The new tax regime introduced by the Finance minister co-exists with the old tax regime, the new income tax slab has decreased tax rates divided under 6 income slabs. Individuals opting for the new tax slab need to give up 70 tax deductions as mentioned in the new tax regime.
The new tax regime would be in effect from the 1st April 2019 and to choose this tax regime, it is paramount to know the process of income tax calculation. We can calculate income with the help of the income tax calculator available on different websites and can calculate tax manually.
What is Income Tax Calculator?
You can calculate your tax payable on your income with the help of an easy-to-use online tool – Income tax calculator.
Here Are the Details of Using an Income Tax Calculator
- To compute your taxes for the year, you would need to select the year for which you want your taxes to be calculated.
- As taxes vary according to age, one would need to select the age accordingly.
- Click on “next.”
- Calculate your taxable salary after deducting your HRA, LTA, standard deduction or any other exemption you would be willing to take. Enter this taxable income if you wish to apply for the old regime.
- After entering the taxable salary, you must enter the details of rental income, and interest paid on the home loan and on a self-occupied property.
- Click on ‘Go to Next Step”
- Any other exemptions that a person is willing to take under Section 80C, 80D, 80G, 80E, and 80TTA.
- Click on “Calculate” tab and get the amount that is taxable, and you can see the comparison between the taxes paid through old tax regime and the new tax regime.
- In case you do not have to fill any field, you can put a “0”.
Here Is How You Can Calculate the Income Tax?
Your salary comprises of basic salary + HRA + travel allowance or any other components. There are few components that are exempt from taxes like telephone bills, LTA (leave travel allowance once in two years). In case you are living on rent you can get exemption depending upon your HRA limit. You can calculate your HRA amount with the help of HRA calculator.
There is also a standard deduction of Rs. 50,000 introduced by the government of India.
To calculate income tax, let’s first know that both the Tax regimes co-exist and to take up with the new regime one has to let go 70 tax exemptions. Let’s understand the same with the help of an example.
Suppose Mr A gets a monthly salary of Rs. 1,00,000 per month and his HRA is Rs. 50,000, his Special Allowance of Rs. 21,000 while he receives Rs 20,000 per month for LTA. Mr A is staying in New Delhi and pays a rent of Rs. 40,000.
|Components||Amount||Exemptions/Deductions||Taxable (Old regime)||Taxable (New Regime)|
|LTA||20,000||12,000 (bills submitted)||8,000||20,000|
|Gross Total Income||16,50,000||20,72,000|
To calculate the gross taxable income from the salary:
|Under the old regime||Under the new regime|
|Income from salary||16,50,000||20,72,000|
|Gross total Income||20,0001||16,70,000||20,000|
|Section 80 C||1,50,0001|
|Section 80 D||12,000|
|Section 80 TTA||8,000||1,70,000|
|Gross taxable income||15,00,000||20,92,000|
|Total tax to be paid||2,73,000||3,79,704|
From the above calculation, one can easily state that if an individual claims any deduction on the taxes, then one would benefit from choosing the old tax regime.