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wealth creation for the long-term. But this requires precise financial planning to invest in various tax-saving instruments. Investments like life insurance, provident fund, fixed deposit, and many more. Aid in saving on taxes. Read further to know how to calculate taxable income and the different eligible tax deductions.
You can find online tax calculators to aid in understanding your tax liability as to reduce your taxable income. This can be done by investing in financial instruments that give good returns and also serve the goal of paying less on taxes. The government of India encourages such investments of funds in multiple instruments for the movement of funds in the
economy. You can use the taxable income calculator to fulfill the below-given objectives:
The online income tax calculator presents your tax liability by using your annual income, the tax slab applicable to you, the tax deductions under Section 80C and Section
80D. Some tax calculators may also give you different investment options. In your monthly salary, you have allowances that give you tax benefits like House Rent Allowance (HRA) and Leave Travel Allowance (LTA). Let’s consider the below-given salary break up is similar to your salary:
|Special Allowance||INR 5,000|
|LTA||INR 25,000 (Yearly)|
Now, from the annual salary earned by you, the amount of taxable income is given-below:
|Components||Amount (per annum)||Exempted Amount||Taxable Amount|
|Basic||INR 4,20,000||-||INR 4,20,000|
|HRA||INR 1,80,000||INR 84,000||INR 96,000|
|Special Allowance||INR 60,000||-||INR 60,000|
|LTA||INR 25,000 (Yearly)||INR 18,000||INR 7,000|
|Standard Deduction||-||INR 50,000||-|
|Gross Total Taxable Salary||
To calculate income tax, you require the below-given figures:
Let’s assume you have invested in tax-savings instruments like Public Provident Fund (PPF), ELSS (Equity-Linked Savings Scheme), Employee Provident Fund (EPF), Fixed deposit, Savings deposit, Life and Medical insurance.
|Interest from Fixed & Savings Deposit||INR 8,400|
|Life Insurance Premium||INR 8,000|
|Medical Insurance Premiumlt||INR 20,000|
Now, let’s look at the amount you can claim with the tax-savings investments:
|Tax-Saving Section||Maximum Deduction Allowed||Eligible Investment||Amount Claimed|
|Section 80C||INR 1,50,000||PPF + ELSS + Life Insurance Premium + EFP =||INR 50,000 + INR 20,000 + INR 8,000 + INR 72,000||INR 1,50,000|
|Section 80D||INR 25,000 for you + INR 50,000 for parents||Medical Insurance Premium =||INR 12,000||INR 12,000|
|Section 80TTA||INR 10,000||Interest from Fixed Deposit + Interest from Savings Deposit =||INR 8,400||INR 8,400|
So the total taxable income is
= Total annual salary + income from other sources
- tax-savings investments
= INR 5,83,000 + INR 18,000 - INR 1,70,400
= INR 3,94,600
Under section 80C, you can
claim a total tax deduction of up to INR 1,50,000 per year. Investments like
ELSS, PPF, National Savings Certificate (NSC), premiums paid towards life
insurance, Unit-Linked Insurance Plan (ULIP), fixed deposits, etc. can be
claimed under 80C.
Under Section 80D, you can
claim tax deductions for the medical expenses and health insurance for your
family and yourself. A maximum deduction of INR 50,000 can be claimed where INR
25,000 is for expenses of self and dependent family members and INR 50,000 for
your parents if they are above the age of 60 years.
If you live in a rented place, then the rent can be claimed for tax exemption. You can claim this amount even if your employer doesn’t pay you House Rent Allowance. A maximum of
INR 1,00,000 can be claimed by submitting relevant documents.
The amount of HRA exempt from tax can be estimated from the below-given factors:
1. The actual rent paid annually minus 10% of your basic salary
2. The actual amount of HRA given to you annually
3. 50% of your basic salary (for a metropolitan city)
The minimum figure out of these three is the HRA that you can claim for tax deductions.
Under Section 24, you can
claim a maximum amount of INR 2,00,000 paid towards the interest of a home
loan. If you have taken a home loan in FY 2016-17, you can claim additional
benefits of up to INR 50,000 under Section 80EE.
1.Is it mandatory for everyone to file their income tax returns?
If your income is below the basic exemption limit then you are not required to file income tax returns. But if your income is less than INR 2.5 lakhs and you want to claim a tax refund then you can claim the refund by filing the tax returns. Other than for the cases given above, it is mandatory for everyone to file income tax returns.
2.Can the income tax calculator estimate the amount of Tax Deducted at Source?
No, the income tax calculator cannot estimate TDS.
3.How much tax should I pay on my salary?
The tax slab for various income is given below:
|Annual Income||Taxes Applicable|
|Up to Rs 2,50,000||Exempt from tax|
|Rs 2,50,000 to Rs 5,00,000||5%|
|Rs 5,00,000 to Rs 10,00,000||20%|
|More than Rs Rs 10,00,000||30%|
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