With the introduction of the new slab rates for income tax calculation, taxpayers can now compute their annual income tax liability and file return either under the new tax regime or as per the old one. Notably, the new tax regime does not extend the facility of tax deductions and exemptions. However, under the old tax regime, taxpayers are still eligible to claim tax benefits applicable to their income slab.
Irrespective of the regime, computing and filing taxes has always been a complicated process for commoners. It is because incorrect filing can lead to several repercussions like penalty and legal implications. This is why individuals must be extra cautious when it comes to calculating their taxable income and liability.
While income tax e-filing has simplified the process significantly, individuals must be aware of inclusions and exclusions to tax calculations and various other factors involved for a better idea regarding their tax liability. Check out tax filing for dummies
Income tax calculation – A brief overview
Typically, there are 5 distinct sources of income that you should be familiar with before you proceed to calculate income tax.
- Salary income.
- Income generated from housing property through rent.
- Income from business and profession.
- Capital gains.
- Income from investments.
One must note that the tax rates depend on three vital factors – income tax slabs, age of the assessee, and residential status. For instance, individuals under 60 years of age must pay a tax under the existing regime if their annual income is more than Rs.2.5 lakh.
However, for individuals between 60 years and 80 years, the minimum limit is Rs.3 lakh. Furthermore, resident Indians are entitled to higher tax benefits when compared to NRIs.
Steps to compute income tax liability
These pointers below highlight how income tax liability is computed in general –
- Tax liability is computed as per one’s applicable slab rate.
- Applicable deductions are accounted for as the next step; for instance, home loan tax benefits for an under-construction property,among others.
- Subsequently, account for advance taxes and TDS.
- The resulting figure is taxed as per the applicable slab rate.
You should note that the entire tax liability computation and income tax e-filing process is lengthy and involves several detailed calculations. On top of it, individuals must also be aware of the home loan deductions or other exemptions and TDS rebates they are eligible to claim before filing their tax return, which can be way hassling. All of it collectively makes the entire process quite overwhelming to undertake. Taxpayers can thus instead use a reliable income tax calculator to estimate their tax liability with close accuracy.
Steps to use an income tax calculator
An online income tax calculator is a useful tool to compute tax liability. Typically, a reliable online calculator requires individuals to follow these simple steps –
Step 1 – Navigate to the income tax calculator provided on a reliable financial institution’s website.
Step 2 – Enter the relevant ‘Assessment Year’.
Step 3 – Select relevant taxpayer category (eg. senior citizens, females, etc.)
Step 4 – Enter income details like gross annual income from salary, annual income from other sources, interest paid on housing loans, etc.
Step 5 – Provide details of applicable deductions under 80C, 80D, 80G, 80E, etc.
Step 6 – Share details related to HRA exemption as per norms of Income Tax in India.
Once these steps are complete, the calculator will display your taxable income in no time. While at it, taxpayers should also find out the accurate way of filing income tax returns to avoid penalties and to claim applicable tax benefits accordingly.
Subsequently, they should make it a point to find out about home loan tax exemptions and benefits to avail them accordingly. Regardless, to make the overall loan repayment process, more affordable, individuals should apply for a housing credit from a financial institution that provides loans at attractive rates with tenure flexibility.
Some well-known lenders can also offer lucrative pre-approved offers that streamline the process of availing finances while reducing the time involved. These offers accompany multiple financial products like home loans and loans against property. You can check your pre-approved offer by sharing just your name and contact details.
Step-by-step income tax e-filing process
Typically, by following these steps, one can complete income tax e-filing conveniently.
Step 1 – Visit the e-filing portal on the official Income Tax Department website.
Step 2 – Login using your PAN and password. If you are not already registered as a user, create your account first to proceed with the following steps.
Step 3 – Look for the e-file option and select ‘Income-Tax Return’.
Step 4 – Choose relevant Assessment Year and Return form number.
Step 5 – Navigate to ‘Filing Type’ and select ‘Original/Revised Return’.
Step 6 – Navigate to the ‘Submission Mode’ and select ‘Prepare and Submit Online’.
Step 7 – Click on ‘Continue’ to fill up the ITR form.
Step 8 – Navigate to ‘Taxes Paid and Verification’ to initiate the verification process.
Step 9 – Click on ‘Preview and Submit’ to verify details.
Step 10 – Next, click on the ‘Submit’ button to complete this process.
Though return filing can be completed offline, the online method is considered to be quick, efficient, and hassle-free. Hence, make sure to find out all the steps involved to compute the taxable income and file an annual return for hassle-free compliance.