An income tax calculator is a tool that can be used to figure out how much tax you need to pay. The calculator uses important fundamental data to determine a person’s tax burden, including annual earnings, rent paid, tuition fees paid, interest on a child’s education loan, and any other savings.
It provides the total tax payable according to both old and new tax regimes. Additionally, it makes investment recommendations for the person based on their tax liability. The free-to-use online income tax calculator is a practical tool. It is easy to use, and anyone can use it to determine their tax liability.
Anyone can use an income tax calculator to estimate their yearly tax obligations. However, the tax calculator needs information about the taxpayer’s earnings, investments, and outlays to compute taxes online.
Let us see how to use the online income tax calculator step-by-step.
The taxpayer’s applicable income tax bracket and net income determine the income tax due. For the financial year 2022–23, you can compute your income tax by following these steps:
The total gross income under each of the following sources of income must be calculated.
Earnings from salary: Add up the gross salary you received from your job over the financial year. Your gross income will be listed on your Form 16. Upon completion of the financial year, your company will provide you with a Form 16.
Income from Capital Gains: Include your long-term and short-term capital gains. Not all capital gains are subject to slab rates of taxation. As a result, you need to be careful about the applicable tax rate.
Income from Residential Property: Include your net rental income from rented real estate in your gross income. Don’t forget to deduct any paid municipal taxes, the standard deduction, or the interest on your house loan.
Income from Profession or Business: Include the money you made from running a business or working in a profession. When computing the revenue under this heading, including the costs associated with the relevant business or trade.
Income from Other Sources: Include all additional sources of income in your total. Income from other sources includes interest from savings accounts and fixed deposits. Pro-Tip: If you’re investing in P2P lending, you should include only the interest income earned from your P2P lending investments also under ‘income from other sources’.
Now subtract all the exemptions, allowances, and deductions that apply to you with the income earned from the gross income.
Leave travel allowance as described in section 10’s clause (5)
House rent allowance as described in section 10’s clause (13A)
A portion of the allowance described in Section 10’s clause (14)
The standard deduction, entertainment allowance deduction, and employment/professional tax deduction as specified in Section 16
Interest paid on a housing loan under Section 24. A self-occupied or unoccupied property is eligible for the deduction against interest.
Loss under the head income from house property for the rented house shall not be allowed to be set off under any other head and would be allowed to be carried forward as per extant law.
Expenses associated with maintaining such a business or profession
Deduction for donations to or spending on scientific research
Rates, Rent, taxes, insurance, and repairs of building
Any commissions or bonuses given to the staff
A contribution to the employees’ approved gratuity fund or approved superannuation fund or recognized provident fund
The Public Provident Fund (PPF), Employees’ Provident Fund (EPF), the premium paid for a life insurance policy, and the principal repayment of a housing loan are all eligible for deduction under section 80C. In addition, section 80C also includes the National Savings Certificate (NSC), Equity Linked Savings Scheme (ELSS mutual fund), and child tuition costs.
National Pension Scheme contribution (NPS)
Medical insurance for self, spouse, and any dependent children
Repayment of a student loan
Donations for a good cause
Subtract the exemptions, deductions, and allowances from the gross income. Your net taxable income for the financial year will be this amount. Next, you must determine the amount of tax payable on this net taxable income.
Determine the amount of tax due for the financial year using the appropriate income tax slab rate for FY 2022–2023. Determine the taxes already paid for the financial year, including self-assessment tax, advance tax, and TDS. Your net tax to be paid for the financial year will be determined by deducting any taxes already paid from the total amount due.
The Income tax department provides an easy to use tool to determine your net taxable income and income taxes payable on the same. You can check it out here and use it for your own convenience.
To expand your portfolio, it is always a good idea to consider various investment alternatives. Thus, your risk is reduced, and your rewards are maximized. You can make investments in safer options such as fixed deposits and government bonds. Consider investing in stocks if you have a high-risk tolerance. One of the rapidly growing investment opportunities made possible by technology is P2P lending. The fixed maturity peer-to-peer investment plan from LenDenClub offers annual returns of up to 10–12%* p.a. on your investment.