Salaried individuals get into a frenzied state when the tax filing season strikes. The amount of tax that needs to be shelled out at times can get a bit tuff to compute and how can you save on paying taxes also can get tuff to understand. An understanding of what the tax slabs are and what each of your salary breakup components means can help you greatly.
With the advent of technology, it’s easier than ever to calculate your taxes. You can now calculate your taxes with income tax calculator which is available online, following are its features:
- It’s extremely hassle-free and is easy to use.
- The calculator will ask for amounts of basic details that include your annual income, and if there are any expenditures you make like Monthly Rent, Monthly House Rent Allowance, Tuition Fees of Children, Interest Paid on education loan in FY. The calculator will want to know your monthly contribution to Provident Fund from the employee side and understand if you’ve saved in any of the investments like Life Insurance Premium for self, Public Provident Fund, Tax saving mutual funds, National Savings certificate, Tax saving bank FD, NPS investment (voluntary), Health Insurance for self, children, parents or spouse.
- The income tax calculator will help in calculating the tax you’d have to bear for the year and at the same time give you an understanding of whether you’ve reached your tax-saving limit under section 80C without taking a lot of time.
- Income Tax Calculator are available in plenty online and generally accessible 24*7.
- This is a great way to reflect on your investments for the year or to plan on making some investments accordingly.
- As the popular saying goes, Money saved is money earned hence, its important to understand how you can save taxes on salary and this calculator helps in the same.
Per Budget 2019, the following highlights one should keep in mind:
- For salaried individuals, the standard deduction has been raised from Rs.40,00 to Rs.50,000.
- Up to Rs.5,00,000 taxable income, salaried individuals to get a full rebate of tax.
- The threshold of TDS on interest on bank and post office deposits are raised up to Rs.40,000 from Rs.10,000.
- Section 54 Capital Gains exemption is now available in the purchase of two house properties (once in a lifetime)
CTC and Take Home Salary
CTC on a broad level generally includes:
a. Salary received every month by your employer.
b. Retirement benefits include PF and gratuity.
c. Benefits that are non-monetary like a cab service provided by the office, medical insurance provided for by the company, or meals which are free at the office, a phone provided to use but bills are reimbursed by company you work with.
Take-home salary will include:
a. Gross salary received each month.
b. Minus allowable exemptions consisting of HRA, LTA, etc.
c. Minus income taxes payable (calculated after considering Section 80 deductions)
Income chargeable to Tax
But, one has to keep in mind that to calculate Income tax, income from all sources is included as follows:
- Income from Salary- All the cash one receives while rendering your job because of an employment settlement commonly referred to as Salary.
- Income from house property-Income from house property that you simply own; property is often self-occupied or rented out.
- Income from different sources-Income which is amassed from fixed deposits and bank account comes under this head.
- Income from capital gains-Income earned from the sale of a capital asset (mutual funds or house property).
- Income from enterprise and profession-Income/loss arising is a result of wearing on an enterprise or profession. Freelancers’ income comes beneath this head.
All the income heads mentioned above add to make your total gross income, on which deductions under Section 80 can be claimed. The resulting amount is on which one pays tax and tax is calculated on the basis of the following tax slabs:
Up to Rs 2,50,000- No tax
Rs 2,50,000 – Rs 5,00,000- 5%
Rs 5,00,000 – Rs 10,00,000-20%
Rs 10,00,000 and beyond-30%
TDS and Form 16
TDS is Tax deducted at Source and is the amount of money that the employer deducts every month from your salary and pays to the government on your behalf. The total amount of salary you receive in a year, & investment in Tax saving products can help determine how much TDS will be deducted by your employer in a month. In the case of a salaried employee, TDS component forms a substantial portion of an employee’s income tax payment. Form 16 is the TDS certificate that your employer will provide you usually around June or July to give you an understanding of how much tax was deducted each month.
The lower your taxable income, the lower taxes you will have to pay for. Hence, it’s important to claim all the tax deductions and benefits that are relevant to you.
Section 80C of the Income Tax Act can reduce your gross income by Rs 1.5 lakhs and there are a bunch of other deductions under Section 80 such as 80D, 80E, 80GG, 80U etc. that reduce your tax liability.
Income Tax calculators can come handy in such situations where they can help you assess your income and serve as a reality check as well for how much tax you will be paying in the year. You can plan your finances accordingly and make sure to plan for tax saving instruments