Tax Calculator - Gross Taxable Income, Income Tax Slabs, Exclusions, and Deductions

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All About Tax Calculator - Step by Step Calculation of Your Income Tax

All individuals and entities in India, having a taxable income, are required to pay taxes to the Income Tax Department and file their income tax returns.

If you are looking for financial savings, then opting for a health insurance policy is a wise idea.  Buying a health insurance policy is vital as medical inflation has created a financial burden on families. Getting a tax deduction under Section 80D of the Income Tax Act, 1961, is one of the advantages of buying a health insurance policy.

Tax is paid depending on the current income tax slab under which the person falls. One can estimate the tax to be paid through manual calculation or by using an income tax calculator, which is an online tool. 

The income tax calculator gives you an estimate of tax that depends on your income. The taxable income is assessed after making deductions, other taxes that you may have paid and tax deducted at source. The calculated taxable income is taxed at the applicable slab rate.

Here is a complete guide to the Income Tax Calculator and the tax benefits you can avail under your health mediclaim policy.

What are the Various Income Tax Slabs?

The income tax is imposed on an individual as per the income tax slab where the different tax rates are prescribed for various income tax slabs. As per the existing tax regime, there are three categories of individual taxpayers:

  • Taxpayers below the age of 60 years
  • Senior citizens above the age of 60 years and below 80 years
  • Super senior citizens above the age of 80 years

The income tax slab is different for each category of taxpayers. The income tax slabs may change after every budget announcement.

As per the Union Budget 2019, the income tax slab, and rates applicable for tax-paying persons including individuals, Body of Individuals, Hindu Undivided Family (HUF) and Association of People are given below:

For Resident Individuals whose Age is Below 60 Years

Income Range

Tax rates

Up to Rs 2.5 Lakh

Nil

Rs 2,50,001 to Rs 5,00,000

5% of total income which exceeds Rs 2,50,001

Rs 5,00,001 to Rs 10,00,000

Rs 12,500 + 20% of total income which exceeds Rs 5,00,000

Rs 10,00,001 and above

Rs 1,12,500 + 30% of total income which exceeds Rs 10,00,000

For Resident Individuals whose Age is Between 60 to 80 Years

Income Range

Tax rates

Up to Rs 5 Lakh

Nil

Rs 5,00,001 to Rs 10,00,000

20% of total income which exceeds Rs 5,00,000

Rs 5,00,001 to Rs 10,00,000

Rs 10,000 + 20% of total income which exceeds Rs 5,00,000

Rs 10,00,001 and above

Rs 1,10,000 + 30% of total income which exceeds Rs 10,00,000

For Resident Individuals whose Age is above 80 Years

Income Range

Tax rates

Up to Rs 5 Lakh

Nil

Rs 5,00,001 to Rs 10,00,000

20% of total income which exceeds Rs 5,00,000

Rs 10,00,001 and above

Rs 1,10,000 + 30% of total income which exceeds Rs 10,00,000

 

Note: In addition to the tax amount given above, a cess of 4% is also applicable.

An individual taxed under the new tax regime, as announced in Budget 2020-21, will have to forgo certain tax deductions and exemptions. Mentioned below are certain income tax deductions that a taxpayer has to forgo while opting for the new tax regime.

  • Leave Travel Allowance
  • House Rent Allowance
  • Relocation Allowance
  • Deductions as per Chapter VI A of the Income Tax Act, 1961 such as Section 80 CCC, Section 80D and 80 TTA

The New income tax slabs for individuals for FY 2020-21

Income Range

Tax rates

Up to Rs 5 LakhUp to Rs.2.5 Lakh

Nil

Rs.2,50,001 to Rs.5,00,000

5% of the total income that is exceeding Rs.2.5 lakh

Rs.5,00,001 to Rs.7,50,000

10% of the total income that is exceeding Rs.5 lakh

Rs.7,50,001 to Rs.10,00,000

15% of the total income that is exceeding Rs.7.5 lakh

Rs.10,00,001 to Rs.12,50,000

20% of the total income that is exceeding Rs.10 lakh

Rs.12,50,001 to Rs.15,00,000

25% of the total income that is exceeding Rs.12.5 lakh

Income exceeding Rs.15,00,001

30% of the total income that is exceeding Rs.15 lakh

Note: In addition to the tax rate given above, a cess of 4% is also applicable.

In every financial year, most employees are worried as to how they should pay the income tax. The income tax is calculated with the help of an online tax calculator.

How to use Online Tax Calculator for calculating tax for FY 2020-21?

