In order to find the deducted tax from your income, its important to know how to compute the taxable income. Once you know what your taxable income is, it will become easier for you to calculate the taxable amount.
The income tax amount will be based on these 5 primary things. 1. Income that you earn. 2. Income from any house property. 3. Income from business. 4. Capital gain income. 5 Income from any other sources.
You need to consider all the above five points while calculating the taxable income. Let’s see how you can actually calculate the taxable amount. Few things to note before we proceed with our example:
- As per law every individual gets a benefit of tax-free income which is up to 2.5 lakhs. So, if you are earning up to 2.5 lakhs, then you are exempted from income tax deduction. But if you earn more than 2.5 lakhs, then till 2.5 lakhs, no tax will be deducted and beyond that, the remaining amount will fall under taxable amount.
- Once the deduction of tax-free income is complete, the remaining 2.5 lakhs income will receive a deduction of 5 %. Which means, the first 2.5 lakhs is free of tax and then the next 2.5 lakhs will be charged with 5% tax deduction.
- Now, if you earn more, the next 5 lakhs will come under 20% tax deduction bracket.
- And if your income is even more after 5 lakhs, then that amount will fall under 30% tax bracket.
Tax deduction plan explained with an example:
Assume you earn 15 lakh net compensation in a year. Presently how would you figure your income tax deduction? After exceptions and derivations, your net assessable salary comes to 11 lakhs. These 11 lakhs are liable to the taxes.
From these 11 lakhs, the first 2.5 doesn’t fall under tax bracket.
11,00,000 – 2,50,000 (Tax free) = 8,50,000
Expense 1 = 0
From the staying 8.5 lakh another 2.5 lakh is liable to 5% impose
8,50,000 – 2,50,000 (5% charge) = 6,00,000
Expense 2 = 12,500
Presently Samara has 6 lakh Rupees. From this sum, Rs. 5,00,000 is liable to 20% expense rate.
6,00,000 – 5,00,000 (20% expense) = 1,00,000
Assessment 3 = 1,00,000
The rest of the 1 lakh rupees would be liable to 30% assessment.
Duty 4 = 30,000
The pay assess obligation would be the expansion of duty 1, impose 2, charge 3, and expense 4.
Add up to Tax obligation = charge 1 + assess 2+ impose 3 + charge 4
Presently we need to charge cess on this assessment. The cess is 3% of the assessment.
Add up to Tax = 1,42,500 + 4,275
That will be the total tax amount payable to the Government. You can follow the same rule for yourself too. Just remember the different slabs and likewise calculate your net income, follow all these 7 stages, and you should have the correct taxable amount ready in front of you.