One of the most asked questions is How can I calculate my income tax? This article will help you answer this question.
It depends on your Income. You have to check the Tax bracket you belong to, based on the Old Tax Regime and New Tax Regime mentioned below. For example, if your income is 8 Lacs, based on Old Tax Regime, you belong to 20% tax bracket and based on New Tax Regime, you belong to 15% Tax Bracket. According to the tax bracket, your income tax will be calculated. After calculations, you have the option to choose between Old Tax Regime or New Tax Regime to pay your income tax.
| Income | Old Tax Regime | New Tax Regime |
|---|---|---|
| Rs. 0 to Rs. 2.5 Lacs | 0% | 0% |
| Rs. 2.5 Lacs to Rs. 5 Lacs | 5% | 5% |
| Rs. 5 Lacs to Rs. 7.5 Lacs | 20% | 10% |
| Rs. 7.5 Lacs to Rs. 10 Lacs | 20% | 15% |
| Rs. 10 Lacs to Rs. 12.5 Lacs | 30% | 20% |
| Rs. 12.5 Lacs to Rs. 15 Lacs | 30% | 25% |
| more than Rs. 15 Lacs | 30% | 30% |
Here are the steps to calculate your Income Tax
- Identify the tax bracket you belong to, based on above Income Tax Slab Rates table
- Calculate your taxable income on which income tax will be calculated
- Calculate income tax based on each slab rate, up to your taxable income
- Add income tax from each slab to get intermediate total income tax
- Calculate 4% cess on this intermediate total income tax
- Add this cess amount to reach total income tax
- Perform above steps with both – Old Tax Regime and New Tax Regime
- Choose between Old or New Tax Regime to pay your income tax. Choose the one that helps you pay less income tax
Note: Difference between Old and New Tax Regime is that New Tax Regime has lower tax rates compared to Old Tax Regime. Also, in Old Tax Regime you will be able to claim investment options as deductions to save your income tax which is not possible in New Tax Regime.
Let’s take few examples below. For simplicity we have considered that you are a salaried employee and only have standard deduction = Rs. 50,000 as the deduction option in Old Tax Regime based on income tax calculation for FY 2022-23. Standard deduction is not applicable for new tax regime.
How much tax do I pay on 10 lakh salary?
So for Salary = 10 Lakh in FY 2022-23, with standard deduction = Rs. 50,000, your taxable income will be:
- Taxable Income (Old Tax Regime ) = Rs. 9.5 Lakh
- Taxable Income (New Tax Regime ) = Rs. 10 Lakh
And you belong to 20% tax bracket in Old Tax Regime and 15% Tax bracket in New Tax Regime. Below is the table of your income tax calculation:
| Items | Old Tax Regime | New Tax Regime |
|---|---|---|
| Income | Rs. 10,00,000 | Rs. 10,00,000 |
| Standard Deduction | Rs. 50,000 | Rs. 0 |
| Taxable Income | Rs. 9,50,000 | Rs. 10,00,000 |
| 5% Slab | Rs. 12,500 | Rs. 12,500 |
| 10% Slab | Rs. 0 | Rs. 25,000 |
| 15% Slab | Rs. 0 | Rs. 37,500 |
| 20% Slab | Rs. 90,000 | Rs. 0 |
| Income Tax | Rs. 1,02,500 | Rs. 75,000 |
| Cess (4%) | Rs. 4,100 | Rs. 3,000 |
| Total Income Tax | Rs. 1,06,600 | Rs. 78,000 |
How 5% Income Tax is Calculated in above slab?
5% tax rate is applicable on income between Rs. 2.5 Lacs to Rs. 5 Lacs based on above Income Tax Slab Rate table. So 5% tax will be applicable on this difference of Rs. 2.5 Lacs, which will be Rs. 12,500. Similar calculation is done with other slab rates as well.
