Income Tax CalculatorBudget 2020 introduced a new system of income tax calculation, which has the potential to affect individuals, based on their yearly earnings significantly. Still, switching to the new tax regime is optional. Thus, one must assess whether he/she can benefit more from the older system or need to move on to the new regime. An income tax calculator can help with this decision.

What is an income tax calculator?

An income tax calculator refers to an online tool that can help determine your IT liabilities for a particular financial year based on your earnings. Such a tax calculator also takes into account whether you have interest earnings from certain tax-exempt investment schemes. Listed below are some of the other details that you must provide in an online tax calculator to assess your true tax liability for any given year.

  • Declare any investments to claim tax rebates under Section 80C of the Income Tax Act, 1961.
  • Declare investments and associated tax discounts under Section 80CCD of ITA, 1961.
  • Declare whether you pay premiums for medical insurance. In such a case, you can claim exemptions under Section 80D.
  • HRA deduction is applicable if you pay rent, as per Section 10(13A.)
  • Income from interest is eligible for tax discounts under Section 80TTA and Section 80TTB.
  • Those repaying education loans are eligible for tax rebates under Section 80E.

Lastly, housing loan consumers are eligible for considerable tax-savings on home loans. Since the EMI for such a loan is substantial, tax rebates are also quite high. As an individual paying interest on home loans, you are eligible for a yearly tax rebate of up to Rs.2 lakh on interest payment. Nevertheless, to acquire the said benefit, you must avail a housing loan from reputed lenders.

After understanding the basic utility for a tax calculator, one must assess the process in which such a calculation can be conducted.

How to use income tax calculators

Those who want to assess their tax liability can follow the steps mentioned below for a hassle-free calculation.

 

  • Step 1: Choose whether you are above or below 60 years of age because your tax liability and rebates differ significantly if you are a senior citizen.
  • Step 2: Enter your annual income.
  • Step 3: Fill up the investment sections to check your tax exemptions under Section 80C and 80CCD (1B).
  • Step 4: Provide details regarding insurance premiums.
  • Step 5: If you reside in a rented property, input rent details.
  • Step 6: If you are paying interest on education and/or home loans, relay the interest details.
  • Step 7: After submitting all of these details, the income tax calculator should showcase your IT liability for that year.

 

An individual who has availed a housing loan can instead use a calculator for home loan tax benefit to determine their liabilities. Specialised calculators are necessary to assess the intricacies of tax rebates on such credit. For instance, such a calculator can differentiate between tax benefits on a joint home loan in comparison to a regular loan application.

Similarly, the tax burden on home loans can differ based on whether you buy a ready-to-move-in property, or if you want to create the ideal residence from the ground up. Assess the tax benefits for under construction properties as well to claim the available exemptions.

Apart from tax liabilities, home loan consumers should also look into the various housing loan interest rates. These rates would determine the total interest payable in a year, which, in turn, would help you claim higher tax exemptions.

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