Examples of Income Tax Calculation
Based on the queries received on the forum we realized that there is confusion about how to calculate income tax. In this article we shall look at some examples of how to calculate income tax . Let’s start with the process. The process is described in detail in Income Tax Overview.
Income Tax Assessment Process
Income tax assessment comprises of following stages:
 Computation of total income.
 Deducting valid deductions.
 Determination of the tax payable thereon.
 Paying the tax.
 Filling Income Tax Return Form
Total Income:The total income is the sum of all sources of income that an individual has or the total income he earns in a financial year. It has to fall into one of the five heads and is supported with documents
1. Income from Salary : Form 16, Form 12BA
2. Income from House Property
3. Income from Profits and Gains of Business or Profession
4. Income from Capital Gains
5. Income from other Sources
Deduction under various sections: Tax Deduction is a legal way to reduce the income hence the tax that one needs to pay. One can claim the reduction under different heads like 80C (limit 1 lakh), 80CCF(limit 20,000) etc.
Income Tax slabs
After a person calculates his income, applies various deductions one gets taxable income. If taxable income is less than the exemption limit specified by the government he does not have to pay any tax. If the taxable income is more than the exemption limit then one has to see which category or Type ex Individual, Hindu Undivided Family (HUF), Firm, Trust etc, does one fall into. For an individual it depends on: Gender (male or female),Age (senior citizen between 60 years to 80 years, women below the age of 60 years ) , Residential status (NRI, NRE). Tax rates for Resident Indian based on gender and income slab For Financial year 201112 or Assessment Year 201213 are given below. For income tax rates of earlier years checkout our Income Tax rates Since AY 19921993
TAX  MEN  WOMEN  SENIOR CITIZEN(60 – 80 yrs)  Very Senior Citizens(Above 80 years) 
Basic Exemption  180000  190000  250000  500000 
10% tax  180001 to 500000  190001 to 500000  250001 to 500000   
20% tax  500001 to 800000  500001 to 800000  500001 to 800000  500001 to 800000 
30% tax  above 800000  above 800000  above 800000  above 800000 
Every Indian income tax assessee gets appropriate exemption. For indian male less than 60 years of age for For Financial year 201112 or Assessment Year 201213 is as follows:
Level of income  Tax 
1. Where the total income does not exceed Rs. 1,80,000/.  Nil 
2. Where the total income exceeds Rs. 1,80,000 but does not exceed Rs. 5,00,000/  10 per cent of the amount by which the total income exceeds Rs. 1,80,000/ 
3. Where the total income exceeds Rs. 5,00,000/ but does not exceed Rs. 8,00,000/.  Rs. 32,000/ plus 20 per cent of the amount by which the total income exceeds Rs. 5,00,000/. 
4. Where the total income exceeds Rs. 8,00,000/.  Rs. 92,000/ plus 30 per cent of the amount by which the total income exceeds Rs. 8,00,000/. 
For example tax on income for Indian male earning 6,00,000, is calculated as follows:
 10% on 5,00,0001,80,000=3,20,000 i.e 32,000 and
 20% on 6,00,0005,00,000 = 1,00,000 i.e 20,000.
So total tax becomes 52,000(32,000+ 20,000)
Education cess: Education cess@ 2% of tax and Secondary and Higher Education Cess@ 1% of Tax or together at 3% is added to payable tax. Note Education cess and Secondary and Higher Education Cess is on the tax and not on the income. Explained in example below:
Gross Salary

5,00,000

Less: Deduction U/s 80C

50,000

Taxable Income

4,50,000

(A) Tax thereon

27,000

Add:


(i) Education Cess @ 2%.

540

(ii) Secondary and Higher Education Cess @1%

270

Total tax payable

27,810

Mandatory Quoting of PAN and TAN: According to the provisions of section 203A of the Incometax Act, it is obligatory for all persons responsible for deducting tax at source to obtain and quote the Taxdeduction Account No. (TAN) in the challans, TDScertificates, statements and other documents.
The person for whom Tax is being deducted has to provide Permanent Account number or PAN. Note that nonfurnishing of PAN by the deductee to the deductor will result in deduction of TDS at higher rates. For Salary please read about Section 206AA.TaxGuru:TDS on Salary – Rate & Provisions A.Y. 201213
Examples of Calculation of Income tax
Man below 60 years and only contribution it to Provident Fund
Example: A male employee, say Mr Sharma, is below the age of sixty years and has gross salary income of Rs.1,50,000 with Rs 10,000 contribution to G.P.F. (Source :Circular No.08/2010 dated 13.12.2010 at TaxGuru:TDS on Salary – Rate & Provisions A.Y. 201213 )
Gross Income  1,50,000 
Deductions  
under section 80C  10,000 
Total taxable income  1,40,000. 
Tax thereon  Nil 
As total taxable income for Assessment Year(AY) 201213 or Financial Year (FY) 201112 less than 1,80,000 for men. Mr Sharma does not have to pay tax.
Examples: Male employee below 60 years of age with salary and contribution to GPF. Source :Circular No.08/2010 dated 13.12.2010 at TaxGuru:TDS on Salary – Rate & Provisions A.Y. 201213
Particulars

