As per India’s income tax laws, a person can have a maximum of five income sources. These sources include income from salary, income from real estate property, income from the business, income from returns on investments, income from other sources, etc. In case you are a corporate employee, you can compute your income from the salary you are drawing using the TDS certificate issued with Form16 by your employee.
Calculating income from capital gains can be difficult as it includes the number and complexity of transactions. We all know that filing income tax returns is necessary for various reasons, and to file the income tax returns, the first step is to collect all the information needed to file it.
The next step is to calculate your total taxable income. The final tax payable or refundable must be compounded by applying the current tax rates applicable and then deducting the taxes already paid as TDS, TCS, or advance tax.
The easiest way to calculate your taxes is by using an online income tax calculator. All you need to do is insert your information regarding your income, deductions, and HRA exemptions along with an approximate figure of income tax liability.
Generally, computing income tax involves the following steps:
- First thing first, you need to ascertain your set gross income.
- Next step, you must calculate your federal taxable income and consequent tax. This includes building your itemised deductions, computing the deductions, and subtracting the same.
- The last and the final step is to calculate your final tax and exemptions. Calculate the allowed exemptions, establish your gross income tax for the present financial year. And lastly, exclude credits that are entitled to you.
How can using a tax income calculator help you?
An income tax calculator is a useful tool that helps you to easily calculate a person’s tax liability based on the details like your salary, expenses, and investments. Here are a few ways in which using an income tax calculator can be helpful.
- Eases tax planning – The Ministry of Finance under the Union Budget 2020 gives a new tax regime to the taxpayers and the existing one. The taxpayer gets to decide which tax regime to follow. And the income tax calculator will help you choose the tax regime that suits you the best and get maximum benefits. Tax planning is an important component for many plans especially retirement plans as 80C and NPS provide benefits in retirement planning. An income tax calculator helps you to plan well, considering various factors.
- Saves time – Tax planning can be a tedious and time-consuming process. The introduction of the new tax regime comes with the benefit of letting the taxpayers choose the best option but also complicates it further. An income tax calculator helps to calculate, assess both the options and then select the best plan in seconds.
- Cost effective – An income tax calculator being available online can be used any number of times for free.
- Easy to use – An income tax calculator is a straightforward and easiest way to calculate your taxes merely by giving simple inputs like your income, expenses, and investment details.
