How to Calculate Income Tax?

In our previous article we have shared with you the income tax rates for the financial year 2009-10. We have received hundreds of requests from readers to describe the method of income tax calculation in an easier way. We have developed an Income Tax calculator to calculate the tax liability on your own. There are different categories of Individuals for the purpose of calculating Income tax. Income Tax Act has categorized all Income Tax Payers (Individuals) into 3 different types:

• Male taxpayers

• Female taxpayers

• Senior citizens 

Income Tax Slab for Male Tax Payers

Annual Income	Income Tax rates for FY 2009-10
Up to 160000	Nil
160000 – 300000	10%
300000 – 500000	20%
500000 and above	30%

Now, let us see the method of calculating income tax in detail with few examples:

Example 1: Mr. Rahul is 35 year old and earning 8 lac annually.

Calculation

Example 2: Mr. Sandeep is 40 year old and earning 12 lac annually.

Calculation:

Heads	% of Income Tax	Tax Amount
Tax on Income up to 160000	Nil	Nil
Tax on Income between 160000-300000	10%	14000
Tax on Income between 300000-500000	20%	40000
Tax on Income between 500000- 1200000	30%	210000
Total		264000
Educational Cess	3% on the total tax	7920
Net Tax Payable		272920

Income Tax Slab for Female Tax Payers

Annual Income	Income Tax rates for FY 2009-10
Up to 190000	Nil
190000 – 300000	10%
300000 – 500000	20%
500000 and above	30%

Now, let me explain the method of calculating income tax in detail with few examples:

Example 1: Ms. Shreya is 35 year old and earning 8 lac annually.

Calculation:

Heads	% of Income Tax	Tax Amount
Tax on Income up to 190000	Nil	Nil
Tax on Income between 190000-300000	10%	11000
Tax on Income between 300000-500000	20%	40000
Tax on Income between 500000- 800000	30%	90000
Total		141000
Educational Cess	3% of the total tax	4230
Net Tax Payable		146230

Example 2: Ms.Priya is 40 year old and earning 12 lac annually.

Calculation

Heads	% of Income Tax	Tax Amount
Tax on Income up to 190000	Nil	Nil
Tax on Income between 190000-300000	10%	11000
Tax on Income between 300000-500000	20%	40000
Tax on Income between 500000- 1200000	30%	210000
Total		262000
Educational Cess	3% on the total tax	7860
Net Tax Payable		269860

Income Tax Slab for Senior Citizens

Annual Income	Income Tax rates for FY 2009-10
Up to 240000	Nil
240000 – 300000	10%
300000 – 500000	20%
500000 and above	30%

Now, let us the the method of calculating income tax in detail with few examples:

Example 1: Mr. Ganesh Prasad is 67 year old and earning 8 lac annually.

Calculation:

Heads	% of Income Tax	Tax Amount
Tax on Income up to 240000	Nil	Nil
Tax on Income between 240000-300000	10%	6000
Tax on Income between 300000-500000	20%	40000
Tax on Income between 500000- 800000	30%	90000
Total		136000
Educational Cess	3% of the total tax	4080
Net Tax Payable		140080

Example 2: Ms. Lakshmi 66 year old and earning 12 lac annually.

Calculation:

Heads	% of Income Tax	Tax Amount
Tax on Income up to 240000	Nil	Nil
Tax on Income between 240000-300000	10%	6000
Tax on Income between 300000-500000	20%	40000
Tax on Income between 500000- 1200000	30%	210000
Total		256000
Educational Cess	3% on the total tax	7680
Net Tax Payable		263680

See Also: How do i file income tax returns?

We hope this will help you to understand income tax calculation better. Please click on the below link to access Income Tax Calculator.

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