How do I calculate income tax in India?

In India, calculating income tax is one of the most complex tasks for a layman. There are so many salary components which make the task difficult and cumbersome. Before moving forward and do the actual tax calculation through income tax calculator, let’s first understand the different component for salaried person.

Income Tax Slab

For the financial year 2017-18, below is the applicable income tax slab.

income tax slab

Over and above the total tax amount, you also need to pay CESS at 3% on the tax amount.

Now let’s understand the various salary component.

House rent allowance (HRA)

Following 3 conditions are taken as the exemption amount on HRA:

  • Actual HRA provided by the employer
  • Rent actually paid by you less 10% of your basic salary (Rs 281400 in your case)
  • If you live in a metro then 50% of your basic salary or 40% of basic salary for other cities

Suppose, your actual rent is Rs 10000, and you live in Mumbai then the least of the following 3 conditions will be the deduction:

  • Rs 140700 (Actual HRA by the employer)
  • 120000 less (10% of 281400)= Rs 91860
  • 50% of 281400= Rs 140700

The taxable HRA amount would be Rs 140700 less Rs 91860 = Rs 48840

Special Allowance

The special allowance is fully taxable (if any)

Transport allowance

Exemption on transport allowance is allowed by Rs 1600 per month i.e. Rs 1600x 12= Rs 19200/ year. Therefore, no tax incidence will occur in your case under this category

Medical Reimbursement

Medical reimbursement up to Rs 15000 in a financial year is exempt from tax but, you have to submit the bills for the expenses.

Provident fund

Employer’s contribution to provident fund is exempt up to Rs 1.5 Lakhs in a financial year. Therefore, in your case, the amount under PF will be exempt.

Based on the above components, you can easily compute the gross taxable income with the help of the below calculator. Download the excel based income tax calculator. Fill in the basic require figures and your taxable income will be calculated.

The calculator is applicable to salaried people only.

You cannot calculate taxes like HRA and Capital gain tax (STCG/LTCG).

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