You’ve probably heard of people filing their ITRs on an annual basis. An income tax calculator is used to compute this taxable income. It is a simple online calculator or tool that allows you to estimate your taxes. The calculation is based on your annual income. It assists users in calculating taxes in accordance with the provisions of the Income Tax Act rules and regulations. The inputs provided are for earned income and the deductions allowed by the act.
In this article, we will give you a comprehensive guide on how to use an income tax calculator online.
What is an Income Tax Calculator?
An income tax calculator is a tool that helps in the calculation of the taxes that an individual is liable to pay under both the old and new tax regulations or regimes. It uses the most basic and necessary information, including annual income, rent paid, interest on an ongoing loan, tuition fees, and other savings. This calculator calculates the tax liability of an individual.
Also, it is an excellent tool for suggesting income opportunities based on tax liability. An online income tax calculator is convenient and free to use, with easy understanding. There is even an option for income tax calculation for senior citizens since the rules change a bit when it comes to senior citizens.
Steps to Use an Online Income Tax Calculator
There are a few steps when you use an income tax calculator online. These steps include:
- Enter the annual income: The first and foremost step is to provide all details of the income you earn under the various heads of payment, such as interest on deposits, capital gains, rental income, salary, and other taxable income.
- Put in the exemptions: The next step is to provide all the details related to exemptions that are available against the earned income during the financial year. These exemptions can be against any property, let-out property, salary, etc.
- The tax deductions: Moving on, you will have to provide all the details regarding tax deductions available under section 80C health insurance, education loan, donations, health insurance, etc.
- Provide basic information: The next step is to provide all essential details, such as age and the taxes paid during the financial years. Your age is a crucial factor in determining the amount of tax that is payable.
- Tax breakdown: In this final step, the calculator processes all the information mentioned above and calculates the total tax amount. This is both as per the old and new schemes. It also aids in determining how much more money you need to invest in order to save tax.
Furthermore, taxpayers can withdraw and change the values as required. Also, the tax calculator online will give you the best investment options to save yourself from getting further taxed.
The Various Tax Saving Schemes
Although it is mandatory for everyone to pay taxes, taxpayers with a net taxable income that is less than the minimum tax slab of Rs 2.5 lakhs per annum are exempt. It is essential for taxpayers looking to claim tax refunds to deduct TDS when filing an ITR. This can lead to a few benefits.
Also, when applying for a loan, the sanctioned amount and eligibility depend on the borrower’s income. Additionally, the taxpayers can even carry forward the losses. This will set them off against capital gains. However, it can only be done by filing taxes for that specific assessment year.
There are various tax slabs when income tax is calculated online. The government decides on these multiple slabs, which they can change yearly when presenting the annual budget. Also, knowing the various rules related to the Income Tax Act can come in handy since different salary components are either partially or not taxable.