How to Use the Income Tax Calculator

Master Your Tax Planning with the Income Tax Calculator

Understanding your tax liability is the first step toward effective financial planning. Our Income Tax Calculator helps you estimate your taxes under both the Old and New Tax Regimes, empowering you to make informed decisions about which regime saves you more money. With tax laws changing frequently, having a reliable calculator at your fingertips is invaluable for salaried employees, business owners, and freelancers alike.

Complete Step-by-Step Tutorial

Step 1: Enter Your Annual Income

Start by inputting your total annual income. This is your gross income before any deductions:

• For Salaried Individuals: Enter your annual CTC (Cost to Company) or gross salary. This includes your basic salary, HRA, allowances, and bonuses.
• For Business Owners/Freelancers: Enter your total annual revenue minus business expenses. This is your net profit for the financial year.
• Multiple Income Sources: If you have income from salary, business, rental property, or investments, add them all together for your total annual income.

Example: If your monthly salary is ₹75,000, your annual income is ₹9,00,000. If you also earn ₹1,00,000 from freelancing, your total annual income is ₹10,00,000.

Step 2: Choose Your Tax Regime

India currently offers two tax regimes, and you must choose one:

Old Tax Regime

This regime has been around for decades and allows you to claim various deductions and exemptions:

• Section 80C deductions (up to ₹1.5 lakh): PPF, ELSS, life insurance, home loan principal, etc.
• Section 80D (health insurance): Up to ₹25,000 (₹50,000 for senior citizens)
• HRA exemption for rent paid
• Home loan interest deduction (up to ₹2 lakh)
• Standard deduction of ₹50,000 for salaried individuals

Tax Slabs (Old Regime):

• Up to ₹2.5 lakh: Nil
• ₹2.5 - ₹5 lakh: 5%
• ₹5 - ₹10 lakh: 20%
• Above ₹10 lakh: 30%

New Tax Regime

Introduced in 2020 and made default from FY 2023-24, this regime offers lower tax rates but fewer deductions:

• Most deductions and exemptions are NOT available
• Only standard deduction of ₹50,000 is allowed
• Simpler tax calculation with no need to track investments

Tax Slabs (New Regime):

• Up to ₹3 lakh: Nil
• ₹3 - ₹6 lakh: 5%
• ₹6 - ₹9 lakh: 10%
• ₹9 - ₹12 lakh: 15%
• ₹12 - ₹15 lakh: 20%
• Above ₹15 lakh: 30%

Step 3: Add Your Deductions (Old Regime Only)

If you selected the Old Regime, you'll need to input your deductions:

Section 80C Deductions

Enter the total amount invested in 80C instruments (maximum ₹1.5 lakh):

• Public Provident Fund (PPF)
• Employee Provident Fund (EPF)
• Equity Linked Savings Scheme (ELSS) mutual funds
• Life insurance premiums
• Home loan principal repayment
• National Savings Certificate (NSC)
• Tuition fees for children

Section 80D (Health Insurance)

Enter premiums paid for health insurance:

• Up to ₹25,000 for self, spouse, and children
• Additional ₹25,000 for parents (₹50,000 if parents are senior citizens)

HRA Exemption

If you receive House Rent Allowance and live in rented accommodation, enter your HRA details:

• Actual HRA received
• Rent paid minus 10% of basic salary
• 50% of basic salary (for metro cities) or 40% (for non-metro)

The calculator will automatically compute the exempt amount based on the minimum of these three.

Home Loan Interest

Enter the interest paid on your home loan (maximum deduction of ₹2 lakh for self-occupied property).

Step 4: Review Your Tax Calculation

Once you've entered all information, the calculator displays:

• Gross Total Income: Your total income before deductions
• Total Deductions: Sum of all eligible deductions
• Taxable Income: Income after deductions
• Tax Liability: Total tax based on applicable slabs
• Cess: 4% Health and Education Cess on total tax
• Final Tax Payable: Your total tax obligation

Step 5: Compare Both Regimes

The calculator shows tax liability under both regimes side-by-side, helping you choose the one that saves you more money.

Real-World Example

Profile: Priya, 32, Software Engineer in Bangalore

• Annual Salary: ₹12,00,000
• HRA Received: ₹3,60,000
• Rent Paid: ₹30,000/month (₹3,60,000/year)
• 80C Investments: ₹1,50,000 (PPF + ELSS)
• Health Insurance: ₹15,000
• Home Loan Interest: ₹1,80,000

Old Regime Calculation:

• Gross Income: ₹12,00,000
• Less: Standard Deduction: ₹50,000
• Less: HRA Exemption: ₹1,80,000
• Less: 80C: ₹1,50,000
• Less: 80D: ₹15,000
• Less: Home Loan Interest: ₹1,80,000
• Taxable Income: ₹7,25,000
• Tax: ₹62,500 + 4% cess = ₹65,000

New Regime Calculation:

• Gross Income: ₹12,00,000
• Less: Standard Deduction: ₹50,000
• Taxable Income: ₹11,50,000
• Tax: ₹1,20,000 + 4% cess = ₹1,24,800

Result: Priya saves ₹59,800 by choosing the Old Regime!

Pro Tips for Tax Optimization

• Plan Early: Don't wait until March to think about tax savings. Start planning in April.
• Maximize 80C: Invest the full ₹1.5 lakh limit in tax-saving instruments.
• Don't Forget 80D: Health insurance premiums provide dual benefits - tax savings and health coverage.
• Keep Rent Receipts: If you're claiming HRA, maintain proper rent receipts and rental agreements.
• Review Annually: Your optimal regime might change as your income and investments evolve.

Use our Income Tax Calculator regularly to stay on top of your tax planning and make informed financial decisions!