Income Tax and Ways to Find Out Tax Payable

Income tax is a tax imposed by the government on the income of individuals, businesses, and other entities. In India, the tax system is progressive, meaning the rate of tax increases as income increases. The amount of income tax an individual pays depends on their income level, the applicable tax slab, and any exemptions or deductions they are eligible for.

How to calculate income tax in India:

  1. Determine your Gross Income: This includes your total income from all sources, such as salary, business income, rental income, interest, and dividends.

  2. Apply deductions and exemptions: Deductions are subtracted from your gross income to reduce your taxable income. Common deductions include:

    • Section 80C: Investments in life insurance, PPF, NSC, tax-saving FD, etc. (up to Rs. 1.5 lakh)
    • Section 80D: Premiums for health insurance policies
    • Section 80E: Interest on education loans
    • Section 10(14): House Rent Allowance (HRA), if applicable

  3. Determine the Taxable Income: Subtract all eligible deductions from your gross income to calculate your taxable income.

  4. Apply the tax slabs: India has different tax slabs based on income levels and the type of taxpayer (individual, senior citizen, etc.). Here are the tax slabs for individual taxpayers (below 60 years) for FY 2024-25:

    Income Tax Slabs for Individuals (Below 60 Years):

    • Up to Rs. 2.5 lakh: No tax
    • Rs. 2.5 lakh to Rs. 5 lakh: 5% of income exceeding Rs. 2.5 lakh
    • Rs. 5 lakh to Rs. 10 lakh: 20% of income exceeding Rs. 5 lakh, plus Rs. 12,500
    • Above Rs. 10 lakh: 30% of income exceeding Rs. 10 lakh, plus Rs. 1,12,500

  5. Add Cess and Surcharge:

    • Health and Education Cess: 4% on the total tax payable.
    • Surcharge: Applicable for higher income brackets, typically for income above Rs. 50 lakh.

Example Calculation:

Let’s say your taxable income is Rs. 8,00,000.

  • Tax on the first Rs. 2.5 lakh: No tax
  • Tax on the next Rs. 2.5 lakh (Rs. 2.5 lakh to Rs. 5 lakh): 5% of Rs. 2.5 lakh = Rs. 12,500
  • Tax on the next Rs. 3 lakh (Rs. 5 lakh to Rs. 8 lakh): 20% of Rs. 3 lakh = Rs. 60,000

So, the total tax before cess = Rs. 12,500 + Rs. 60,000 = Rs. 72,500

Then, add 4% cess:

  • Cess = 4% of Rs. 72,500 = Rs. 2,900

Total tax payable = Rs. 72,500 + Rs. 2,900 = Rs. 75,400

This would be your income tax payable for the year.


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