tax they are required to pay based on their income. It’s a tool that can be used by individuals , Hindu Undivided Families (HUFs), businesses, cooperative societies, trusts, and other entities to ensure they comply with the income tax rules.

Once exemptions, deductions, and rebates are subtracted from a person’s income, the remaining amount is taxable income. These rules are updated annually based on the Union Budget.

To simplify the process, the Income Tax Calculator helps you easily determine your taxable income and the tax liability for the given financial year. For example, for FY 2025-26, you just need to enter basic details such as your age, residential status, income, investments in tax-saving instruments, and income from other sources.

How to Calculate Income Tax for Salaried Individuals

Step-by-Step Guide

Step 1:

Visit the e-filing portal homepage at https://www.incometax.gov.in/iec/foportal/.

Step 2:

Navigate to Quick Links > Income and Tax Calculator. You will be directed to the Income and Tax Calculator page, where you’ll find two tabs: Basic Calculator and Advanced Calculator. The Basic Calculator tab is selected by default.

Step 3a:

In the Basic Calculator tab, fill in the required details such as Assessment Year (AY), taxpayer category, age, residential status, total annual income, and total deductions. The tax calculation based on your inputs will be displayed in the Tax Summary section.

Note: Click View Comparison to see a detailed comparison of tax calculations under the old and new tax regimes.

Step 3b:

In the Advanced Calculator tab, enter the following details

• Preferred tax regime
  
• AY
  
• Taxpayer category
  
• Age
  
• Residential status
  
• Due date and actual date of submission of the return.
  

Under Details for Income and Tax Calculation, enter the following information:

• Income from Salaries
  
• Income from House Property
  
• Income from Capital Gains
  
• Income from Business or Profession
  
• Income from Other Sources
  

Fill in the remaining headers according to the requirements and conditions established by the Income Tax Department.

The total tax and interest payable will be shown at the end of the page.

Income tax calculation for the Salaried Individual

1. Income from salary

   
   

   includes various components such as:

   
   

   Income tax calculation for the Salaried Income from salary = Basic salary + HRA + Special Allowance + Transport Allowance + any other allowance.

   
   

   Certain salary components, such as telephone bill reimbursements and leave travel allowances, are tax-exempt. If you receive HRA and live in rented accommodation, you can claim an exemption on the HRA amount. Use an HRA Calculator to determine the exempt portion.

   
   

   In addition to these exemptions, a standard deduction of ₹50,000 is available under the old tax regime, and ₹75,000 under the new regime.

   
   
   

2. Income from House Property:

   
   

    

   Income from house property or land is taxable under this head. It includes rental income from properties you own. There are three categories:

   
   
   • Self-Occupied Property
     
     
   • Let-Out Property
     
     
   • Deemed Let-Out Property
     
     
   
   

3. Income from Capital Gains

   
   

    

   Capital gains arise when you sell or transfer assets like real estate, stocks, mutual funds, gold, etc. These gains are classified as:

   
   

   • Short-term Capital Gains

     
     
     

   • Long-term Capital Gains

     
     
     

   Each type of gain has different tax rates based on how long the asset was held.

   
   
   

4. Income from Business Profits or Profession:

   
   

    

   Income from any business or profession is taxable under this head. You can deduct your business expenses to determine the taxable income. This includes:

   
   
   • Profits from selling a specific license
     
   • Profit earned by an individual in a given assessment year
     
   • Profit earned by an organization from its operations
     
   • Cash received from exporting under a government scheme
     
   • Benefits received by a business
     
   • Earnings, bonuses, or salary received by an individual through a partnership with a firm
     
   
   

5. Income from Other Sources:

   
   

    

   This category covers any income not mentioned in the other heads, as per Section 56(2) of the Income Tax Act. It includes:

   
   
   • Dividends
     
   • Interest income
     
   • Rent on plant and machinery
     
   • Lottery, rewards from sports, etc.
     
   
   

Benefits of Income Tax Calculator

Using an online Income Tax Calculator provides several advantages, including:

• Accuracy

  
  

  The Income Tax Calculator ensures precise tax calculations, eliminating manual errors.

  
  
  

• Quick and Simple

  
  

  Calculate your tax liability in seconds, anytime and anywhere.

  
  
  

• User-Friendly

  
  

  Easily enter your income and deductions to determine your tax liability.

  
  
  

• Better Financial Management

  
  

  Knowing your tax liability in advance helps in smart financial planning and tax-saving investments.

  
  
  

An online income tax calculator ensures accuracy and helps you explore deductions and exemptions to lower your tax liability

Conclusion

Calculating income tax for salaried individuals is simple if you track your income, deductions, and exemptions accurately. Using an income tax calculator can make this easier. Stay informed about income tax slabs and deductions to plan your finances better and avoid surprises during tax season.

Frequently Asked Questions (FAQs)

1. What is an Income Tax Calculator?

   
   

   An Income Tax Calculator is a tool that helps individuals calculate their tax liability based on their income, exemptions, deductions, and applicable income tax slabs. It simplifies the process of determining how much tax you need to pay.

   
   
   

2. How do I use the Income Tax Calculator?

   
   

   To use the calculator, visit the e-filing portal, select "Income and Tax Calculator," and enter details like your income, age, residential status, and applicable deductions. The tool will then calculate your tax liability for the given financial year.

   
   
   

3. What components of salary are included in income tax calculations?

   
   

   Income from salary includes basic salary, HRA, special allowances, transport allowance, and other allowances. Some components, like telephone bill reimbursements and leave travel allowances, are tax-exempt, and HRA exemptions can be calculated using an HRA calculator.

   
   
   

4. How is income from house property taxed?

   
   

   Income from house property includes rental income from self-occupied, let-out, or deemed let-out properties. This income is taxable and should be reported under the "Income from House Property" head.

   
   
   

5. What is the difference between short-term and long-term capital gains?

   
   

   Capital gains arise when you sell assets like real estate, stocks, or gold. Short-term capital gains are taxed at higher rates if assets are sold within a short period, while long-term capital gains have lower tax rates when assets are held for a longer duration.

   
   
   

6. Why should I use an Income Tax Calculator?

   
   

   Using an Income Tax Calculator ensures accurate tax calculations, saves time, and helps with better financial planning by allowing you to explore exemptions and deductions to reduce your tax liability.