An Income Tax is a taxation that is imposed on an individual or business by the Government on the income the former generate. In our country, Income Tax is monitored and administered by the Central Board of Direct Taxes (CBDT) under the Ministry of Finance.
STEPS TO FILE INCOME TAX
Follow the steps below to file your Income Tax:
- Sign up or register on incometaxindiaefiling.gov.in
- Your PAN number as your User ID
- View your Tax Credit Statement. Note that your TDS certificate needs to tally with the figures in your statement
- Now, click on Income Tax return form
- Select your Financial Year
- Download the ITR form which is applicable to you
- Fill in the necessary details using your TDS certificate in the excel attached
- Click Calculate Tax
- Make the payment and fill up the details in the challan
- Click on ‘validate’ and confirm the details
- An XML file will be generated
- Save the XML file
- Now Click on ‘Upload Return’ and upload your XML file
- A window will pop up where you will be needed to sign the file digitally
- If you have digital signature, then select ‘yes’, otherwise ‘no’
- This will generate the ITR Verification form (ITR-V)
- Take a print out of the same and sign it in blue ink
- Post the form through speed post or ordinary post within 120 days of online submission of your Income Tax Filing to the following address:
Post Bag No.1,
Electronic City Post Office,
Bengaluru – 560100,
DOCUMENTS REQUIRED TO FILE INCOME TAX RETURN
The following are the essentials for Income Tax Returns:
- Your PAN number, AADHAR Card details, and Current address
- All Bank account details of the selected Financial Year
- Proofs of income (salary slips, Fixed Deposits, Savings Account, etc.)
- The deductions claimed under section 80
- Details of payments of TDS and advanced tax
Income Tax Calculator
An Income Tax Calculator is an online calculation tool which helps in summing up the amount of tax an individual needs to pay. The calculation is done on the basis of the budget proposed by the Union.
How to Calculate Income Tax?
To calculate tax, you can use the easy online Income Tax Calculator tools. Follow the steps provided below to calculate your tax liability:
- Select the financial year of which you wish to calculate the tax
- Select your age group
- Click ‘Go to Next Step’
- Put in your salary that is taxable (taxable salary is the salary which is the amount left after deducting exemptions like HRA, LTA, etc.)
- Now enter the other necessary details like interest income, rental income, etc.
- Once again, Click on ‘Go to Next Step’
- Now input your taxation saving investments under the following sections: 80C, 80D, 80E, 80G, and 80TTA
- Click on ‘Calculate’, and your taxation liability will be displayed
To understand how to calculate tax liability, a quick example is as follows. Say, Dipak works in an IT Firm and receives a basic salary of Rs. 50,000. He also receives a House Rent Allowance of Rs. 25,000 and a Special Allowance of Rs. 13,000 per month. He lives in a rented house in Mumbai by giving a rent of Rs. 20,000. He also receives a Leave Travel Allowance of Rs. 20,000 per annum. So the structure of Dipak’s income is as follows:
|Basic Salary||Rs. 6,00,000 (P.A.)||—||Rs. 6,00,000|
|House Rent Allowance||Rs. 3,00,000||Rs. 1,80,000||Rs. 1,20,000|
|Leave Travel Allowance||Rs. 20,000||Rs. 12,000 (after the submission of bill)||Rs. 8,000|
|Special Allowance||Rs. 1,56,000||—||Rs. 1,56,000|
|Gross Total||Rs. 8,34,000|
NOTE: You can also calculate the HRA component on any HRA calculator tool available online.
Income Tax calculation includes incomes one receives from several sources. Incomes generated from salary from employer, rental income/interest paid on home loan, incomes that generate from purchase or sale of shares, income from business/freelancing, interest from savings account, fixed deposits, or bonds, are all must be incorporated in the Income Tax calculation.