  • Opt for a financial year for which you want the tax to be calculated
  • Select age as per tax liability that is different depending on the age group
  • Mention your taxable salary after eliminating different exemptions such as HRA, standard deduction, etc. if you are selecting the old income tax slabs. Else, you can enter your salary without availing exemptions if you are choosing the new tax slab.
  • Apart from the taxable salary, you should enter details like rent, interest income, and interest paid on home loans for rent.
  • If you want to calculate tax under the old income tax slab, make sure you show your investments as per Section 80C, 80D, 80G, 80E, and 80 TTA.
  • Hit on calculate to get tax liability. You will get a comparison of the old and new income tax slabs

The online tax calculator calculates the amount of tax that is payable by you. It considers different parameters such as your income, age, gender, and other factors that give a definite amount of tax that has to be paid.

Salaried employees can calculate the income tax with the help of an online tax calculator. 

How to Calculate the Gross Taxable Income?

If you are a resident Indian or an NRI, you are required to pay taxes if your income falls within the taxable range. The income can be obtained from various sources, as mentioned below:

  • Income from salary: If you are a salaried individual, your salary structure includes Basic Pay, House Rent Allowance (HRA), Transport Allowance, Leave Travel Allowance (LTA), Special Allowance, Other Allowance, reimbursement of phone bills, etc. However, you are entitled to tax exemptions in some cases, like HRA and LTA. Besides, a standard deduction of Rs 50,000 is applicable.
  • Income from Residential Property: The annual value of the property you own, besides self-occupied property is chargeable to tax. That is, the rent received from your properties is taxable. However, you can claim deductions up to 30% of the annual value or rent obtained, as per section 24 of the I-T act.
  • Income from Profits and Gains of Business or Profession: The ‘profits and gains’ of business or profession undertaken by the assessee, at any time, during the previous year are chargeable to tax.
  • Income on Capital Gains: Profit obtained from transfer or sale of any capital asset (property, securities, etc.) is chargeable to tax. The income thus earned is classified into two categories - Short Term Capital Gain and Long Term Capital Gain – depending on the tenure during which the capital asset is held.
  • Income from other sources: The various income sources which are not categorized under other heads viz. income from salary are classified under income from other sources. For instance, interest earned on securities, income from lottery, family pension, etc.

Thus, ‘gross total income’ is the amount obtained by adding up all the income earned under the heads of income as specified above.

Taxpayers have the option to choose the old income tax slab or the new tax slab, which was introduced in the Union Budget 2020. In both the tax regimes, individuals who have net taxable income up to Rs 5 lakh are be eligible for rebate up to Rs 12,500.

The taxable income, for those following the old income tax slab, is achieved after making income tax deductions. If you have opted for a health insurance policy, you will get deductions on the premium paid as per Section 80D of Income Tax Act for yourself and your family.

What is Excluded from Gross Total Income?

According to Section 10 of the Income Tax Act, certain income types are not counted under Gross Total Income and thus are tax exempted.

Few of them are given below:

  • Income earned from agriculture
  • Income received as a HUF member
  • Profit earned as a co-owner in a partnership firm
  • Amount obtained from Provident Fund Account or ‘Sukanya Samruddhi’ Account
  • Amount obtained in the form of death-cum-retirement gratuity under the revised Pension Rules of the Central Government
  • Amount received on voluntary retirement or termination of service, as per any voluntary retirement scheme, up to max. Rs 5 lakh.
  • Amount obtained in the form of gratuity received under Payment of Gratuity Act if it does not exceed the amount calculated as per the provisions of sub-sections (2) and (3) of section 4 of that Act
  • Sum received as an employee from the National Pension Scheme (NPS) Trust on account closure/opting out of the scheme, provided the sum does not exceed 40% of the total sum payable to the person at the time of closure/ opting out of the scheme. 

Deductions Applicable on Gross Taxable Income

The income tax deductions help the salaried employees in saving tax. These deductions help in reducing tax liability to a great extent. The tax-free expenses incurred during a financial year are subtracted from an individual’s annual income. The income tax deduction can be claimed by an individual, on investments made during the last year, at the time of filing the income tax return.

An individual taxpayer can apply for several deductions on their income to reduce their taxable income. Let us discuss some of the important income tax deductions that a taxpayer can claim.

