How to Calculate Income Tax on your Salary?
Summary- Would you like to know how income tax for salaried individuals is calculated? Here is a post just for you!
With employment, you also need to bear the responsibility of paying income tax on a regular basis. To calculate income tax for salaried individuals, most of us seek professional help.
However, having to pay a chartered accountant additional money, for helping you calculate income tax in India is a bit expensive. The only other way to deal with this situation is learning how to calculate tax ourselves.
Due to the advancement in technology, one can now calculate their tax rate online as well. Various websites provide you with online income tax calculators. One of the most accurate and popular of them all is the website of the Income Tax Department of India.
Below are some steps that will help you to know the exact process of calculating income tax for salaried employees.
This may seem like an unnecessary step, but it does play an important role. The tax percentage payable by salaried employees depends on the age of the individual as well. The two age divisions in India are below the age of 60 and above the age of 60.
The tax percentage drops drastically between the two age divisions. Most people retire after the age of 60. But there are still a few business owners and entrepreneurs, who work on a salary basis till a much more extended period.
- Identify the year: A lot of employees, due to their busy schedule, choose to pay accumulated income tax for two or more years. For this reason, it is essential to identify the exact year, for which you are using the online tax calculator. Also, by doing so, you will be able to identify the correct amount of income inflow, for that particular year. It will make sure that you pay the precise amount without going overboard or under board.
- Salary slab: The next phase of calculating income tax for salaried individuals is identifying the actual income slab. Everyone is not fortunate enough to earn equal amounts of money. That is why our expenses and savings also differentiate.
Keeping this point in mind, the Government of India has created specific salary slabs. Depending on the slap your income falls under, a tax percentage is prefixed for you. This makes it all the more comfortable for you to use the income tax calculator.
- Additional income: Paying income tax does not mean that you only have to include your salary as a cash source. There are various other income sources that need to be claimed, to file your taxes.
These factors can include things like income generated from rented property, interest earned from savings, and TDS deducted on your salary. So, whenever you use an income tax calculator in the future, make sure you disclose all these sources.
- Deductibles: Lastly, you even need to adjust certain expenses against your income, to find the actual taxable amount. The Government of our country has approved a few predetermined deductibles that can be written off while filling the income tax returns.
The list of deductibles has sections like the premium you pay on various types of loans, the rent you pay to your landlord, the premium paid on insurances, etc. These are just a few typical examples. However, there are many more deductibles listed online.
The Bottom Line
By following these simple steps, you will be able to calculate the income tax rate yourself. It will even keep you from the hassle of visiting a professional each time to get an income tax return created for you. In short, self-calculation saves you both money and time.