In our example already mentioned above, Dipak receives an income from his savings account, which amounts to Rs. 8,400; interest from his FDs which is Rs. 10,000 in the whole of a given year. To save his Income Tax, Dipak has some investments like PPF (Rs. 50,000) and has also purchased ELSS of Rs. 20,000 (in a year). He also has a LIC premium of Rs. 8,000 and a medical insurance of Rs. 12,000. These investments help Dipak in claiming deductions in his Income Tax under the following sections:
|Nature||Deduction (Max.)||Valid Investments||Amount Claimed|
|Section 80C||Rs. 1,50,000|
PPF deposit (Rs.50,000)
ELSS (Rs. 20,000)
LIC Premium (Rs. 8,000)
EPF (12%) which gets deducted by his employer (Rs. 72,000)
Rs. 25,000 (self)
Rs. 50,000 (parents)
|Medical Insurance (Rs. 12,000)||Rs. 12,000|
|Section 80TTA||Rs. 10,000||Interest from Savings Account (Rs. 8,400)||Rs. 8,400|
So, now we have to calculate Dipak’s Gross Taxable income after including the deductions he gets from his tax saving investments:
|Income generated from Salary||Rs. 8,34,000|
|Income generated from other sources||Rs. 18,400|
|Gross Total of Income generated (Salary+others)||Rs. 8,52,400|
|Deduction under Section 80C||Rs. 1,50,000|
|Deduction under Section 80D||Rs. 12,000|
|Deduction under Section 80TTA||Rs. 8,400||Rs. 1,70,400|
|Total Taxable Income||Rs. 6,82,000|
In India, Income Taxation is calculated based on tax slab. After making deductions like the above, deductions of taxes already paid and Tax Deducted at Source (TDS), the remaining taxable income is then taxed at the proposed slab rate.
|Taxable Income||Rate of Taxation|
|Upto Rs. 2,50,000||Exemption from tax|
|Rs. 2,50,000 to Rs, 5,00,000||5%|
|Rs. 5,00,001 to Rs. 10,00,000||Rs. 12,500+20% of income exceeding Rs. 500,000|
|Above Rs. 10,00,000||Rs. 1,12,500+30% of income exceeding Rs. 10,00,000|
|Taxable Income||Rate of Taxation|
|Upto Rs. 3,00,000||Exemption from taxation|
|Rs. 3,00,001 to Rs. 5,00,000||5%|
|Rs. 5,00,001 to Rs. 10,00,000||Rs.10,000+20% of income exceeding Rs. 500,000|
|Above Rs. 10,00,000||Rs. 1,10,000+30% of income exceeding Rs . 10,00,000|
|Very Senior Citizen|
|Taxable Income||Rate of Taxation|
|Upto Rs. 5,00,000||Exemption from taxation|
|Rs. 5,00,0001 to Rs. 10,00,000||20%|
|Above Rs. 10,00,000||Rs. 1,00,000+30% of income exceeding of Rs. 10,00,000|
So, as per the tax slab, Income Tax for Dipak’s taxable income will be as follows:
|Taxable Income||Tax Rate||Amount|
|Up to Rs. 2,50,000||Exemption from Taxation||0|
|Rs. 2,50,000 to Rs. 5,00,000||5%||12,500|
|Rs. 5,00,001 to Rs. 10,00,000||20%||36,400|
|Above Rs. 10,00,000||30%||0|
|Cess||4% of Total Tax [4%(Rs. 12,500+Rs36,400)]||1,956|
|Total Income Tax||Rs. 12,500+Rs.36,400+Rs.1,956||Rs. 50,856|
Thus, Dipak’s Income Tax would be Rs. 50,856.
NOTE: The Union Budget for FY2019-20 has proposed full tax rebate for income up to Rs. 5,00,000 under section 87A.
Glossary: Tax Deduction Section?
Below is a detailed list of the sections (already aforementioned) that aids in deductions of Income Tax.
Section 80C: Under this section, one can claim a deduction up to Rs. 1,50,000 under certain payments or investments one makes. This section also incorporates four subsections. The following investments are eligible for this section:
- Life Insurance
- Sukanya Samriddhi Yojana
- Public Provident Fund (PPF)
- Equity Linked Saving Scheme (ELSS)
- Five Year Bank Deposits
- Stamp Duty and Registration Charges
- Senior Citizens Saving Scheme
- National Savings Certificate
- Home Loan Principal Repayment
Section 80D: This section allows an individual to avail deductions by paying premium towards a government-issued policy of health insurance. Policies for self, spouse, and dependent children can help in deductions too. Under this section, a maximum of Rs. 100,000 can be claimed.
Section 80E: Under this section, an individual can avail deductions when he gets an approved loan from a certified financial or charitable institution for his or her ward’s higher education. However, one must note that the institution which is giving them the loan is permitted for tax benefits. The maximum amount that can be deducted under this section is Rs. 3 lakhs.
Section 80G: Under this section, tax deductions can be availed on the funds that has been donated to a charitable institution. The limit of this deduction is dependent on the following factors:
- 100% deductions without limit- Donations made to National Defence Fund, National Illness Assistance Fund, Prime Minister’s Relief Fund, etc.
- 100% deductions with qualifying limits: donations to family planning and sports development organisations.
- 50% deductions without limits: Donations to Prime Minister’s Drought Relief Fund, Rajiv Gandhi Foundation, etc.
- 50% deductions with qualifying limits: Donations to Places of Local authority or religious institutions.
