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How to Calculate Your Income Tax Based on Tax Slab?

Image of percentage calculator used to calculate income tax

Income Tax* is a Direct Tax paid to the Government of India based on the different sources of income. It is paid for by all residents and Non-Resident Indians. The exact value of the Income Tax is calculated based on various factors. Deductions and tax slabs are the most prominent factors that require special mention. Let us discuss the method to calculate the income tax based on the tax slab in detail here.

Income Tax* Calculation

Calculation on Income Tax is a simple process, provided you have understood the different terminologies and the factors for consideration. A tax calculator can help you derive at the amount. However, you can follow these simple steps to calculate the Income Tax* based on Tax Slab:

  1. Consider the income from different sources that are applicable for Income Tax:
    Sources of Income
     – Income from different sources is accountable in the calculation of Income Tax. Here is a basic list of source information.

    • Salary 

    • Income from house property or buildings in the form of rents

    • Capital gains from assets

    • Business income

    • Other sources

  2. Consider exemptions and subtract them from the gross income:


    Exemptions -
    The type of income that can be excluded from gross income while calculating Income Tax is called an Exemption. For example, agriculture income, conveyance allowance, transfer allowance, etc., are exempt from income tax calculation.

  3. Calculate the appropriate deductions that apply to your expenses:
    Deductions -
    Deductions refer to the expenses that can be reduced from the taxable income to lower the income tax* payable. For example, there is a standard deduction of ₹50,000 of the salary earned annually for every individual.

    Section 80C of the Income Tax Act, 1961 provides a list of deductions that can be availed. Here are a few to be mentioned. 

    • Deductions for investments made in Public Provident Fund, Equity Linked Savings Scheme, Life Insurance Plans, National Savings Certificate, Senior Citizen Savings Scheme, ULIPs, etc. subject to certain terms and conditions. 

    • Deductions on interest received on a savings account, paid for house rent, education loan, home loan.

    • Deductions for a premium paid on Medical Insurance, money spent on medical expenses for physical disability, donations, etc. 

  4.  

         Using the tax benefit calculator, you can derive the exact amount for these deductions.

  5. Derive at the Net Taxable Income and apply the correct tax rate.
    Tax Slab -
    Taxpayers are divided into different groups according to their taxable income to apply the appropriate tax* rate. This concept of grouping is referred to as a tax slab. 

 
Income Rates based on Tax* Slab

The Income Tax Department has announced a ‘New Tax* Regime’ for the Assessment Year, AY21-22. 


According to the Old Tax Regime, the tax rates were as listed:

Income

Tax Rate(%)

Tax Payable

Up to ₹2.5 Lakh

Nil

Nil

2.5 Lakh to ₹5 Lakh

5

5% of Taxable Income

5 Lakh to ₹10 Lakh

20

₹12,500 + 20% of the Income above Rs 5 Lakh

Above ₹10 Lakh

30

₹1,12,500 + 30% of the Income above Rs 10 Lakh


According to the New Tax Regime, the Tax Rates are:

Income

Tax Rate(%)

Tax Payable

From ₹2.5 Lakh to ₹5 Lakh

5

5% of Taxable Income

From ₹5 Lakh to ₹7.5 Lakh

10

₹12,500 +10% of Excess

From ₹7.5 Lakh to ₹10 Lakh

15

₹37,500 + 15% of Excess

From ₹10 Lakh to ₹12.5 Lakh

20

₹75,000 + 20% of Excess

From ₹12.5 Lakh to ₹15 Lakh

25

₹1,25,000 + 25% of Excess

Above ₹15 Lakh

30

₹1,87,500 + 30% of Excess


However, as per the New Tax Regime that offers lower rates, the taxpayer is not allowed to avail many deductions and exemptions.

In addition to the Income Tax, a surcharge is levied when the Total Income exceeds ₹5 million. The Health and Education Cess is further charged at 4% of the Income Tax* and Surcharge if applicable.

 

Tax-Saving Life Insurance Plans from Tata AIA Life Insurance

Tata AIA Life life insurance plans to suit every need. You can choose from:

  1. Term Insurance Plans

  2. Life Insurance Savings Solutions

  3. Wealth Solutions (Unit Linked Insurance Plans)

  4. Retirement Solutions

  5. Group Insurance Plans

And much more!


The premiums paid for the life insurance plans are tax-deductible under Section 80C of the Income Tax Act. Additionally, maturity benefits or death pay-out are subject to exemption from taxation under Section 10(10D). Further, if you choose any health-based riders# with your life cover, you can avail of an additional tax deduction under Section 80D of the Income Tax Act.

To determine your life insurance quotes, you can use the wide range of Tata AIA Calculators available on our website.

 

Summing Up

After a basic understanding of the various factors associated with Income Tax*, it is easy to calculate the tax based on the tax slab. Ensure you pay attention to these factors while document your income tax* by doing an online income tax* return.

Read through the deductions and exemptions to make the best use of tax benefits. If it is the first time you are calculating, seek expert guidance to avail all the benefits and make the most appropriate calculation. You can try different avenues for tax* benefits such as insurance, investments, loans, etc. 

For more information on Tata AIA Life Insurance plans, get in touch with us today!

L&C/Advt/2021/Oct/1867

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Tata AIA Life Insurance

A joint venture between Tata Sons Pvt. Ltd. and AIA Group Ltd. (AIA),  Tata AIA Life Insurance  is one of the leading life insurance providers in India. We post everything you need to know about life insurance, tax savings and a variety of lateral topics such as savings and investments in this space. You can access and read a host of different blogs, articles and pages at the Tata AIA Life Insurance Knowledge Center or get in touch with us with any queries or questions!

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