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What is an Income Tax Calculator?

Income Tax Act 1961 in India defines rules and regulations basis which the income is calculated for Indian resident citizens as well as Non-Resident Indians who earn from different sources and occupation in any financial year. Within this Act, there are various sections that cover different sources of income and expenses and their treatment for the purpose of calculating income tax for an assessee. Further, the Act provides various deductions and exemptions that are provided tax relief to tax-payers under different Sections. The rules of Income Tax Act 1961 are lengthy and tough, which makes it difficult for a common taxpayer to calculate his income tax liability and that's why it is best to use an income tax calculator 2020.

The income tax calculator is a simple online tool in which you can simply put the values against the field, which is relevant for you, and get your income tax calculated for the financial year.

How to use Tax Calculator for FY 2019-2020 (AY 2020-2021)?

The step-by-step process to use the tax calculator is:

  • First of all, choose the financial year for which you want to calculate your income tax.
  • The next step is to choose your gender and fill your Date of Birth, City/pin code, and email.
  • Click on 'Next'.
  • Now, enter your basic salary, and actual HRA received.
  • In the next step, enter the details like actual rent paid, the number of houses owned, other allowances received, amount of rent received/receivable, interest and housing loan, and municipal taxes as applicable.
  • Click on 'Next'.
  • The next tab is for any income earned from various other sources like lottery income, the commission received, interest from various investments made, or any other source not named till now
  • After entering all the deductions, click on 'Calculate'.

You will get a comparable result of your tax liability as per the old income tax regime and new income tax regime. In addition, you can also get the detailed calculation of your income tax by entering your mobile number and verifying it with the OTP.

How to Calculate Income Tax?

Income tax calculation is different for individuals, self-employed professionals and businessmen. Further, the calculation also differs by the nature of entity which could be a self-proprietorship firm, partnership firm or a company. Another aspect is the source of income which could be income from salary or business, rental income, lottery income, capital gains, income from securities and many other such heads. Income tax is calculated based on the total income of an individual which includes income from the following sources:

  • Income from Salary
  • Income from House Property
  • Income from Business and Profession
  • Income from Capital Gain
  • Income from Other Sources

Most of the income tax calculators in India are designed to calculate the tax payable of salaried individuals which form the largest part of the total taxpayers in the country. You can use MyLoanCare’s online Income tax calculator to calculate the amount of tax a salaried individual has to pay based on his salary income, income from other sources and various deductions and exemptions available to him under the various sections of Income Tax Act.

How to calculate Income Tax for Salaried?

The income from salary is calculated by clubbing the amount received as Basic Salary, Dearness Allowance, HRA, Transport Allowance, and any other allowance. Also, the Income Tax Act exempts certain salary components like reimbursement of telephone bills, travel leave allowance, etc. In addition, if you live on rent and receive HRA, then a portion of your HRA will also be exempt, which will be determined by calculating the HRA exemption.

There is a standard deduction of ₹ 50,000 as well for salaried individuals along with a maximum tax rebate of ₹ 12,500 .

Let us understand the calculation of income tax in current as well as the new tax regime with the help of an example. Aashi receives a basic salary of ₹ 80,000 per month. Her HRA is ₹ 40,000 per month and a special allowance she receives each month is ₹ 15,000 . She receives an LTA of ₹ 15,000 annually, pays a monthly rent of ₹ 30,000 and lives in Mumbai.

For calculating income tax, you need to include income from all sources like:

  • Firstly include the salary income received from the employer.
  • Next include income earned from house property like rental income, or deduct the interest paid on the home loan.
  • Thirdly, income from capital gain arising from the sale of shares or assets like house property.
  • Also, include income earned from any business or profession like freelancing or any other business or profession.
  • Lastly, include income from other sources like interest income from deposits, minor’s income, etc.

Thus, Aashi also received ₹ 5,000 as interest income from fixed deposit. She has also made an investment in PPF of ₹ 50,000 . The LIC premium paid by her amounts to ₹ 9,000 and medical insurance premium amounts to ₹ 8,000 .

