To find out how much tax you have to pay, you need to first calculate total taxable income. Once you know your taxable income, you can easily find out how much tax you have to pay, by applying the applicable tax rates.
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This is how you can calculate your total taxable income:
Income from salary can be calculated by adding the basic salary, dearness allowance, house rent allowance, travel allowance, commission, bonus and other allowances. You can compute this income by using the TDS certificate in Form 16.
After adding all these components, you now have your gross salary. From the gross salary, you have to deduct a portion of House Rent Allowance (HRA), travel allowance exemption and medical reimbursement on furnishing medical bills.
Another source of taxable income is the rent received from house property. If you have only one house and even if it is self-occupied, you will be required to calculate income from house property. In most of the cases, it will be nil.
If you have rented out your house and receive rent each month, then you can calculate taxable income from house property as follows:
Let's assume Mr Suresh has a property and he earns a rent of Rs 20,000 a month, renting this property. Let's also assume that he has paid Rs 60,000 interest on home loan and Rs 12,000 Municipal taxes for the year.
Calculating income from business and profession is a challenging task and it is advisable to take the help of an expert such as a chartered accountant. To deal with the allowances/disallowances of various expenditure and income, there are several provisions under the Income Tax Act.
Income from capital gains can be broadly classified as Long-term capital gains (LTCG) and Short-term capital gains (STCG). To calculate the income from capital gains, you need to compute your long-term capital gains and short-term capital gains, from the sale of all capital assets and claim deductions under Section 54, 54G, 54EC and so on if any.
Income from other sources includes, Interest from Savings Account, Dividend Income, Interest Income from FD, Taxable gifts and so on. You can identify these incomes from the credit entries in your savings account statements. You can avail deductions up to certain amounts.
Gross total income will be sum total of all the five heads of income.
There are deductions which are given under Sections 80C to 80U, commonly called Chapter V1-A Deductions to reduce taxable income. Some of the investments which are claimed as deductions include, investment in PPF, ELSS, NPS, life insurance premiums, health insurance premiums, donations and so on. Once your taxable income is calculated, you need to apply the tax as per your respective income tax slab, to find out your tax liability. Be Wise, Get Rich.
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