(a) 53 x 55 x 5
Answers
Step-by-step explanation:
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Blog » Tax » How to Calculate Your Income Tax in 5 steps
How to Calculate Your Income Tax in 5 steps
Posted on March 27th, 2020 in Tax
By many, income tax is looked as a necessary evil. With ever-changing tax laws and several jargons – tax exemption, tax rebate, tax deduction, tax saving etc – to decipher, most of the time we do not even realize what portion of our income is being taxed, and how we can save some money.
In this blog, we show you how you can calculate your income tax, so that the next time, you can do your own math and take enough measures to save as much tax as possible.
First, what is income tax? And, what is taxable income?
Income tax is the tax levied by the government on an individual’s income. This term individual here applies to a person, Hindu Undivided Family, company, co-operative societies and trusts. And, the tax slabs are decided based on one’s income and age.
Now, taxable income is income of an individual minus the tax exemptions, deductions and rebate. These processes are laced with complicated calculations and adjustments, so we take you through them to make the math simple.
Step 1: Calculate your gross income
First, write down your annual gross salary you get. This will include all the components of your salary including House Rent Allowance (HRA), Leave Travel Allowance (LTA) and special allowances, like food coupons and mobile reimbursements etc..
Next, take out the exemptions provided on the salary components. The major exemptions you get are HRA i.e. House Rent Allowance and LTA i.e. Leave Travel Allowance.
For HRA, remember you can claim HRA ONLY if you live in a rented house. If you have your own accommodation or live with parents, then HRA is fully taxable. Also, your tax exemption under HRA is taken as the lowest of the following amounts:
HRA received from an employer
Actual rent paid less 10 percent of basic monthly salary
50 percent of basic salary if the taxpayer is living in a metro city
40 percent of basic salary if the taxpayer is living in a non-metro city
After this, remove the standard deduction of Rs 50,000 (every salaried individual is entitled to this deduction) to arrive at the net salary amount.
Next, you need to add income that you might have received from other sources. This could be rental income, interest earned from deposits, capital gains you might have received etc.
The amount you arrive at is your gross total income.
Step 2 – Arrive at your net taxable income by