Income Tax Calculation

Income tax calculation for FY 2023-24 and AY 2024-25 requires a thorough understanding of the income tax slab rates, deductions and exemptions under the new and old tax regime. Using an income tax calculator streamlines this process, offering individuals a reliable tool to estimate their tax liability with ease. 

Read on to learn about simple steps of income tax calculation, helping you swiftly assess your tax obligations under different tax regimes and make informed financial decisions.

Steps to Calculate Income Tax for FY 2023-24

Calculating your income tax for financial year 2023-24 (assessment year 2024-25) involves the following steps:

Step 1: Choose Your Tax Regime

Choose between the old and new tax regimes. Understand the deductions and exemptions available under each regime to decide which one suits you better.

Step 2: Calculate Your Gross Total Income

This step includes calculating your salary income, interest income, business income, rents, capital gains, and income from other sources.

Step 3: Claim Deductions and Exemptions

Subtract allowable deductions from your gross income to arrive at your taxable income. Deductions under the old regime can be claimed for investments under Sections 80C, 80D, etc., and exemptions are available for the basic exemption limit, HRA, etc.

Step 4: Apply Tax Slabs

The applicable tax rate depends on your taxable income slab and your age. Income tax slabs are different for old and new regimes, so do your research properly.

Step 5: Calculate Your Tax Liability

Multiply your taxable income falling under each tax slab by the corresponding tax rate and add the amounts to arrive at your total tax liability.

Check out the following formula for calculating taxable income

Gross salary (basic salary + special allowance + house rent allowance + perquisites) - deductions = taxable income

Now income tax or total tax liability is calculated from taxable income in the following way:

(Taxable income x applicable interest rates) - tax rebates

How to use an Income Tax Calculator for FY 2023-24 & AY 2024-25?

Check out the following steps to use an income tax calculator to calculate tax for the FY 2023-24 and AY 2024-25:

• Step 1: Go to the e-Filing portal homepage (https://www.incometax.gov.in/iec/foportal/)
• Step 2: Select Quick Links > Income and Tax Calculator.
• Step 3: In the Basic Calculator tab, enter the required details such as AY, taxpayer category, age, residential status, total annual income and total deductions. 
• Step 4: Click View Comparison to get a more detailed comparison of tax under the old and new tax regime.
• Step 5: In the Advanced Calculator tab, enter the following details:

Preferred tax regime, AY, taxpayer category, age, residential status, due date and actual date of submission of return.

• Under Details for Income and tax calculation, enter the required details of:
• Income under the head Salaries, 
• Income under the head House Property, 
• Income under the head Capital Gains, 
• Income under the head Business or Profession, and 
• Income under the head Other Sources. (what details are required?) – (entered)  

Under Deduction Details, enter the relevant deductions applicable to you, including but not limited to PPF, LIC, Housing Loan, NPS, Mediclaim, Loan on Higher Education. (what details are required?) – (entered)

Under Taxable Income, enter or edit the TDS/TCS details where you have substantiating evidence available.

Also Read - A Guide to Basic Concepts of Income Tax

Income Tax Calculation Example Based on New vs Old Tax Regime

Now, let's assume a situation where Rahul earns a basic salary of Rs.1 Lakh monthly while getting a house rent allowance of Rs.30,000. He gets a leave travel allowance of Rs.10,000 per year and a special allowance amounting to Rs.11,000 per month. Moreover, he lives in Kolkata and pays rent of Rs.20,000 for his flat each month. This is how his income tax will be calculated under both the old and new regime.

Type	Amount (Rs.)	Deduction	Taxable Amount (Old Regime)	Taxable Amount (New Regime)
Basic salary	12 Lakh	-	12 Lakh	12 Lakh
House rent allowance	3,60,000	1,20,000	2,40,000	3,60,000
Special allowance	1,32,000	-	1,32,000	1,32,000
Leave travel allowance	10,000	8,000 (bills submitted)	2,000	10,000
Standard deduction	-	50,000	-50,000	-50,000
Gross taxable income			15,24,000	16,52,000

 

Now, consider that Rahul has an income from a fixed deposit interest of Rs.8,000 and a savings account interest of Rs.12,000. He has also invested Rs.40,000 in PPF while investing Rs.10,000 in an ELSS during the financial year 2024-2025. He has also paid Rs.26,000 for medical insurance for himself and LIC premium of Rs.9,000. Check out the following deductions that he is eligible for under the old tax regime:

Section	Maximum Deduction (Rs.)	Eligible Expenses	Amount Claimed by Rahul (Rs.)
80C	1,50,000	PPF of Rs.40,000, ELSS of Rs.10,000, LIC premium of Rs.9,000. The contribution made by Rahul towards his EPF is = 1 Lakh * 12% * 12 = 1,44,000	1,50,000
80D	25,000 for self and 50,000 for parents	Health insurance premium of Rs.26,000	25,000
80TTA	10,000	Savings interest of Rs.12,000	10,000

 

Calculation of Income Tax Under Old Regime

Now, the gross taxable income under the old regime will be calculated in the following way:

Particulars	Amount (Rs.)	Total (Rs.)
Income from salary	15,24,000
Income from other sources	20,000
Gross total income		15,44,000
Deductions
80C	1,50,000
80D	25,000
80TTA	10,000	1,85,000
Gross taxable income		13,59,000

 

Check out the following table for the calculation of income tax under the old regime:

Income Tax Slab	Tax Rates (for age below 60 years)	Amount (Rs.)	Tax Rates (for ages of 60 to 80 years)	Amount (Rs.)	Tax Rates (for age above 80 years)	Amount (Rs.)
Up to 2.5 Lakh	Nil	-	Nil	-	Nil	-
2.5 to 3 Lakh	5%	2,500	Nil	-	Nil	-
3 to 5 Lakh	5%	10,000	5%	10,000	Nil	-
5 to 10 Lakh	20%	1,00,000	20%	1,00,000	20%	1,00,000
Above 10 Lakh	30% (13,59,000 less 10,00,000 * 30%)	1,07,700	30%	1,07,700	30%	1,07,700
Cess	4% of total tax	8,808	4%	8,708	4%	8,308
Total income tax liability		2,29,008		2,26,408		2,16,008

 

Calculation of Income Tax Under New Regime

The following table shows how to calculate one’s gross taxable income and income tax under the new tax regime (using the above example):

Particulars	Amount (Rs.)	Total (Rs.)
Income from salary	16,52,000
Income from other sources	20,000
Gross taxable income		16,72,000

 

The calculation of taxable income under the new regime is as follows:

Income Tax Slab (Rs.)	Tax Rates	Total (Rs.)
Up to 3 Lakh	Nil	-
3 to 6 Lakh	5%	15,000
6 to 9 Lakh	10%	30,000
9 to 12 Lakh	15%	45,000
12 to 15 Lakh	20%	60,000
Over 15 Lakh	30%	51,600 (16,72,000 less 15,00,000 * 30%)
Cess	4%	8064
Total Tax Liability		2,09,664

 

Deductions Under Different Sections & Exemptions Under Old Tax Regime

Here are some of the common deductions and exemptions available under the old regime:

• Section 80C

This section allows for a deduction of up to Rs.1.5 Lakh for investments made in various schemes like Equity Linked Savings Schemes (ELSS), Public Provident Fund (PPF), National Pension System (NPS), tuition fees for children, etc.

• House Rent Allowance (HRA)

If you live in rented accommodation, you can claim an exemption for HRA received from your employer as per the prescribed limits.

• Leave Travel Allowance (LTA)

You can claim an exemption for LTA received from your employer for travel within India.

• Medical Insurance Premiums Under Section 80D

Premiums paid for health insurance for yourself, spouse, parents and dependent children qualify for deductions under Section 80D. The maximum imit is Rs.25,000 for self, spouse or dependent children. And for parents who are senior citizens, the maximum limit is Rs.50,000.

• Interest on Loan for House Property

Interest paid on a home loan can be claimed as a deduction under Section 80EE up to a limit of Rs.50,000 each financial year.

• Section 80TTA

This section provides a deduction for interest earned on savings accounts from banks, post offices or cooperative societies. The maximum deduction allowed is Rs.10,000 per year.

Deductions Under New Tax Regime

The new tax regime in India offers a simplified tax structure with lower tax rates. The following are the deductions allowed under the new tax regime:

• Standard Deduction

A standard deduction of Rs.50,000 is available to salaried individuals, helping them save tax outgo.

• Section 80CCD

A deduction of not more than Rs.1.5 Lakh is allowed for the employer's contribution to the employee's National Pension Scheme (NPS) account.

Also Read - 9 Top Income Tax Saving Instruments You Must Know

To Conclude

Using an income tax calculator empowers taxpayers to make informed financial decisions by accurately estimating their tax liability for FY 2023-24 and FY 2024-25. With the ability to compare tax liabilities under different regimes and claim eligible deductions, you can optimise your tax planning strategies and ensure compliance with the prevailing tax laws.

Frequently Asked Questions

1. What are the eligibility criteria to file income tax?

An individual below the age of 60 must file ITR if their income exceeds Rs.2.5 Lakh under the old tax regime and Rs.3 Lakh under the new tax regime.

2. Are income tax calculators accurate?

The income tax calculator for FY 2023-24 can provide a reasonably accurate estimate of your tax liability depending on the accuracy of the financial information you provide. However, it is recommended to seek the expertise of a tax advisor if you face challenges while using the tool.

3. What are the income tax saving options available for salaried individuals?

Salaried individuals can claim deductions under Sections 80C, 80D, 80TTA, etc., and exemptions such as house rent allowance (HRA) under the old tax regime. In the new tax regime, one can claim the standard deduction of Rs.50,000 and the employer's contribution to NPS under section 80CCD

Disclaimer

This blog provides informational content on tax benefits and rules based on the current provisions of the Income Tax Act of India, 1961. The interpretations are subject to change as per amendments made by the Government of India. Applicable rates of GST and cess will be as per the current regulations. Readers must seek professional advice for accurate and up-to-date information.
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