For example, 20% slab rate is applicable on income between Rs. 5 lacs to Rs. 9.5 Lacs based on Old Tax Regime in above example. So 20% tax is applicable on difference of Rs. 4.5 Lacs which is Rs. 90,000. And this is the way your income tax is calculated for FY 2022-23.
ALSO READ: 6 Tax Saving Options to pay Zero Income Tax with Rs. 11 Lakh Salary
Note that cess of 4% is applied after adding income tax from different slabs, which is added to get your total income tax to be paid or tax liability. Watch below video on income tax calculation using excel.
Income Tax Calculation using excel Video
How much tax do I pay on 14 lakhs?
Let’s take another example of Rs. 14 Lakhs salary with standard deduction = Rs. 50,000. This belongs to 30% tax bracket with old tax regime and 25% tax bracket with new tax regime.
- Taxable Income (Old Tax Regime ) = Rs. 13.5 Lakh
- Taxable Income (New Tax Regime ) = Rs. 14 Lakh
| Items | Old Tax Regime | New Tax Regime |
|---|---|---|
| Income | Rs. 14,00,000 | Rs. 14,00,000 |
| Standard Deduction | Rs. 50,000 | Rs. 0 |
| Taxable Income | Rs. 13,50,000 | Rs. 14,00,000 |
| 5% Slab | Rs. 12,500 | Rs. 12,500 |
| 10% Slab | Rs. 0 | Rs. 25,000 |
| 15% Slab | Rs. 0 | Rs. 37,500 |
| 20% Slab | Rs. 1,00,000 | Rs. 50,000 |
| 25% Slab | Rs. 0 | Rs. 37,500 |
| 30% Slab | Rs. 1,05,000 | Rs. 0 |
| Income Tax | Rs. 2,17,500 | Rs. 1,62,500 |
| Cess (4%) | Rs. 8,700 | Rs. 6,500 |
| Total Income Tax | Rs. 2,26,200 | Rs. 1,69,000 |
Above is the calculation for various slab rates on Rs. 14 Lakh salary. It is better to choose new tax regime in above case as you will be paying less income tax with new tax regime.
Above calculations can be seen in the excel screenshot here:
You can Download the Excel Calculator from here.
How much tax should I pay for 8 lakhs?
Another example of Rs. 8 Lakh salary, with standard deduction = Rs. 50,000. You’ll belong to 20% tax bracket with Old Tax Regime and 15% Tax bracket with New Tax Regime.
- Taxable Income (Old Tax Regime ) = Rs. 7.5 Lakh
- Taxable Income (New Tax Regime ) = Rs. 8 Lakh
| Items | Old Tax Regime | New Tax Regime |
|---|---|---|
| Income | Rs. 8,00,000 | Rs. 8,00,000 |
| Standard Deduction | Rs. 50,000 | Rs. 0 |
| Taxable Income | Rs. 7,50,000 | Rs. 8,00,000 |
| 5% Slab | Rs. 12,500 | Rs. 12,500 |
| 10% Slab | Rs. 0 | Rs. 25,000 |
| 15% Slab | Rs. 0 | Rs. 7,500 |
| 20% Slab | Rs. 50,000 | Rs. 0 |
| Income Tax | Rs. 62,500 | Rs. 45,000 |
| Cess (4%) | Rs. 2,500 | Rs. 1,800 |
| Total Income Tax | Rs. 65,000 | Rs. 46,800 |
Again, here as well it is better to choose new tax regime since you’ll be paying less income tax with no other investment deductions available apart from standard deduction.
Income Tax Calculator App – FinCalC
If you find it difficult to make these calculations manually or via excel document, you can Download my Android App “FinCalC” which I have developed for you to make your income tax calculation easy.
What you can do with this mobile App?
- Calculate Income Tax for new FY 2022-23 and previous FY 2021-22
- Enter estimated Investments to check income tax with Old and New Tax Regime
- Save income tax details and track regularly
- Know how much to invest more to save income tax
- More calculators including PPF, SIP returns, Savings account interest and lot more
Some More Reading:
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