Rupees

Rupees

Rupees

Rupees

Gross Salary

2,00,000

5,00,000

10,00,000

20,00,000

Less: Deduction U/s 80C

45,000

50,000

1,00,000

1,00,000

Taxable Income

1,55,000

4,50,000

9,00,000

19,00,000

(A) Tax thereon

Nil

27,000

1,22,000

4,22,000

Add:


(i) Education Cess @ 2% of Tax.

Nil

540

2440

8440

(ii) Secondary and Higher Education Cess @1% of Tax

Nil

270

1220

4220

Total tax payable

Nil

27,810

1,25,660

4,34,660

(B) TDS under sec. 206AA in case where
PAN is not furnished by the employee 
Nil

90,000

1,80,000

4,36,720

Woman below age of 60 years with no tax savings investments
Example: A female employee, say Ms Anjali, below the age of sixty years and has gross salary income of Rs. 2,40,000. She has made no tax savings investments during the year. Let us calculate her income tax liability.
Gross Total Income  Rs. 240,000  
Deductions  Nil  
Taxable Income  Rs. 240,000  
Income Tax Calculations  Tax  
Tax on Income upto Rs 1,90,000  0%  Zero  
Tax on the remaining Rs 50,000  10%  Rs.5,000  
Total Income Tax Due  Rs.5,000  
Educational Cess @ 3%  Rs. 150  
Total Tax Payable  Rs. 5,150 
Woman with Income from Salary and Interest on Saving Bank Account
Income from salary  Rs. 8,00,000 
Income from other sources  
Interest on Saving Bank Account  Rs 14,000 
Total Income  8,14,000 
Deductions:  
Under Section 80C :Employee Provident Fund  34,000 
Total Taxable Income  7,80,000 
Income Tax Calculations  
Tax on Income upto Rs 1,90,000  Zero 
Tax at 10% ( on income between Rs 1,90,001 to Rs 5,00,000)  31,000 
Tax at 20% (on income exceeding Rs. 5,00,000 i.e 280000)  56,000 
Total tax on income of Rs 7,80,000  87,000 
Education Cess @ 3% of Income Tax Payable  2,610 
Total Tax liability  89,610 
Less: TDS / Advance Tax deposited  80,000 
Net Income Tax due  9,610 
Woman with Income from Salary and Interest on Saving Bank Account exceeding 10,000
Income from salary  Rs. 8,00,000 
Income from other sources  
Interest on Saving Bank Account  Rs 18,000 
Total Income  8,18,000 
Deductions:  
Under Section 80C :Employee Provident Fund  34,000 
Total Taxable Income  7,84,000 
Income Tax Calculations  
Tax on Income upto Rs 1,90,000  Zero 
Tax at 10% ( on income between Rs 1,90,001 to Rs 5,00,000)  31,000 
Tax at 20% (on income exceeding Rs. 5,00,000 i.e 284000)  56,800 
Total tax on income of Rs 7,84,000  87,800 
Education Cess @ 3% of Income Tax Payable  2,634 
Total Tax liability  90,434 
Less: TDS / Advance Tax deposited  80,000 
Net Income Tax due  10,434 
Advance Tax
As per income tax an assessee is expected to calculate the estimated income for the year and if the total tax due is more than Rs 10,000 he has to pay advance tax. If one fails to pay Advance Tax or if one pays less than the stipulated tax, (s)he would be penalised and would have to pay extra tax under Sections 234A, 234B, 234C. Advance Tax:DetailsWhat, How, Why explains the process and how interest calculation under Sections 234A, 234B, 234C.
Description  Amount 
Calculation of Interest Payable Under Section 234 A  0 
Calculation of Interest Payable Under Section 234 B  
Number of months for which interest is payable on shortfall amount @ 1% per month  4 
Interest Payable under Section 234 B  417 
Calculation of Interest Payable Under Section 234 C  
Advance Tax Payable upto 15th September 2011 (At least 30% of Total Tax Liability)  3130 
Shortfall in Advance Tax payment  3130 
Interest Payable under Section 234 C (1% per month for 3 months on shortfall, if Total Tax Liability is more than Rs. 10,000/) 
94 
Advance Tax Payable upto 15th December 2011 (At least 60% of Total Tax Liability)  6260 
Shortfall in Advance Tax payment  6260 
Interest Payable under Section 234 C (1% per month for 3 months on shortfall, if Total Tax Liability is more than Rs. 10,000/) 
188 
Advance Tax Payable upto 15th March 2012 (100% of Total Tax Liability)  10434 
Shortfall in Advance Tax payment  10434 
Interest Payable under Section 234 C (1% per month for 3 months on shortfall, if Total Tax Liability is more than Rs. 10,000/) 
104 
Total Interest payable under Section 234 C (94+188 + 104)  386 
Total Interest payable under Sections 234 A, 234 B and 234 C  803 
Man with Income from Salary and Interest on Saving Bank Account exceeding 10,000
Income from salary  Rs. 8,00,000 
Income from other sources  
Interest on Saving Bank Account  Rs 18,000 
Total Income  8,18,000 
Deductions:  
Under Section 80C :Employee Provident Fund  34,000 
Total Taxable Income  7,84,000 
Income Tax Calculations  
