Finance

How to Compute Your Total Taxable Income

Income tax is the tax that you must pay on your income. It is levied on your total taxable income. Therefore, by calculating your total taxable income, you will understand your income tax liability.

If you want to know how to calculate total taxable income, then read this article.

In order to file your income tax return, you should first collect all the details about your income. Then, you need to calculate your total taxable income. After this, calculate the final tax payable or refundable. The final tax is calculated by using the applicable tax rates and then deducting taxes that are paid prior via TCS/TDS or advance tax from the tax amount due.

As per the Income Tax laws, you can generate income via 5 sources. In order to find out your total taxable income, you must first calculate your income from all the sources.

  • Income from Salary

To calculate income from salary, collect salary slips and Form 16. Then, add all the salary parts such as basic salary, HRA, DA, TA, other reimbursements and allowances. These will be mentioned in your salary slips and Form 16 (Part B). Then, add the bonus received. The total will be your gross salary.

Deduct the exemptions of HRA, standard deduction, and professional tax from the gross salary. The total will be your net salary.

  • Income from House Property

Income from house property consists of income that an individual receives by giving his/her property on rent.

  • Income from Capital Gains

Income received by selling capital assets falls under this category.

  • Income from Business or Profession

Income                 generated by profits from business or profession falls under this category.

  • Income from Other Sources

Generally, income from other sources consists of interest income, bonus, etc.

Once you add income from all the sources, you need to deduct the available deductions from it, such as deductions under Section 80C, Section 80D, etc. Finally, after the deductions, the income that you receive is net taxable income. The income tax slab depends on your net taxable income. Furthermore, you can take help from an income tax calculator to easily calculate your income tax liability.

An income tax calculator will calculate the income tax based on your annual income, applicable tax slab rates, and available deductions. This tool can be a tax saving calculator as it can help you understand how you can save more tax.

Income Tax Slab

Income Tax Rate
Below Rs. 2.5 Lakhs 0
Between Rs. 2.5 Lakhs and Rs. 5 Lakhs 5%
Between Rs. 5 Lakhs and Rs. 10 Lakhs 20%
Above Rs. 10 Lakhs 30%

You can also choose to pay tax as per the new tax regime. If you opt for the new tax regime, then you can pay tax at lower rates compared to the old tax regime. However, you can’t avail most of the tax exemptions and deductions.

New Tax Regime

Income Tax Rate
Below Rs. 2.5 Lakhs 0
Between Rs. 2.5 Lakhs and Rs. 5 Lakhs 5%
Between Rs. 5 Lakhs and Rs. 7.5 Lakhs 10%
Between Rs. 7.5 Lakhs and Rs. 10 Lakhs 15%
Between Rs. 10 Lakhs and Rs. 12.5 Lakhs 20%
Between Rs. 12.5 Lakhs and Rs. 15 Lakhs 25%
Above Rs. 15 Lakhs 30%

By calculating the total taxable income, you can find out the income tax you have to pay using the old and the new regime. Therefore, you can opt for a tax regime that helps you save more tax.

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