Calculation of Gross Total Income from Salary

Component Amount (₹) Deduction/Exemption (₹) Taxable as per Old Regime (₹) Taxable as per New Regime (₹)
Basic Salary 9.60 Lakh - 9.60 Lakh 9.60 Lakh
HRA 4.80 Lakh 2.64 Lakh 2.16 Lakh 4.80 Lakh
Special Allowance 1.80 Lakh - 1.80 Lakh 1.80 Lakh
LTA 15,000 11,000 (worth bills submitted) 4,000 15,000
Standard Deduction - 50,000 50,000 -
Gross Total Income From Salary 13.10 Lakh 16.35 Lakh

Investments Eligible for Deduction

Section Maximum Deduction Limit (₹) Eligible investments (₹) Deduction Claimed (₹)
Section 80C 1.50 Lakh Deposit in PPF of ₹ 50,000 , LIC Premium of ₹ 9,000 , Contribution in EPF by Aashi’s employer (80,000 *12%*12) = ₹ 1.15 Lakh 1.50 Lakh
Section 80D For self - ₹ 25,000
For Parents - ₹ 50,000
Medical Insurance Premium of ₹ 8,000 8,000

Calculation of Gross Taxable Income as per Old Regime

Nature Amount (₹) Total (₹)
Salary 13.10 Lakh
Income from Other Sources (FD interest) 5,000
Gross Total Income 13.15 Lakh
80C 1.50 Lakh
80D 8,000 1.58 Lakh
Gross Taxable Income 11.57 Lakh
Total Tax including Cess 1.66 Lakh

Calculation of Gross Taxable Income as per New Regime

Nature Amount Total
Salary 16.35 Lakh
Income from Other Sources 5,000
Gross Taxable Income 16.40 Lakh
Total Tax including Cess

Calculation of Income tax for Aashi as per New Regime

Till ₹ 2.50 Lakh Exempt from Tax 0
From ₹ 2.50 Lakh to ₹ 5 Lakh 5% (₹ 5 Lakh - ₹ 2.50 Lakh) 12,500
From ₹ 5 Lakh to ₹ 7.50 Lakh 10% (₹ 7.50 Lakh - ₹ 5 Lakh) 25,000
From ₹ 7.50 Lakh to ₹ 10 Lakh 15% (₹ 10 Lakh - ₹ 7.50 Lakh) 37,500
From ₹ 10 Lakh to ₹ 12.50 Lakh 20% (₹ 12.50 Lakh - ₹ 10 Lakh) 50,000
From ₹ 12.50 Lakh to ₹ 15 Lakh 25% (₹ 15 Lakh - ₹ 12.50 Lakh) 62,500
Above ₹ 15 Lakh 30% (₹ 16.40 Lakh - ₹ 15 Lakh) 42,000
Cess 4% (₹ 12,500 + ₹ 25,000 + ₹ 37,500 + ₹ 50,000 + ₹ 62,500 + ₹ 42,000 ) 9,180
Total Income Tax ₹ 12,500 + ₹ 25,000 + ₹ 37,500 + ₹ 50,000 + ₹ 62,500 + ₹ 42,000 + ₹ 9,180 2.39 Lakh

Income Tax Calculation for Salaried

Salaried taxpayers can calculate their tax using income tax calculator. Income from salary is the sum of basic salary, HRA and any other allowances. If you receive house rent allowance and live on rent, then you can claim an exemption on HRA. A standard deduction of ₹ 50,000 is applicable on top of these exemptions.

In Budget 2020, a new income tax regime has been introduced, in which tax-payers will be given an option to choose between the existing income tax regime and new tax regime. Under the new tax regime, taxpayers are not allowed to claim many exemptions as available under the current regime, but will be charged at much lower tax slab rates. The new tax regime is applicable for FY20-21.

