Budget 2020 brought several revisions in India’s existing taxation system. Under the new tax regime, taxpayers would pay taxes at a reduced rate, given they do not claim tax exemptions under any of the existing categories. Notably, individuals have the liberty to either pay taxes as per the new regime or continue with the previous tax slabs.
Consequently, taxpayers will now have to decide which tax regime would prove more beneficial to them and would allow them to lower their tax liability. To help ease such prevalent doubts, the Income Tax Department introduced an online Income Tax calculator. Such an online tool is likely to help users compare the tax liability under both slabs and help them pick a more suitable tax regime.
What is an Income Tax calculator?
It is an online financial tool that allows an individual to calculate their estimated taxable income. It also helps compute the amount of tax they need to pay once they provide essential details pertaining to their income, tax slab, etc.
The Income Tax calculator is a useful online tool when it comes to tax planning. It helps individuals to gain a fair idea about the tax deductions, basic exemptions, and rebates they are eligible to claim. Similarly, it also helps taxpayers to estimate the actual tax liability and plan their finance accordingly.
How to use an Income Tax calculator?
An individual’s Income Tax is calculated based on the tax slab they fall under. Typically, the taxable income is computed after applicable deductions, TDS and advance taxes have been subtracted.
Instead of computing the taxable income manually, taxpayers can use an Income Tax calculator and obtain accurate estimation within a few seconds. Here are the steps one needs to follow to use the financial tool accurately –
- Visit the Income Tax calculator page online.
- Select the relevant financial year.
- Select a suitable age group and click on ‘Go to Next Step.’
- Those who intend to find out their tax liability under the old tax slabs need to enter their taxable salary after subtracting the exemptions like the LTA, HRA, standard deduction, etc. Alternatively, those who want to estimate their tax liability as per the new slab would have to provide details about their taxable salary without subtracting any exemptions.
- Provide information about income from rent and accrued interest, home loan interest for a rented property or home loan interest paid on a self-occupied property.
- Click on the ‘Go to Next Step’ option.
- To obtain information about tax liability, click on the ‘Calculate’ option.
- To compute tax amount as per old tax slab provide information about tax saving investment instruments. Investments that falls under the following sections are calculated – Section 80C, Section 80D, Section 80E, Section 80G, and Section 80TTA.
- Click on ‘Calculate.’
- Check the comparison between the tax liability under the old and new slab.
The information pertaining to taxable income and applicable exemptions would come in handy to file Income Tax returns and further claim the Income Tax refunds effectively.
Notably, taxpayers should find out the associated terms and conditions to claim tax exemptions and complete the process effectively
Hence, by using an online Income Tax Calculator, taxpayers would be able to eliminate any misunderstandings about the new tax slabs. It would allow them to compare the Income Tax returns they would be entitled to claim under both regimes. In turn, they would be able to make an informed decision about whether to opt for the new routine or to stick with the existing one.