Process of Income tax calculation for the Salaried Persons for F.Y. 2020-21 As per Budget 2020
Income from salary
is the sum of Basic salary + HRA + Special Allowance + Transport Allowance +
any other allowance. Some components of your salary are exempt from tax, such
as telephone bills reimbursement, leave travel allowance. If you receive HRA
and live on rent, you can claim exemption on HRA. Calculate exempt portion of
HRA, by using this HRA Calculator.
On top of these
exemptions, a standard deduction of Rs 40,000 was introduced in budget 2018.
This has been increased to Rs 50,000 in budget 2019.
In case you opt for
the new tax regime, these exemptions will not be available to you.
Let's understand
income tax calculation under the current tax slabs and new tax slabs (optional)
by way of an example. Mira receives a Basic Salary of Rs 1,00,000 per month.
HRA of Rs 50,000. Special Allowance of Rs 21,000 per month. LTA of Rs 20,000
annually. Mira pays a rent of Rs 40,000 and lives in Delhi.
Nature
|
Amount
|
Exemption/Deduction
|
Taxable(Old
regime)
|
Taxable(New
regime)
|
Basic Salary
|
12,00,000
|
-
|
12,00,000
|
12,00,000
|
HRA
|
6,00,000
|
3,60,000
|
2,40,000
|
6,00,000
|
Special Allowance
|
2,52,000
|
-
|
2,52,000
|
2,52,000
|
LTA
|
20,000
|
12,000 (bills submitted)
|
8,000
|
20,000
|
Standard Deduction
|
-
|
50,000
|
50,000
|
-
|
Gross Total Income from Salary
|
16,50,000
|
20,72,000
|
To
calculate Income tax,
include income from all sources. Include:
- Income from Salary (salary paid by your employer)
- Income from house property (add any rental income, or include interest paid on home loan)
- Income from capital gains (income from sale purchase of shares or house)
- Income from business/profession (income from freelancing or a business or profession)
- Income from other sources (saving account interest income, fixed deposit interest income, interest income from bonds)
Mira has income
from interest from savings account of Rs 8,000 and a fixed deposit interest
income of Rs 12,000 during the year. Mira has made some investments to save
income tax. PPF investment of Rs 50,000. ELSS purchase of Rs 20,000 during the
year. LIC premium of Rs 8,000. Medical insurance paid of Rs 12,000. Here are
the deductions Mira can claim under the old tax regime.
Nature
|
Maximum
Deduction
|
Eligible
investments/expenses
|
Amount claimed
by Neha
|
Section 80C
|
Rs.1,50,000
|
PPF deposit Rs 50,000, ELSS investment Rs 20,000, LIC
premium Rs 8,000. EPF deducted by employer(Neha’s contribution) = Rs 1,00,000
*12% *12 = 1,44,000
|
Rs 1,50,000
|
Section 80D
|
Rs 25,000 for self Rs 50,000 for parents
|
Medical insurance premium Rs 12,000
|
Rs 12,000
|
Section 80TTA
|
10,000
|
Savings account interest 8,000
|
Rs. 8,000
|
Nature
|
Amount
|
Total
|
Income from Salary
|
16,50,000
|
|
Income from Other Sources
|
20,000
|
|
Gross Total Income
|
16,70,000
|
|
Deductions
|
||
80C
|
1,50,000
|
|
80D
|
12,000
|
-
|
80TTA
|
8,000
|
1,70,000
|
Gross Taxable Income
|
15,00,000
|
|
Total tax on above (including cess)
|
2,73,000
|
Nature
|
Amount
|
Total
|
Income from Salary
|
20,72,000
|
|
Income from Other Sources
|
20,000
|
|
Gross Total Income
|
20,92,000
|
|
Total tax on above (including cess)
|
3,79,704
|
Up to Rs 2,50,000
|
Exempt from tax
|
0
|
Rs 2,50,000 to Rs 5,00,000
|
5% (5% of Rs 5,00,000 less Rs 2,50,000)
|
12,500
|
Rs 5,00,000 to Rs 7,50,000
|
10% (10% of Rs 7,50,000 less Rs 5,00,000)
|
25,000
|
Rs 7,50,000 to Rs 10,00,000
|
15% (15% of Rs 10,00,000 less Rs 7,50,000)
|
37,500
|
Rs 10,00,000 to Rs 12,50,000
|
20% (20% of Rs 12,50,000 less Rs 10,00,000)
|
50,000
|
Rs 12,50,000 to Rs 15,00,000
|
25% (25% of Rs 15,00,000 less Rs 12,50,000)
|
62,500
|
More than Rs Rs 15,00,000
|
30% (30% of Rs 20,92,000 less Rs 15,00,000)
|
1,77,600
|
Cess
|
4% of total tax (4% of Rs 12,500 + Rs 25,500+ Rs 37,500 +
Rs 50,000 + Rs 62,500 + Rs 1,77,600)
|
14,604
|
Total Income Tax
|
Rs 12,500 + Rs 25,500+ Rs 37,500 + Rs 50,000 + Rs
62,500 + Rs 1,77,600 + Rs 14,604
|
Rs 3,79,704
|
Individual or HUF
opting for taxation under the newly inserted section 115BAC of the Act shall
not be entitled to the following exemptions/deductions:
(i) Leave travel
concession as contained in clause (5) of section 10;
(ii) House rent
allowance as contained in clause (13A) of section 10;
(iii) Some of the
allowance as contained in clause (14) of section 10;
(iv) Allowances to
MPs/MLAs as contained in clause (17) of section 10;
(v) Allowance for
the income of minor as contained in clause (32) of section 10;
(vi) Exemption for
SEZ unit contained in section 10AA;
(vii) Standard
deduction, deduction for entertainment allowance and employment/professional
tax as contained in section 16;
(viii) Interest
under section 24 in respect of self-occupied or vacant property referred to in
sub-section (2) of section 23. (Loss under the head income from house property
for the rented house shall not be allowed to be set off under any other head
and would be allowed to be carried forward as per extant law);
(ix) Additional
deprecation under clause (iia) of sub-section (1) of section 32;
(x) Deductions
under section 32AD, 33AB, 33ABA;
(xi) Various
deduction for donation for or expenditure on scientific research contained in
sub-clause (ii) or sub-clause (iia) or sub-clause (iii) of sub-section (1) or
sub-section (2AA) of section 35;
(xii) Deduction
under section 35AD or section 35CCC;
(xiii) Deduction
from family pension under clause (iia) of section 57;
(xiv) Any deduction
under chapter VIA (like section 80C, 80CCC, 80CCD, 80D, 80DD, 80DDB, 80E, 80EE,
80EEA, 80EEB, 80G, 80GG, 80GGA, 80GGC, 80IA, 80-IAB, 80-IAC, 80-IB, 80-IBA,
etc). However, deduction under sub-section (2) of section 80CCD (employer
contribution on account of the employee in notified pension scheme) and section
80JJAA (for new employment) can be claimed.
Following
allowances shall be allowed as notified under section 10(14) of the Act to the
Individual or HUF exercising option under the proposed section:
a) Transport
Allowance granted to a div yang employee to meet the expenditure for the purpose
of commuting between place of residence and place of duty
b) Conveyance
Allowance granted to meet the expenditure on conveyance in performance of
duties of an office;
c) Any Allowance granted
to meet the cost of travel on tour or on transfer;
d) Daily Allowance
to meet the ordinary daily charges incurred by an employee on account of
absence from his normal place of duty.
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