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How to calculate Income Tax on Salary

02/Dec/2017
How to calculate Income Tax on Salary

The best part of the end of the month is the expectation of obtaining your salary but income tax can be a dampener on your joy. Most of us receive our salaries by the first half of the month. Our employers are bound by law to deduct income tax for us as individuals before they disburse the monthly wage. But it is the individual who is responsible for payment of income tax and submission of income tax returns at the end of every financial year.

Income is usually calculated by adding basic salary, HRA, transport allowance, special allowance, perquisites, and all the other allowances together. Some of these allowances are exempted from income tax slab and to get all possible deductions, you need to calculate it well.

Income tax deduction by employers on the salary of employees is done mandatorily in India. The employer needs to subtract the applicable amount of income tax based on the estimated income of the employee and deposit the same with the government.

The tax schedule for financial year 2017-18 are shown below:

  • for salary earners below 60 years:
Annual Income Tax Rate
Up to Rs.2,50,000 Nil
Rs.2,50,001-Rs.5,00,000 5%
Rs.5,00,001-Rs.10,00,000 20%
Above Rs.10,00,000 30%

  • for income earners between 60 years and 80 years:
Annual Income Tax Rate
Up to Rs.3,00,000 Nil
Rs.3,00,001-Rs.5,00,000 5%
Rs.5,00,001-Rs.10,00,000 20%
Above Rs.10,00,000 30%

  • for income earners between 80 years and over
Annual Income Tax Rate
Up to Rs.5,00,000 Nil
Rs.3,00,001-Rs.5,00,000 5%
Rs.5,00,001-Rs.10,00,000 20%
Above Rs.10,00,000 30%

You can always use our income tax calculator to simplify your tax determination. With this automated tax calculation system, you need only enter the information asked in the stated fields and push the calculate button. The online Income Tax calculator will calculate the final amount after eliminating all necessary deductions.

You can find more tax-related information on other interesting topics here.

The government grants tax exemption (under Section 80C and 80D) which allows a person to apply income deductions from taxable income based on certain investments she is allowed to make for the purposes of tax saving in that financial year. These tax saving instruments must then be subtracted from total annual earnings. What remains will be the amount on which existing tax rates will apply.

It is essential for an employee to declare her income at the end of the year through online income tax return forms. Some typical components of salary on which income tax exemption falls are given below:

  • House Rent Allowance – If an employee lives in a rented accommodation and receives HRA from her employer, she can declare this amount as a tax deduction
  • Conveyance/ Travel Allowance – Such an allowance is tax-exempt as part of an expense.
  • Medical Allowance – To claim this tax deduction the employee must furnish medical bills when filing tax returns.

You don’t have to be a math genius to do your taxes! You can instead hire a tax expert. We, at AllIndiaITR, guarantee you the best rates in the market for totally personalized financial services such as income tax e-filing, TDS payments online, ITR return submission, NRI tax compliance, income tax refunds, calculation of taxable income, etc.

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