Every season is a tax season in India. Not planning your income and taxes wisely would lead to losing a significant portion of your income to taxes. But did you know by using a tax calculator, you can not only save taxes but also file ITR yourself and even plan your investments?
But what is an income tax calculator, and how does it empower you? Let’s find out!
The income tax calculator is an easy-to-use online tool that allows you to calculate your taxes as your income following the Union Budget is presented. With provisions of each budget, the tax calculator is updated to estimate the payable tax as per various parameters that you select in the process.
To use this calculator, all you need to know is your age, income, investments, and tax-saving instruments. If you have all that information handy, then you will know within minutes the amount of tax you need to pay this year and how much money you saved in taxes.
Why is income tax calculator necessary?
Income tax saving is a crucial aspect of your financial planning. One of the best ways to enhance your income and create wealth for your future is by planning your investments wisely. By planning your taxes, you will be able to yield good results from your investments.
An online tool for tax calculation is important because it helps you assess your taxes based on your income. Moreover, it will also help you have a better understanding of the tax savings and benefits, in case you are planning to switch to the new tax regime.
With the new financial year, the taxpayer can now choose between the new and old tax regime. The new one discontinues tax deductions and exemptions whereas the old one continues with the same tax slabs and taxation rules. Using a tax calculator will help you see your tax liability in each regime. Therefore, it is a vital tool to help you make wise investment decisions and choose the right system for your taxation purposes.
How to use Income Tax calculator?
A tax calculator is a tool designed to help you calculate your overall tax liability. The calculator will estimate the payable tax based on your annual income, applicable income tax slab, deductions applicable under Section 80C and 80DD.
The calculator also provides you with investment options that can strengthen your financial portfolio and also enhance your tax-saving ability.
All the income earned by you during a financial year will be entered under the Salary head. It is crucial to know your income slab to allocate the correct tax component to your income. If you don’t equip yourself with these details, you will either end up overpaying or underpaying your taxes. To avoid paying taxes more than you owe, it is essential to know not only your income slab but also investment details to make an accurate declaration.
Income Tax Calculation for FY 2020-21?
To use the income tax calculator for tax calculation, you must use the following steps:
- Choose the year for which you are calculating your income tax.
- In India, the tax liability changes as per your age. Therefore, you must choose the correct age group.
- Once you make these selections, you need to provide details regarding your salary or income you receive after all the deductions such as house rent allowance, insurance premiums, and rent. This information is a prerequisite if you are planning to file your taxes under the old tax regime. If you wish to know your tax liability in the new system, you need to provide the salary information without deductions. And exemptions.
- Besides all these details, you must also enter interest income, rental income, and any other sources of income.
- If you want to calculate the tax as per the old slab, then you must also provide details regarding your tax-saving investments that fall under section 80C, 80TTA, 80E, 80D, and 80G of the income tax act.
- Once you have entered all the details, you must click the calculate button to know your tax liability. You will be able to compare your tax payable in both the old regime and the new tax regime. Also, you will get a detailed calculation of your income tax by entering your phone number. This information will help you choose the correct taxation method that gives you maximum benefit.
Aside from giving you instant and accurate tax estimates, an income tax calculator also makes it easy for you to plan your investments. You can use the calculator anywhere and enter different figures to work out how you can save maximum tax as per your income. Since it takes all factors like age and future growth of income into account, you can also use this tool for financial planning.