Tax on Income upto Rs 1,80,000  Zero 
Tax at 10% ( on income between Rs 1,80,001 to Rs 5,00,000)  32,000 
Tax at 20% (on income exceeding Rs. 5,00,000 i.e 284000)  56,800 
Total tax on income of Rs 7,84,000  88,800 
Education Cess @ 3% of Income Tax Payable  2,664 
Total Tax liability  91,464 
Less: TDS / Advance Tax deposited  80,000 
Net Income Tax due  11,464 
As total tax due is more than 10,000 Ajay had to pay advance tax . If Ajay has not paid advance tax before 31st July he would also have to pay interest under Section 234 A, B and C. Which in his case turn out to be Rs 883. So total tax due is 12,347(11,464 + 883)
Note that for same data(income, deductions etc) Ajay and Bharti had to pay different amounts. This is because exemption limit for woman was Rs 1,90,000 vs Rs 1,80,000 for man.
Note:Calculations have been done using the Finotax:Calculator For assessment Year 201213 , Finotax:AdvanceTax
How to pay tax which is due?
• Nationalised banks
 Select (0021) INCOMETAX (OTHER THAN COMPANIES) in tax applicable field
 Select (300) SELF ASSESSMENT TAX in type of payment.
We have tried to give very simple examples of how to calculate income tax. Hope they are helpful. Apologies upfront for any mistake. Please let us know of the mistake or error in calculation we will correct it. Looking forward for your feedback.
Dear Sir
I have some simple questions to ask you…..
1. I have some kishan vikas patras whose accrued interest in the current fi year is rs. 99000/. now if I invest rs. 150000/ with interest rate 10% per annum in this year what will be my taxable amount for the current financial year? Is it Rs. (99000 + 10% of 150000) = Rs. 114000 or Rs. (99000 + 150000) = Rs. 249000 ?
2. What is the maximum amount I can gift to my wife / parents in a financial year? Is gift taxable?
3. Is the only interest gained from FD is taxable in a fi year and not the total investment amount? If it is so then one can Invest Rs. 20 Lakhs with interest rate 10% (interest gained from it is Rs. 2 Lakhs) + 1 Lakh in 80C for a fi year. Am I correct?
4. Does investment instruments like mutual fund, shares, IPO, NCD, Bonds fall under same category of FD ( means only the interest is taxable, not the total investment amount)?
My DOB is 26121952 and age will be 60 years during the current financial year(i.e.Assess Year – 201314). Will I be eligible for the IT benefits of Senior Citizen when I file the IT return for the FY 201213 (AY 201314)?
For consideration under a senior citizen category, the tax payer’s age should be 60 years during any part of the financial year. In your case as you would be 60 as on March 31, 2013 you will be eligible for IT benefits for Senior Citizen when you file IT return for FY 201213 (AY 201314).
I was a salaried employee newly recruited and will be having gross total income of Rs.4.32lakhs. I was to reduce my tax burden by investing/saving in various sources so that i want to meet nearby(within 2yrs) of financial obligation. Please suggest me in this regard so that my money is not locked for greater period.
With Regards,
A.S.P.Anjaneyulu
A.S.P.Anjaneyulu with due apologies we are not qualified and have expertise to offer suggestions.
Investing is just like planning for a tripbudget , risk, time etc needs to be considered. Our article Beginner to Investing throws light on the topic.
Interest earned from Fixed Deposits is Rs.12000. Since I had given Form 15G, no TDS is deducted. My total income (salary+interest) is less than Rs.1,80,000. Now in ITR1 should I declare the Interest as income?
Thanks
As your total income is less than 1,80,00 you have an option of not filing Income Tax return.
But it is good if you file Income Tax return for it is proof of your income and is needed for visa and loans by banks.
If you are filing ITR then yes declare the interest as income under the head income from other sources.
Dear Sir
I have some simple questions to ask you…..
1. I have some kishan vikas patras whose accrued interest in the current fi year is rs. 99000/. now if I invest rs. 150000/ with interest rate 10% per annum in this year what will be my taxable amount for the current financial year? Is it Rs. (99000 + 10% of 150000) = Rs. 114000 or Rs. (99000 + 150000) = Rs. 249000 ?
2. What is the maximum amount I can gift to my wife / parents in a financial year? Is gift taxable?
3. Is the only interest gained from FD is taxable in a fi year and not the total investment amount? If it is so then one can Invest Rs. 20 Lakhs with interest rate 10% (interest gained from it is Rs. 2 Lakhs) + 1 Lakh in 80C for a fi year. Am I correct?
