A government report has shown that only 1% of the total Indian population pays tax and thus declares earnings above the non-taxable income groups. The report further states that in FY 2018-19, only 5.78 crore individuals filed for an income tax return till February 2020. Evidently, tax accountability in the country remains low. One of the reasons for such a scenario can be cited as the lack of information regarding the revised tax slabs that were targeted to bring relief for taxpayers.
It is, nevertheless, of utmost importance for a responsible citizen to calculate his/her tax payable in the current financial year after considering the tax slab applicable. However, to complete such a calculation can be complicated and confusing for many. In such a case, they can make use of an online tax calculator to estimate the amount that they need to pay against their taxable income.
Nevertheless, first, they need to gain a clear idea about their taxable incomes in detail.
How to calculate income tax in FY 2020-2021?
To calculate the tax liability, individuals first need to know in detail about their taxable income for a given year. For instance, it includes the following –
- Amount drawn from salary.
- Rental income.
- Income from capital gains.
- Other miscellaneous sources of income.
After adding all money received from these sources, individuals will derive the gross annual income.
Now, taxpayers need to consider all the exemptions that they are eligible to avail under different sections of the Income Tax Act, 1961. For example, they need to mention the amount paid as insurance premium, investment towards PPF, cost of servicing loan, etc. Thus, they should gain a comprehensive idea about the tax savings and other advantages offered by home loans today to claim a tax deduction in this front.
After deducting the exempted amount from the gross annual income, individuals need to choose the correct income tax slab for AY 2020-21. Thereby, they can arrive at the tax payable for a concerned financial year.
For instance, the tax rate levy on income up to Rs.2.5lakh will be nil and it will be 5% for income of Rs.2.5 lakh – Rs.5 lakh. Nevertheless, to make this process error-free and less time-consuming, they can alternatively use an online tax calculator for free of cost.
How to use an online tax calculator?
Following is a step-by-step procedure to calculate tax using an income tax calculator 2020.
- Open an online tax calculator provided by one of the financial institutions.
- Enter income details like gross annual salary, interest earned from a savings account, and such other sources.
- Click on ‘Next’.
- Enter details of HRA exemption like basic salary, city of residence, HRA received, rent paid, etc., and click on ‘Next’.
- Enter details of all deductions from different sources.
- Also, provide the details of a self-occupied or let-out house.
- Click on ‘Calculate’, and the result will appear consisting- total tax payable and total income.
Nevertheless, selected lending institutions also offer online tax calculators to use. Prospective borrowers can use this online tool to calculate their tax payable while servicing a home loan or any other credit that accompanies some special exemptions as well.
They also provide pre-approved offers that simplify and shorten the loan application process. Besides home loans, these offers are also available on a range of financial products, like loans against property and many more. You can check your pre-approved offer instantly by entering your name and contact number.
What are the benefits of an income tax calculator?
Following are some of the major advantages of using an income tax calculator.
- An online tax calculator helps individuals to tally several combinations of income and investments to estimate the tax liability.
- Since this tax calculator is free and available 24/7, one can use it on the go.
- The result it provides is error-free and takes only a few seconds.
- It cuts the hassles of conducting lengthy and complicated calculation processes.
- This online tool also helps with investment planning for maximised tax savings.
- It suggests ways on how to save tax by adopting some healthy financial habits.
These are some of the benefits of using an online income tax calculator. Similarly, home loan borrowers also can use an online home loan tax benefit calculator that will show them the amount they can save each year, availing this credit.
Thus, while paying tax is mandatory, individuals can look for ways to get maximum tax deductions on their taxable income. For instance, you can save tax when you take a home loan from any financial institutions in India, both on its principal and interest component.