After every financial year, which starts on 1st April and ends on 31st March, taxpayers are required to aggregate their income earned during the financial year and pay tax; if any, on the same. The income tax department has simplified the income tax return filing process by making it online. Moreover, an income tax calculator helps you assess your tax liability and pay income tax easily. Let’s understand how the calculator works in filing the income tax returns.
What is an income tax calculator?
An income tax calculator is an online tool that helps you calculate your tax liability. It allows you to record your income from all sources, club them together, find out your gross taxable income, allow for deductions and exemptions, calculate the net taxable income and then assess your tax liability.
How does the calculator help in income tax return filing?
Calculating your tax liability might prove to be a technical and complex process if you are not conversant with the different sections of the Income Tax Act 1961. This is where the income tax calculator can come to your rescue. Here are ways in which the calculator helps in income tax return filing –
1. Easy computation
The calculator helps you calculate your tax liability easily. It contains the five heads of income –
- Income from salary
- Income from business or profession
- Income from house property
- Income from capital gains
- Income from other sources.
It helps you enter the relevant income under the corresponding heads and then aggregates your total income. Moreover, the different tax treatment of different types of incomes is also done by the calculator and shown to you when determining your tax liability.
You can also enter the available tax-saving deductions and exemptions into the calculator to find the net taxable income on which your tax liability is computed when filing for income tax return.
Thus, with the help of the calculator, you can calculate your income tax easily and without hassles.
2. Choosing the right regime:
There are two income tax regimes under which income tax returns can be filed – the old and new regime. While the old regime allows tax-saving deductions and exemptions, the new regime has lower tax rates.
There has been a change in the slab rates for the New Tax Regime from Financial Year 2023-24, as per the latest Union Budget 2023$. However, this change will only be effective from the Financial Year 2023-24.
So, depending on your income and investments, you can choose the suitable tax regime.
3. Saves time and energy:
Calculating your tax liability using the calculator is time and energy-saving. You don’t have to devote hours to calculate your income tax liability. You can simply calculate your taxes using the calculator and then file the income tax return.
4. Accurate results:
Since the calculator is a mechanical tool, it gives accurate results without the scope of any human error. Thus, with the calculator, you can get accurate tax liability for income tax filing.
5. Free of cost:
Lastly, the income tax calculator is a free tool which you can use without spending a dime. You can use the calculator multiple times and find your tax liability when filing your income tax returns.
Calculating income tax – the process1:
While the calculator helps you calculate your tax liability, you should know how to calculate your income tax. The steps for the same are as follows –
- Choose your city, whether metro or non-metro and occupation, whether salaried or self-employed/ business.
- Enter your income details, i.e., salary (along with all allowances) or business income, rent paid, house rent allowance and the income earned from other sources.
- Deduct the applicable tax-saving deductions or exemptions that you are eligible for. For instance, you can claim a deduction under the following sections of Income Tax Act 1961, under the old tax regime:
- Section 80C up to Rs. 1.5 lakhs per annum
- Section 80D up to Rs. 25,000 per annum + Rs 50,000 per annum for senior citizen parents
- Section 24(b) up to Rs 2 lakhs per annum
- Section 80E, 80 TTA, 80TTB, 80CCD (1B), etc., if you have made eligible investments and expenses during the financial year.
- After deducting the deductions and exemptions, you will get the net taxable income.
- Then you can calculate the tax liability under the old and new regimes and choose a suitable regime that gives you the maximum tax saving.
Conclusion
As the financial year ends in March, taxpayers start preparing their income tax returns so that they can do income tax return filing on time and avoid penalties. So, use the income tax calculator to calculate your tax liability and file income tax return within the due date. The calculator can also help you identify tax-saving avenues like life insurance, fixed deposits, mutual funds, etc. that can bring down your tax liability and help in saving taxes So, consider using the income tax calculator properly and plan your taxes efficiently.
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