What is Income Tax?
Income tax is a tax levied by the Government of India on the income earned by individuals and businesses. The amount you owe depends on your income level, applicable deductions, and the tax regime you choose.
How is Tax Calculated?
Tax is calculated by applying slab rates to your taxable income after deducting eligible exemptions and deductions (Old Regime) or by using reduced slab rates without deductions (New Regime).
Why Use an Income Tax Calculator?
An income tax calculator simplifies your tax planning by instantly calculating your tax liability under both regimes. It helps you choose the most beneficial regime and plan investments wisely.
Old vs New Tax Regime
- Old Regime: Higher tax rates with several deductions and exemptions.
- New Regime: Lower tax rates with limited deductions.
How to Use the Income Tax Calculator
Enter your annual income, age group, and deductions (if any). The calculator will show tax payable under both regimes so you can compare and choose wisely.
Common Deductions Allowed in Old Tax Regime
Under the old tax regime, you can reduce your taxable income significantly by claiming various deductions under sections of the Income Tax Act. Here are the most commonly used ones:
- Section 80C (Limit Rs. 1,50,000): Includes EPF, PPF, life insurance premiums, ELSS (tax-saving mutual funds), 5-year bank FDs, Sukanya Samriddhi Yojana, home loan principal repayment, and children's tuition fees (max 2 children).
- Section 80D: Deduction for medical insurance premiums:
- Self + family: up to Rs. 25,000
- Parents (under 60): Rs. 25,000 | Parents (above 60): Rs. 50,000
- Preventive Health Checkup: Rs. 5,000 (within limits above)
- Section 80DD: For medical treatment and maintenance of a dependent
with disability:
Rs. 75,000 for 40-80% disability, Rs. 1,25,000 for above 80%. - Section 80U: For a taxpayer with disability: Rs. 75,000 or Rs. 1,25,000 depending on severity.
- Section 80E: Interest on education loan for higher studies. No upper limit. Deduction available for 8 years.
- Section 80TTA/80TTB: Deduction on savings account interest:
- 80TTA: Up to Rs. 10,000 (for individuals below 60)
- 80TTB: Up to Rs. 50,000 (for senior citizens)
- Section 24(b): Interest on home loan: Up to Rs. 2,00,000 annually (self-occupied property).
- Standard Deduction: Rs. 50,000 is auto-applied for salaried and pensioned individuals.
These deductions help lower your tax liability substantially. You can use our calculator to enter these details and compare your net tax payable under both regimes.
Example Calculation
Scenario: Annual Income = Rs. 10,00,000, Age: < 60 years, Deductions under 80C/80D = Rs. 1,50,000
- Old Regime: Taxable income = Rs. 8,50,000 -> Tax = Rs. 75,400 (after deductions and rebate)
- New Regime: No deductions -> Tax = Rs. 62,400 (flat slabs)
In this case, the New regime results in lower tax. The calculator helps you find such insights instantly.
Frequently Asked Questions (FAQs)
What is the difference between Old and New tax regime?
Old regime offers deductions like HRA, 80C, etc. New regime has lower tax rates but does not allow most deductions.
Can I change tax regime every year?
Yes, salaried individuals can switch between regimes every financial year.
Does income from all sources get taxed?
Yes, income from salary, business, house property, capital gains, and other sources are all taxable based on their category.