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How To Calculate Ur Income Tax
How To Calculate Ur Income Tax
When calculating income tax liability each year, the first and foremost aspect which comes across
one's mind is the tax slabs. In this year's annual budget, the government has brought about relief for the
common man by widening this tax slab from the previous years.
Here is a look into the slabs for the current financial year to help you prepare your investments and
income, and to be able to file your tax returns accurately in the following assessment year.
Financial Year, Assessment Year and Previous Year: Do these commonly used income tax jargons
often confuse you? This is what they mean.
Duration of one year between April 1 to March 31 of the following year, in which all financial
information are reported. The current financial year is April 1, 2010 to March 31, 2011.
The income of a particular financial year is assessed in the following financial year, which is known as
the assessment year. For the current financial year, income will be assessed in the assessment year
2011-2012.
The financial year preceding the assessment year, the income of which is assessed in the following
assessment year. Assessment year 2011-2012 will assess income for previous year 2010-2011.
With the upward revision of the tax slabs, there would now be more savings for the taxpayers.
Basic tax exemptions limits have been retained; however, the brackets have been broadened. Below are
the income tax slabs and rates applicable for the current financial year 2010-11 and assessment year
2011-12.
As a result of the widening of the tax brackets, for an individual in the bracket between Rs 3 lakh to Rs
5 lakh, there could now be a saving of up to Rs 20,000.
Earlier, this bracket of 10 per cent tax rate was applicable only up to an income of Rs 3 lakh. Similarly,
for the tax slab of Rs 8 lakh and above, there could now be a saving of more than Rs 50, 000.
Additionally, the government has also introduced section 80CCF where investments in infrastructure
funds could fetch an extra deduction of Rs 20,000.
Calculating income tax is not any rocket science. The following 5 steps give you an idea of the
process.
Calculate your gross total income. This includes gross income from Form 16; and the taxable income
from other sources.
Calculate your net deductions, which may include, donations, investments and savings such as
provident fund subscriptions, life insurance premiums etc.
Your net taxable income is gross total income minus net deductions.
Apply the appropriate income tax slab to calculate your tax payable on aggregate income.
Education Cess of 3 per cent is applied on the tax payable to arrive at the total tax payable. Relief under
various sections would be applied on this total tax.
Calculation
Total = Rs 94,000