Income Tax Calculator

In India, income tax is a crucial component of financial planning and compliance for individuals and businesses alike. Whether you are a salaried employee or a freelancer, understanding how income tax is calculated and learning about available exemptions and deductions can significantly impact your financial strategy. Thankfully, the Income Tax Calculator makes this process simpler, providing a quick and accurate way to estimate your tax liability.

This detailed guide will walk you through everything you need to know about income tax, including the tax slabs, exemptions, deductions, and how to use the income tax calculator for financial years 2024-25 (Assessment Year 2025-26) and 2025-26 (Assessment Year 2026-27).

What is Income Tax?

Who Pays Income Tax?

In India, income tax is primarily paid by individuals and entities whose income exceeds the basic exemption limit. This includes:

• Salaried individuals: Those receiving wages, salaries, pensions, or other similar income.
• Freelancers: People earning income through self-employment or freelancing.
• Businesses: Entities engaged in the production, manufacturing, or services industry.
• Investors: Those who earn from capital gains, interest, dividends, etc.

However, individuals whose income falls below the basic exemption limit are not required to pay income tax, but may still need to file a return in certain cases (like if they wish to claim a refund).

How is Income Tax Calculated?

Income tax is calculated based on your total taxable income. The process involves the following steps:

1. Total Income Calculation: Add up income from all sources (salary, business income, capital gains, etc.).
2. Apply Deductions: You can claim deductions under various sections like 80C, 80D, etc., which will reduce your taxable income.
3. Tax Slabs: Apply the relevant tax slab based on your total income and the financial year (FY).
4. Add Surcharge and Cess: If your income exceeds certain limits, you may be subject to an additional surcharge. Also, health and education cess (4%) is added to the total tax.
5. Final Tax Liability: The result is your income tax liability for the financial year.

Current Income Tax Rates in India (For FY 2024-25 and FY 2025-26)

Tax Slabs Under the Old Regime (For Financial Year 2024-25)

Tax Slabs Under the New Regime (For Financial Year 2024-25)

Budget 2025 Changes: In Budget 2025, the new regime was updated with revised tax slabs. Now, income up to Rs. 12 lakh is tax-free due to a rebate of Rs. 60,000.

Tax Slabs for FY 2025-26 (Assessment Year 2026-27)

How to Use the Income Tax Calculator for FY 2024-25 and FY 2025-26?

Step 1: Select Your Age Group and Gender

Tax calculations vary based on age groups. Select your age group (Below 60, 60 to 80, or above 80) to ensure accurate calculation.

Step 2: Enter Income Details

Enter your income details, such as salary, income from other sources (interest, rental income, etc.), and capital gains. Include exemptions like HRA, LTA, and others where applicable.

Step 3: Enter Deductions

Input any tax-saving investments you have made under sections like 80C, 80D, and others.

Step 4: Click on Calculate

Once you have entered all your details, click on the "Calculate" button to get an estimate of your tax liability. The calculator will compare the tax liability under both the old and new regimes.

Example of Calculating Income Tax on Salary

Let's take the example of Aman, who earns a salary and also has some savings and investments. Here's how the tax is calculated under both regimes.

Income Details:

• Basic Salary: Rs. 12,00,000
• HRA: Rs. 6,00,000
• Special Allowance: Rs. 2,52,000
• LTA: Rs. 20,000

Tax Calculation (Old Regime):

• Gross Total Income: Rs. 16,50,000
• Exemptions/Deductions: Rs. 1,70,000 (Section 80C, 80D, 80TTA)
• Net Taxable Income: Rs. 15,00,000
• Tax Payable: Rs. 2,73,000

Tax Calculation (New Regime):

• Gross Total Income: Rs. 19,97,000
• Exemptions/Deductions: Rs. 75,000 (Standard Deduction)
• Net Taxable Income: Rs. 19,42,000
• Tax Payable: Rs. 2,83,504

Slab Rates and Benefits of the Income Tax Calculator

The Income Tax Calculator not only simplifies your tax filing but also helps you explore tax-saving opportunities. Here’s why you should consider using it:

Accuracy and Efficiency

The calculator reduces errors that can occur with manual calculations and ensures that all exemptions and deductions are factored into the final calculation.

User-Friendly

The tool is simple to use, even for those who are not financially savvy. Just input your income and deductions, and the tool will handle the rest.

Helps You Plan Financially

Knowing your tax liability ahead of time helps you manage your finances better. You can adjust your spending and plan investments accordingly to save on taxes.

How to Calculate Gross Income from Different Sources?

Before using an online Income Tax Calculator to determine your tax liability, you must first compute your gross income. Gross income includes earnings from various sources, classified into five categories for Income Tax Return (ITR) filing:

1. Income from Salary

If you are a salaried employee, your earnings fall under this category. Your total salary includes multiple components such as:

• Basic Salary
• House Rent Allowance (HRA)
• Dearness Allowance (DA)
• Gratuity
• Provident Fund (PF) contributions
• Travel and other allowances

You can find all these details in your monthly salary slip provided by your employer.

2. Income from Business or Profession

This category applies to individuals earning through self-employment, business activities, or freelancing. Profits made from running a business or practising a profession (such as doctors, consultants, or lawyers) are taxable under this head.

3. Income from House Property

Any income earned by renting out a residential or commercial property falls under this category. The rental income is taxable, but certain deductions, such as municipal taxes and a 30% standard deduction for maintenance, can be claimed.

4. Income from Capital Gains

Capital gains refer to profits made from the sale or transfer of capital assets, such as:

• Stocks and mutual funds
• Real estate or property
• Gold or other investment assets

Capital gains are further divided into:

• Short-Term Capital Gains (STCG) – For assets held for a short period (varies by asset type).
• Long-Term Capital Gains (LTCG) – For assets held beyond the specified period.

Tax rates differ for STCG and LTCG based on the asset type and duration of investment.

5. Income from Other Sources

Any income that does not fall under the above categories is classified here, including:

• Bank interest
• Dividends
• Lottery winnings
• Gifts exceeding ₹50,000 per year

How Does the Government Collect Income Tax?

The government collects income tax through multiple channels, including:

• Tax Deducted at Source (TDS): Employers, banks, and other entities deduct tax before making payments, such as salary, interest, or rent.
• Advance Tax: Individuals and businesses with significant tax liabilities (above ₹10,000 per year) must pay tax in instalments during the financial year.
• Self-Assessment Tax: If there is any remaining tax liability after TDS and advance tax, individuals must pay it before filing their Income Tax Return (ITR).
• Tax Collected at Source (TCS): Certain sellers (e.g., car dealers, e-commerce platforms) collect tax at the point of sale and deposit it with the government.
• Regular Assessment Tax: If the Income Tax Department finds discrepancies during scrutiny, taxpayers may have to pay additional taxes as per the final assessment.

All these payments are made through the Income Tax e-Filing portal or designated bank branches.

Disclaimer: All the steps, income tax rates, slabs, and other information specified above are sourced when this page was written and are subject to change. For exact information, refer to the Income Tax Department’s website or contact them.

Other Key Terms You Should Know

TDS (Tax Deducted at Source)

Under TDS, tax is collected at the point where income is generated. For example, employers deduct tax on salaries before paying you, and banks deduct TDS on interest income.

Advance Tax

Advance tax refers to income tax paid in advance based on the estimated income for the year. This tax is paid in instalments throughout the year.

Income Tax Return (ITR)

Income Tax Refund

If excess tax has been paid, individuals can file for a refund. The process of getting the refund can be tracked online.

How to Check IT Refund Status?

To check your refund status, visit the official website of the Income Tax Department and enter your PAN number and assessment year.