Income Tax Calculator FAQs:
1. How much tax must I pay on my salary?
2. Does the Income Tax Calculator calculate the TDS?
3. Who has to file Income Tax Returns?
4. What is an Income Tax Return?
5. What is a Financial Year?
Income Tax News
Revised Income Tax Slab Rates and changes in Budget 2023 – Here’s what Deloitte expects
Budget 2023 Income Tax Slab Rate Change Expectations: As the economy has been resilient after the pandemic and returning to a growth trajectory, tax experts are expecting some changes in Income Tax slab rates in Union Budget 2023, especially for those in the higher tax slabs.
“Per the current income tax provisions, an individual is required to pay taxes based on slab rates” said Ghosh.
Hence, to give more purchasing power to individuals and some relief to the employed taxpayers, the highest tax rate of 30 percent should be reduced to 25 percent and the threshold limit for the highest tax rate be increased from INR 10 lakh to INR 20 lakh.
News Updated Date: 16th December 2022
How The Income Tax Act’s Amendment Can Help You Under The New Income Tax Regulations
- The Income Tax Act of 1961’s provisions for compounding has recently been changed by the Central Board of Direct Taxes (CBDT).
- Cases previously ineligible for compounding because they lasted less than two years are now eligible if they last less than two years.
- If the taxpayer fraudulently removes, conceals, transfers, or delivers any property or interest, prosecution procedures may be initiated under Section 276.
- The former 24 months have been extended to 36 months for compounding
- Additional compounding fees in the form of penal interest that were 2% per month for the first three months and 3% per month after that were now 1% and 2%, respectively.
News Updated Date: 29-09-2022
Center Decides to Put an End to an Income Tax Benefit Home Loan After 31st March
The central government has declared that the income tax benefit to first-time homebuyers worth Rs 1.50 lakh will be discontinued from April 1st, 2022. Home loan borrowers purchasing their first house with stamp duty up to 45 lakh INR could avail of this benefit since it was first announced in the budget 2019 until the end of this financial year. This means the borrowers who have their loan sanctioned by 31st March 2022 are still eligible for having this income tax benefit under section 80 EEA, as stated by Balwant Jain, a tax and investment expert. However, from 1st April 2022, two new income tax benefits up to Rs 2 lakh and 1.5 lakh will be available for the home loan borrowers under sections 24(b) and 80C, respectively.
News Updated Date: 24-03-2022
No Relaxation on Income Tax Slabs and the Revised ITR Filing Window Increased: Budget 2022
Minister of Finance Nirmala Sitharaman, on her 4th Straight Union Budget, announced no changes on Income tax slabs. However, the finance minister provided some respite to those who filed their revised Income Tax Returns on time by expanding the tax filing window. In case the taxes are not filed within two years from the year of assessment, the revised tax filing period will remain open.
There is a long adjudication process if the assessee misses any income. With the new proposal, taxpayers will be granted a trust so that they will be able to disclose the income they missed out on when filing their returns. Additionally, it demonstrates a commitment to voluntary compliance with taxes, as said by the FM. Sitharaman also proposed a 30% tax rate to be imposed on any income from the exchange of virtual digital assets. During the computation of such income, no deduction should be made for any expenditure or allowance, except for the cost of acquisition. Moreover, the tax deduction limit for center and state government employees will increase from 10% to 14%. The financial bill has full details of the new proposal.
Updated Date: 07-02-2022
Budget 2022: No Major Changes are Expected in Individual Tax Rates
There are high expectations among taxpayers for the upcoming budget. The common man is expecting relief with tax rate reduction, relief on dividend taxation, increase in housing loan repayment exemption, removal of GST on services, etc. In short, taxpayers are expecting more money at hand at the end of the year.
For the fiscal year 2022, economists are expecting a GDP growth of 9.2%. This projection is yet unknown due to the prevailing uncertainties of COVID-19. To deliver on the GDP growth, the government is focusing on increasing its capital expenditure (Capex). The government will have to rely on tax receipts to meet the projected GDP growth. Hopefully, the government will not have to plan a fiscal deficit as it did earlier in the past decade.
In FY 2020-21, the government has already offered the Concessional Tax Regime (CTR ) to widen the tax base. The CTR regime is optional and can be opted each year by any eligible taxpayers, provided the business is ceased. However, the evaluation of the CTR success is still pending. It is thus unlikely that any changes would be made to the existing tax regime.
Due to HNIs with maximum effective tax rates of 42.744%, we are losing professional and technical skills entrepreneurial capital. These skills are vital for the growth of the country. The policymakers should also consider the rationalization of tax rates.
Updated Date: 26-01-2022