How to calculate Income Tax for FY 2017 – 2018?
How much tax one should pay depends on the tax slab applicable to the taxpayer’s income and age.
Income tax is calculated based on the below mentioned tax slabs.
IT slab for individual tax payers (less than 60 years) (Male & Female)
| Income Slab | Tax Rate |
| Up to Rs 2,50,000 | No Tax |
| Rs 2,50,000 – Rs 5,00,000 | 5% |
| Rs 5,00,000 – Rs 10,00,000 | 20% |
| Above Rs 10,00,000 | 30% |
IT slab for senior citizens (more than 60 years less than 80 years) (Male & Female)
| Income Slab | Tax Rate |
| Up to Rs 3,00,000 | No Tax |
| Rs 3,00,000 – Rs 5,00,000 | 5% |
| Rs 5,00,000 – Rs 10,00,000 | 20% |
| Above Rs 10,00,000 | 30% |
IT slab for super senior citizens (more than 80 years) (Male & Female)
| Income Slab | Tax Rate |
| Up to Rs 5,00,000 | No Tax |
| Rs 5,00,000 – Rs 10,00,000 | 20% |
| Above Rs.10,00,000 | 30% |
Common for all the above Slabs
Surcharge:
- 10% on Income Tax if the total Income exceeds Rs 50 Lakhs upto Rs 1 crore.
- 15% on income tax if the total income is above Rs 1 crore
Cess:
- 3% on total income tax payable including surcharge, if any
Rebate under Section 87A:
- Tax rebate of Rs 2,500 for individuals with income of up to Rs 3.5 Lakhs
Income tax calculation for a Salaried Individual
Income from salary = Basic + HRA + any other allowance
Few components of your salary such as medical reimbursements and conveyance allowance are exempt from tax. If you are receiving HRA from your employer and live in rented accommodation you are eligible for HRA exemption. (HRA exemption calculation is explained in a separate in this same section)
Conveyance allowance is provided to employees as part of the salary to meet their travel expenses from home to work and vice versa. The exemption limit on conveyance allowance has been raised to is 1,600 p.m or Rs 19,200 p.a from 2015-2016. For eg, if an employee receives Rs 2000 as conveyance allowance every month, only Rs 1600 shall be exempted and remaining Rs 400 pm or Rs 4,800 p.a shall be added to taxable income
Let us understand income tax calculation with an example. Rajeev receives a Basic Salary of Rs 50,000 p.m., HRA of Rs 25,000 p.m, conveyance allowance of Rs 8,000 p.m., Special Allowance of Rs 5,000 p.m., LTA of Rs 20,000 annually. Rajeev lives in rented accommodation in Delhi and pays Rs 20,000 p.m as rent.
Include income received (if any) from the following sources to calculate income tax
- Income from Salary which is the salary paid by the employer
- Income from residential property (rental income)
- Income from capital gains (income from sale of shares or house property)
- Income from business or any other profession (income from consulting, freelancing or small business)
- Income from various other sources (Interest received from savings accounts, fixed deposits, bonds, etc)
| Nature | Amount(Rs) | Allowed deduction(Rs) | Taxable(Rs) |
| Basic | 6,00,000 | – | 6,00,000 |
| HRA | 3,00,000 | 1,80,000 | 1,20,000 |
| Conveyance Allowance | 96,000 | 19,200 | 76,800 |
| Special allowance | 60,000 | – | 60,000 |
| LTA | 20,000 | 12,000 (submitted bills) | 8,000 |
| Medical Bills | 15,000 | 15,000 (submitted bills) | – |
| Gross Total Income | 8,64,800 |
Further, Rajeev has received Rs 8,400 as interest from savings account and Rs 10,000 as interest from a fixed deposit account.
In addition, Rajeev has invested in the following to save income tax.
- Rs 50,000 in PPF
- Purchased Rs 20,000 worth ELSS during the year.
- Paid LIC premium of Rs 8,000.
- Paid Rs.12000 as medical insurance premium.
Rajeev can claim the following deductions.
| Nature | Maximum Deduction | Eligible investments | Amount claimed |
| 80C | Rs 1,50,000 | PPF-Rs 50,000, ELSS – Rs 20,000, LIC premium- Rs 8,000. EPF deducted = Rs 50,000 *12% *12 = 72,000 (72000+50000+20000+8000) = 1,50,000 |
Rs 1,50,000 |
| 80D | Rs 25,000 (self) Rs 30,000 (parents) |
Medical insurance premium – Rs 12,000 | Rs 12,000 |
| 80TTA | 10,000 | Interest from Savings account – 8,400 | Rs 8,400 |
Gross taxable income calculation
| Particulars | Amount (Rs) | Total (Rs) |
| Income received from Salary | 8,64,800 | |
| Income received from Other Sources | 18,400 | |
| Gross Total Income | 8,83,200 | |
| Deductions | ||
| 80C | 1,50,000 | |
| 80D | 12,000 | |
| 80TTA | 8,400 | |
| Less Total Deductions | 1,70,400 | |
| Gross Taxable Income | 7,12,800 |
Income tax calculation for Rajeev
| Range | Tax Rates | Tax Amount (Rs) |
| Up to Rs 2,50,000 | Exempt from tax | Nil |
| From Rs 2,50,001 to Rs 5,00,000 | 5% | 12,500 (5% x (Rs 5,00,000 – Rs 2,50,000)) |
| From Rs 5,00,001 to Rs 10,00,000 | 20% | 42,560 (20% x (Rs 7,12,800 – Rs 5,00,000) |
| More than Rs 10,00,000 | 30% | Nil |
| Cess | 3% of total tax | 1651.80 (3% x (Rs 12,500 + Rs 42,560)) |
| Total Income Tax | Rs 56,711.80 (Rs 12,500 + Rs 42,560 + 1651.8) |