4. Does investment instruments like mutual fund, shares, IPO, NCD, Bonds fall under same category of FD ( means only the interest is taxable, not the total investment amount)?
Sorry for delay in replying. The questions were simple but not the answers .
1. Earning from investment is taxable not the invested amount.
So for this year when you have 99000 from kisan vikas patra and 10% of 150000) i.e 114000 will be taxed under
the category income from other sources and would be taxed as per your income tax slab.
2. What is the maximum amount I can gift to my wife / parents in a financial year? Is gift taxable?
Any gift received in cash or kind exceeding Rs.50,000 or purchase of movable or immovable property for inadequate payment is taxed in the hands of recipient as “income from other sources. Gifts received from specified relatives are exempt from Income Tax, and there is no upper limit also. Father is included in the definition of relative, therefore amount given to him would be tax free. Yes you can gift to your husband or wife. But, Please be careful that if your spouse invest this money and any gain like interest on FD, Rent etc is received it would be clubbed with your income. Our article Clubbing of income explains it in detail.
While receiving a gift, its always in the interest of the donee (i.e., the recipient) to get a gift deed signed by the donor. This can always help support the case that the item was indeed a gift and can be used as evidence in case of future litigation/investigation by the Income tax department.
3. Is the only interest gained from FD is taxable in a fi year and not the total investment amount? If it is so then one can Invest Rs. 20 Lakhs with interest rate 10% (interest gained from it is Rs. 2 Lakhs) + 1 Lakh in 80C for a fi year. Am I correct?
Yes only interest gained from FD is taxable in a financial year (apr to Mar) not the invested amount. So if you invest 20 lakh at 10% interest only 2 lakh is taxable.
1 lakh in 80C is deduction available to the taxpayer. Out article Filling ITR1 may be of help.
4. Does investment instruments like mutual fund, shares, IPO, NCD, Bonds fall under same category of FD ( means only the interest is taxable, not the total investment amount)?
In any investment only the earnings are taxed not the invested amount. And taxation of each category of investment is different which also depends on time period for which investment was held.
For ex: investment in equity mutual funds and stocks if held for less than 1 year are taxed for short term capital gain at 15% while if held for long period are tax free. While for debt mutual funds Selling before 1 year the profit is added to the income and taxed as per tax slab.while if held for longer than 1 year taxed at 20% if indexation used, Without indexation 10% Our article Basics of Capital Gain throws light on it.
Hope it answers your queries. If you still have doubt please let us know.
FYI: This blog is run by women.
Thanks a ton. Very detailed and informative article with nice examples. I am greatful to all the efforts you put in here.
But, couple of clarifications, might be typos, but want to get confirmed before I calculated my income tax due :
1. In the example of Ms. Aarthi, you mentioned while calulating interest under 234 C, is the last calculation 104 (1% of 10434) correct. (OR) is it 3 months 104 * 3 = 312. Please confirm.
2. You mentioned “So the total tax due to be paid before 31st July by Ms. Bharti becomes 11,237( 10,434 + 803)”. So eventhough I am paying income tax before 31st July. I have to pay the interest as mentioned under section 234 A, B, C. Am I right ?
But in the Ajay’s example you said “As total tax due is more than 10,000 Ajay had to pay advance tax . If Ajay has not paid advance tax before 31st July he would also have to pay interest under Section 234 A, B and C. Which in his case turn out to be Rs 883. So total tax due is 12,347(11,464 + 883)”
3. “TDS deducted by her employee is 80,000″, should be corrected to TDS deducted by her employer is 80,000. I think it is a typo.
Thanks Kavita for your valuable input.
I have added information about advance tax hope it helps in clarifying.
Number of months is 1 as due date is 15 Mar.
So in case of both Bharti and Ajay as they had to pay tax about Rs 10,000 and did not pay they would have to pay penalty under section 234 B and C.
Please let us know if clarification are fine and/or you have more queries?