Check Out the Steps to Calculate Income

Regardless of your income or occupation, filing income tax on time is a significant financial responsibility. The criteria for income tax varies based on differences in salaries, expenditures, investments and savings. Read on to know more about eligibility and calculation of income tax in India.

1. Who Pays Taxes?

Income tax is levied on anyone who has been in India for:

• 182 days during the previous financial year
• 60 days for the last fiscal year and 365 days in the past 4 fiscal years

2. Classification of Income Sources

The Income Tax Act allows a person in India to have income from 5 different types of sources:

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

3. Steps to

To calculate the amount of taxable income from salary, follow the steps mentioned below:

• Refer to your salary slips or Form 16 provided by your employer. Add all the payments, including TA, DA, DA on TA, HRA, and basic salary.
• If you have received any bonuses (TVP-ex gratia), add those as well
• The total of these additions is your gross salary. Once you have deduced it, deduct HRA, transport allowance and medical reimbursements from it.
• The resulting amount is your net income.

Additional Read:- Has the Budget Simplified the Income Tax Regime or Complicated it?

If you have other sources of income, you will need to add the net taxable income from those sources to your income from salary. The resultant amount will be your Gross Total Income. Usually, total gross income is classified into two parts, one of which is subject to normal taxes while the other comes under special tax slabs.

Sometimes, factors like home loans or other financial obligations or investments can make you eligible for deductions under sections 80C and 80U of the Indian Income Tax Act. After deducing your gross total income, claim all deductions on it as applicable.

If the amount of deductions you claim exceeds the gross total income, the deductions will be equal to the gross total income itself. Note that only Normal Income is subject to deductions.

Subtract the deductions claimed under Chapter VIA of the Income Tax Act from your gross total income. The resultant will be your taxable income.

4. Tax Slabs

The following are the tax slabs applicable to different incomes for people aged 60 and below:

• For income up to Rs. 2.5 lakhs, no tax has to be paid.
• For incomes between Rs. 2.5 lakhs – 5 lakhs, the tax rate applicable is 5% on Total Income. A tax rebate of Rs. 12,500 is applicable under section 87A.
• For incomes between 5 lakhs to 7.5 lakhs, 10% of total income.
• For incomes between 7.5 lakhs to 10 lakhs, applicable tax rate is 15%.
• For incomes between 10 lakhs to 12.5 lakhs, tax rate applicable is 20%.
• For incomes between 12.5 lakhs to 15 lakhs, applicable tax rate is 25%.
• For incomes above Rs. 15 lakhs, a 30% tax rate is applicable.

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