How To Calculate Income Tax If You Are New To Salary Component?
Income tax is one of the ways in which the government of the country demands taxes from the income earning population of the country. Everyone who earns monthly wages and has achieved an income slab wherein they are liable to pay taxes to the government has to pay income tax. The income tax paid by a particular person depends on the fact that in which income slab does the annual wages of the person lie. The income slab corresponds to the percent of income tax that has to be paid.
For a salaried person, the income from the salary on which income tax is calculated is the sum of the basic salary + HRA + special allowance + transport allowance +any other allowance. However, there are some allowances in your salary that are exempted from any kindof tax. These include the medical reimbursements, telephone bills reimbursements etc. For example, if you receive HRA but you live on rent, then you can claim for an exemption on the HRA. Also, transport allowances are provided to the employees as a part of their salary in order to meet the travel expenses from home to work and back. The government has set certain allowances as transport ones. For example, if 1600 is the transport allowance set during a financial year but you receive 2000 then till 1600 there will be not tax charged but for 400 the tax will be charged.
In order to calculate income tax, income from all the sources has to be included:
- the income from the salary
- income from house properties
- income from any capital gains
- income from business and professions
- income from all the other sources
How to calculate income tax
The income tax is calculated with the help income tax slabs.
- Up to annual income 2.5 lakhs, there is no income tax charged
- Between 2.5 lakhs to 5 lakhs, the income tax paid is 5%
- between 5 lakhs to 10 lakhs, the income tax paid is 20%
- above 10 lakhs, the income tax paid is 30%
- Cess is calculated at 3% of the total tax