  • Section 80C Deductions: A maximum deduction of Rs. 1,50,000 can be claimed for any contribution made by the income tax assessed towards:
    • Payment of Life Insurance policy premium
    • Repayment of the principal portion of home loan
    • Payment of Stamp duty or property registration fees
    • Public Provident fund (PPF), Sukanya Samriddhi Yojana, Equity Linked Saving Scheme (ELSS), Five Year Bank Deposit (FD), Senior Citizens Saving Scheme, National Savings Certificate
  • Section 80D Deductions: Individuals and HUFs, who pay for the premium towards their respective mediclaim policies, are eligible for income tax deductions under Section 80D. The maximum deduction applicable for an individual and his family on the health insurance policy is Rs 25,000. If the plan includes senior citizens or the assessee is above 60 years of age, then the maximum deduction is Rs. 50,000.
  • Section 80DD Deductions: The expenses incurred by individuals and HUFs on medical treatment or maintenance of a person with a disability are applicable for tax deduction up to the maximum amount of Rs 75,000; and up to Rs 125000/- for severe disability.
  • Section 80DDB Deductions: The expenses incurred on medical treatment for specific diseases for self or dependent are applicable for tax deduction up to a maximum amount of up to Rs 40,000. The limit is Rs 1,00,000 for senior citizens.
  • Section 80G Deductions: There is a tax deduction of 100% for contributions made towards charitable institutions specified under the I-T Act, for instance, Prime Minister National Relief Fund or National Defense Fund. In other cases, there is a deduction of 50%. 
  • Section 80TTA Deductions: There is a deduction of Rs 10,000 on saving interest income. 

Thus, the Net Taxable Income = (Gross Total Income – Deductions)

>> Click to Calculate Health Insurance Premium now!

Know how to calculate income tax with the help of this example

The annual income is the total of basic salary, House Rent Allowance (HRA), special allowance, transport allowance, and any other allowance. If you are getting HRA and live in a rented house, then you can claim an exemption on it. 

Let us understand the calculation of income tax as per the income tax slab.

Example:

Rahul is a salaried person who works in an MNC in Gurgaon, India. His salary structure for the financial year 2019-2020 is as mentioned below:

Components

Salary per Month

Salary per Annum

Deductions

Taxable

Basic Salary

Rs 40,000

Rs 4,80,000

-

Rs 4,80,000

HRA

Rs 15,000

Rs 1,80,000

Rs 1,32,000

Rs 48,000

Special Allowance

Rs 11,000

Rs 1,32,000

Rs 1,32,000

LTA

-

Rs 20,000

Rs 10000

Rs 10000

Standard Deduction

-

-

Rs 50,000

-

Deductions

Rahul lives in Delhi and pays a monthly rent of Rs 15,000. He also claimed LTA of Rs 10,000.

The HRA exemption he will get is the amount which is the least among the following:

  1. HRA amount received from an employer in a year = Rs 1,80,000
  2. Actual rent paid in a year – 10% of basic = Rs 1,80,000 – Rs 48,000 = Rs 1,32,000
  3. 50% of the basic salary if he lives in metro city = Rs 2,40,000

Total salary = Rs 8, 12,000 per annum

Gross taxable income from salary = Rs 6, 20,000 per annum

Investments

Rahul has invested his money as specified below:

Category

Investments

Amount

Deductions claimed

Section 80D

Premium paid for mediclaim policy

Rs 12,000

Rs 12,000

Section 80C

Premium paid for LIC policy

Rs 8,000

Rs 1,40,600

PPF

Rs 60,000

ELSS

Rs 15,000

EPF contribution deducted by the employer

(Rs 40,000 * 12%) * 12 = 57,600

Section 80TTA

Interest from the savings account

Rs 8,500

Rs 8,500

Now, Let’s Calculate his Taxable Income:

Gross Taxable Income in India

Nature of income

Amount

Total

Salary

Rs 6,20,000

Income from Other Sources

Rs 8,500

Gross Total Income = Rs 6,28,500

Deductions

80C

Rs 1,40,600

80D

Rs 12,000

80TTA

Rs 8,500

Gross Taxable Income = Gross Total Income –Deductions

Rs 4,67,400

How to Calculate Income Tax?

Since Rahul is below 60 years of age, the following income tax slab is applicable for calculation of his income tax.

Income Range

Tax rates

Up to Rs 2.5 Lakh

Nil

0

Rs 2,50,001 to Rs 5,00,000

5% of (Rs 4,67,400 less Rs 2,50,000)

Rs 10,870

Rs 5,00,001 to Rs 10,00,000

Rs 12,500 + 20% of total income which exceeds Rs 5,00,000

0

Rs 10,00,001 and above

Rs 1,12,500 + 30% of total income which exceeds Rs 10,00,000

0

Cess = 4% of Rs 10,870 = Rs 434.8

Total Income Tax = Rs 10,870 + Rs 434.8 = Rs 11,304.8

Thus, the total tax amount payable by Rahul for the financial year 2019-2020 is Rs 11,304.8. He must file his tax returns for the assessment year 2020-21.

Thus, using an online tax calculator, you can easily find out the estimated tax for the financial year you have selected.