Below are the exemptions and deductions which are not part of the new income tax regime:

  • Income of the Minor exemption mentioned in clause (32) of Section 10.
  • Deductions under Chapter VIA, which includes section 80C, 80CCD, 80CCC, 80D, 80DD, 80DDB, 80EE, 80EEA, 80G, 80GG, 80GGA, 80IA, 80IAB, 80IB, 80EEB, 80GGC, etc. Although, the deduction available under sub-section (2) of section 80CCD (employer’s contribution to EPF) and section 80JJA (for new employment) is available.
  • Deductions under section 33ABA, 32AD, 33AB.
  • Leave travel concession as per clause (5) of section 10.
  • Some allowance contained in clause (14) of section 10
  • MPs/MLAs allowance mentioned in clause (17) of section 10.
  • HRA as per clause (13A) of section 10.
  • Section 24 which provides interest on home loan deduction
  • Family pension deduction as per clause (iia) of section 57.
  • SEZ exemption as per section 10AA
  • Conveyance allowance is also tax exempt under new tax regime as per the guidelines.

MyLoanCare’s Income Tax Calculator is designed in a manner to get an understanding of how your tax calculation will change if you opt for the new tax regime and will help you take a wise decision when it comes to filing an Income Tax Return for the next year. You can also compare the tax payable for this year under current tax regime and new tax regime to be able to get an understanding of which tax regime may be better for you once it comes for implementation from next year.

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Online Tax Calculator FAQs

How is income tax calculated?

Income tax is calculated after adding the income from all sources like salary, house property, capital gain, and other sources to get Gross Total Income. After clubbing the income from all these sources, the investments and expenses which are allowed as deductions and exemptions are to be deducted from the Gross Total Income to arrive at Taxable Income. Then, the tax is calculated as per the applicable income tax slab.

In the case of income from business and profession, the income tax is calculated separately as the individual tax slab is not applicable for it.

What is the standard deduction for AY 2020 21?

The standard deduction for AY 2020-21 is ₹ 50,000 which is available to all salaried individuals irrespective of their total income.

How do I manually calculate income tax?

Calculating income tax manually may not be able to give you accurate results. Most of the time, income tax calculation involves numerous calculations of exemptions within it, along with provisions of multiple sections. All these things make the computation lengthy and complicated. Thus, it is best to use a taxable income calculator to get the right result with the least amount of time.

What is net taxable income?

Net taxable income is the income that is calculated by clubbing the income from various sources after deducting the standard deduction from salary income as well as all available tax exemptions on allowances, income from investments and housing loan etc. The final tax rates and tax slabs are applied on the Net Taxable Income to calculate the amount of tax a taxpayer needs to pay to the government.

How is income tax calculated for the salaried person?

Total taxable income for salaried is calculated after deducting all the applicable exemptions available of allowances such as HRA, LTA as well that available home loan interest, home loan repayment, deposits, savings, insurance, LIC, etc. are then deducted from the gross salary + income from other sources to arrive at total taxable income on whichtax is calculated as per the applicable slab rates.

How much tax do I pay on ₹ 10 Lakh?

The exact amount of tax you would have to pay on the income of ₹ 10 Lakh will depend on the amount of your income which you receive by way of exempted allowances, actual rent paid or not as well the amount of investments done by the individual. As tax calculations are governed by multiple sections of the Income Tax Act, the best way to calculate the amount of tax you will pay on ₹ 10 Lakh are with an online income tax calculator which has been programmed to do the calculations based on provisions of the Act.

What is the maximum limit of non-taxable income?

As per Indian Income Tax Act, maximum limit of income which is non-taxable is ₹ 2.50 Lakh.Further, from FY 2019-20, a rebate of ₹ 12,500 is also available on income upto ₹ 5 Lakh. This means that individuals with a taxable income of upto ₹ 5 Lakh would not be required to pay any income tax.

Can I calculate TDS from the income tax calculator?

No, income tax calculators do not calculate TDS. However, you can get your income tax liability after adjusting for the TDS for an assessment year using an ITR calculator.

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