Income Tax Calculator

How to Calculate Income Tax FY 2023-24

To understand your potential tax liability, you first need to figure out your tax slab. People have to pay taxes based on their annual taxable income. By dividing individuals under income tax slabs, the Government ensures that people do not pay very heavy taxes. Currently, there are two tax regimes available in India, each with different taxations for each slab. Let’s take a look at what they are:

Income Tax Slab for New & Old Regime

Income Tax Slab for Old Regime (FY 2023 – 2024) differentiates between three age cohorts of tax-paying individuals.

Income Tax Slabs for Individuals below 60 years and HUF:

NOTES:

• The exemption limit of income tax is up to ₹2.5 lakh for all individuals, HUF and individuals below 60 years and NRIs for FY 2023-24.
• An additional 4% health and education cess is applicable on the tax amount.

Income Tax Slabs for Individuals aged between 60 years and 80 years :

NOTES:

• The exemption limit on income tax is up to ₹3 lakh for senior citizens for FY 2023-24.
• An additional 4% health and education cess is applicable on the tax amount.

Income Tax Slabs for Individuals above 80 years:

NOTES:

• The exemption limit on income tax is up to ₹5  lakh for super senior citizens for FY 2023-24.
• An additional 4% health and education cess is applicable on the tax amount.

Income Tax Slab for New Regime (FY 2023 – 2024)  

Individuals with a net taxable income of up to ₹ 7 lakh will be eligible for tax rebate u/s 87A under the new tax regime. The rebate limit remains at ₹ 5 lakh for individuals who choose to pay tax under the old regime.

An additional 4% health and education cess is applicable on the tax amount.

Surcharge (applicable for Old & New Tax Regime):

Surcharge is levied over and above the tax subject to marginal relief at following rates if total income exceeds specified limits:

• 10% of Income Tax for income > ₹50 lakh
• 15% of Income Tax for income > ₹1 crore
• 25% of Income Tax for income > ₹2 crore
• 37% of Income Tax for income > ₹5 crore

The enhanced surcharge of 25% & 37%, as the case may be, is not levied, from income chargeable to tax under sections 111A, 112A and 115AD. Hence, the maximum rate of surcharge on tax payable on such incomes shall be 15%.

The maximum rate of surcharge on tax payable on dividend income or capital gain referred to in Section 112, shall be 15%. The surcharge rate for an Association of Persons (AOP) with all members as a company shall be capped at 15%.

It is to be noted that relevant marginal relief from surcharge is available.

Health and education cess at 4% is to be applied on amount of surcharge also.

Once you understand your tax slab based on your income, age and eligible tax deductions, you can use the slab amounts given above to calculate your tax. Let’s assume a 50-year-old man earns INR 10, 80,000 per year. He invests in a ULIP with a premium of INR 2,55,000. Since he falls under the old tax regime, he first needs to calculate his taxable income. After making the eligible deductions, his taxable income works out to INR 8, 80,000. Based on his age and taxable income, he needs to pay INR 12,500 + 20% of (8, 80,000 – 5, 00,000) as income tax. The amount works out to INR 88,500 plus Health and Education cess of INR 3,540 (88,500*4%), so his total tax liability is INR 92,040.

Let’s assume the man did not make any investments or deductions. His taxable income would be INR 10, 30,000 after the standard deduction of INR 50,000. As per the income tax slabs in the new regime, he would have to pay INR 45,000 + 15% of (10, 30,000 – 9, 00,000). In this scenario, the income tax amount works out to INR 64,500 plus Health and Education cess of INR 2,580.

Income Tax Calculation

We can understand how to calculate an individual’s income tax liability by using an example. Amit, a 45-year-old, earns INR 12, 00,000 per year. As per his income break-up, he gets HRA of INR 45,000 per month even though he pays monthly rent of INR 60,000. Additionally, he purchased a life insurance policy for himself, with a premium of INR 3, 00,000. He also pays the premiums for health insurance plans for himself and his mother, who is 70. Let’s take a look at how Amit should calculate his income:

Total Income: INR 12, 00,000

Standard Deduction: INR 50,000

HRA: INR 45,000

Interest on Home Loan- Self Occupied: INR 2, 00,000

Section 80C Deduction: INR 1, 50,000

Section 80D Deduction: INR 75,000

Amit’s total taxable income works out to: INR 6, 80,000.

His income tax liability is INR 12,500 + 20% of the taxable income above INR 5, 00,000

= INR 12,500 + 20% (6, 80,000 – 5,00,000)

= INR 12,500 + 20% of 1, 80,000

= INR 12,500 + 36,000

= INR 48,500 + INR 1,940 (48,500*4%)

So, the total tax Amit has to pay works out to INR 50,440

Now, let’s take a look at Varun’s situation. Varun earns INR 12, 00,000 per year. He does not make any investments, so he follows the new tax regime. After the standard deduction, his total taxable income is INR 11, 50,000.

As per the new tax regime, his income tax liability is INR 45,000 + 15% of the income above INR 9, 00,000

= INR 45,000 + 15% (11,50,000 – 9,00,000)
= INR 45,000 + 15% of 2,50,000
= INR 45,000 +  37,500
= INR  82,500+ INR  3,300 ( 82,500* 4%)

So, the total tax Varun has to pay works out to INR 85,800