To understand the prevalent income tax regime in this country, individuals need to ascertain their income and learn how to calculate their liabilities accurately. While manual calculation is still an option, individuals can turn to an income tax calculator to simplify this calculation processing, assuring an error-free result.
Nonetheless, first, they need to know the process of using this income tax calculator.
Steps to calculate income tax online
Follow the steps mentioned below to calculate income tax using a calculator –
Step 1 – Visit the official portal of the Income Tax Department of India and open an income tax calculator.
Step 2 – Specify “Assessment Year”.
Step 3 – Select right taxpayer category like a senior citizen, female, etc.
Step 4 – Mention all income sources like gross income, earnings from varied sources, etc.
Step 5 – Enter applicable tax deductions like home loan tax benefits for under-construction property, etc.
Step 6 – Enter details of tax exemptions under Sections 80C, 80D, 80E, 80G, etc.
Step 7 – Input details of HRA exemptions and click on calculate.
Within seconds, you will get to know the annual tax payable. Nevertheless, several financial institutions also offer online income tax calculator that individuals can use while availing a home loan. These NBFCs also extend pre-approved offers that expedite and simplify the loan availing process. Such offers are available on various financial products like loans against property, home loans, etc. All you have to do is enter your name and contact number to check your pre-approved offer.
Following these steps, you will get to know your total taxable income and total tax payable for the current financial year. Moreover, you should also know what are the tax savings and other advantages offered by home loans today in case you are servicing or intending to avail these credits.
For instance, you can claim tax deductions of up to Rs.1.5 lakh on principal payment under Section 80C. Moreover, as per Budget 2021, tax benefit is also available on stamp duty and registration charges under this same section. However, the cap is set at Rs.1.5 lakh, including principal payment. Similarly, under Section 24(b), you can claim tax exemptions of up to Rs.2 lakh in a financial year. Besides, new borrowers can also avail tax benefits of up to Rs.50,000 on interest payment under Section 80EE.
Besides knowing how to use an income tax calculator, you should also know simple ways to increase tax benefits against taxable income. In this regard, you can also consider the tax benefits on a joint home loan which also accompanies other advantages.
Pre-requisites of using an income tax calculator
Before computing their liabilities, individuals need to know the new income tax slabs for 2020-2021 and the income sources they need to consider.
- Salary income
- Business revenue
- Rental yield
- Capital gains
- Income from miscellaneous investments
Besides income, the tax payable depends on factors like applicable tax slabs, age of taxpayers and residential status. In FY2020-2021, individuals with taxable income of up to Rs.2.5 lakh needed to pay zero tax. Similarly, senior citizens with annual earnings of up to Rs.3 lakh were exempt from paying taxes.
After considering these facts, taxpayers also had to include the various deductions applicable to their annual earnings. For instance, individuals investing in tax-saving instruments like health and life insurance policies, NCS, etc., could save considerably on their liabilities. Moreover, home loan borrowers could also avail tax benefits on home loan on various fronts.
Calculating income tax after considering these factors often gets cumbersome, and the chances of getting erroneous results are also very high. In such cases, individuals can use an income tax calculator online.
An insight in income tax collection in India
Income tax is one of the primary sources of government revenues utilised to ascertain better living standards and public welfare of the citizens. However, the number of official taxpayers in India is meagre, considering the country’s current population. The Central Board of Direct Taxes tweeted,
- Officially India had 1.46 crore taxpayers in 2018-19, and almost 1 crore of them reported yearly income between Rs.5 lakh and Rs.10 lakh. On the other hand, only 46 lakh taxpayers reported an annual income above Rs.10 lakh.
- 5.78 crore individuals filed income tax during the same period.
Now that you understand the importance of income tax payment, it is wise to use an online calculator and know your tax liabilities in advance. With that, utilise the steps mentioned above to pay your taxes on time.
