HOW TO CALCULATE YOUR TAX LIABILITY...

BALASUBRAMANYA B Npro badge (CCI STUDENT....) (44679 Points)

25 January 2010  

Calculating Your Income Tax Liability 2009-10

The income tax which is charged to you is based on the tax slabs declared by the Government in its annual budget every year. The following table encapsulates the tax slabs applicable this year. (Financial Year 2009-2010)

Taxable Income Slab Tax Slab
Upto Rs. 1,60,000
Up to Rs. 1,90,000 (for women)
Up to Rs. 2,40,000 (for residents, 65 years or above)
Nil
Rs. 1,60,001 - Rs. 3,00,000 10%
Rs. 3,00,001 - Rs. 5,00,000 20%
Rs. 5,00,001 and above 30%
Note: In addition, an education cess of 3% is charged on the entire tax amount. Surcharge of 10% on income above 10 Lakhs have been scraped.

 

Please note that the taxable income is arrived at after adding all your different sources of income and subtracting the deductions that you have taken advantage of under Section 80C to 80U.

Lets take a few examples to illustrate how you can calculate taxes based on these slabs.

Example 1:
Sarla is a salaried employee, her annual income is Rs. 2,40,000. She has made no tax savings investments during the year.
Let us calculate her income tax liability.

Heads Amounts
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

Example 2:
Vinod is a salaried employee. His annual income is Rs. 3,25,000.His home loan interest payment is Rs 1,20,000 and his home loan principal repayment is Rs. 80,000.He has made an investment of Rs. 50,000 in NSC.
Let us calculate Vinod's interest liability.

Heads Amounts
Income from Salary      Rs. 325,000
Income from House Property
(Section 24 Deduction for Home loan interest repayment)
(-)  Rs.120,000
Gross Total Income      Rs. 205,000
Less: Section 80 C Deductions      Rs.100,000
NSC Investment Rs. 50,000  
Home Loan Principal Repayment Rs.80,000  
Total Rs. 130,000  
Taxable Income      Rs. 105,000
Total Tax Due      Rs. 0

Example 3:
Ram is a salaried employee who earned Rs.12,00,000. He has bought a health insurance policy for himself worth Rs 10,000. Ram has also bought ELSS funds for Rs. 80,000 and has also paid a LIC premium of Rs. 20,000.He has also donated Rs. 20,000 to the Prime Minister's Relief Fund.
Let us calculate Ram's tax liability.

Heads Amounts
Gross Total Income Rs. 1,200,000
Less: Section 80 C Deductions Rs.100,000
LIC Premium Rs. 20,000  
ELSS Funds Rs. 80,000  
Total Rs. 100,000  
Less: Other Deductions Rs. 30,000
Section 80D Health Insuance Premium Rs. 10,000  
Section 80G Donation To a Charity Rs. 20,000  
Total Taxable Income 1,070,000
Income Tax Calculations Tax
Tax on Income upto Rs 1,60,000 0% Zero
Tax on the next Rs 1,40,000
(Slab 160,001 to 3,00,000)
10% Rs.14,000
Tax on the next Rs 2,00,000
(Slab Rs. 3,00,001 to Rs. 500,000)
20% Rs.40,000
Tax on next Rs. 570,000
(above 500,001)
30% Rs. 1,71,000
Income Tax Due Rs. 2,25,000
Surcharge on total tax
(No Surcharge is payable from
previous year 2009-10 onwards)
0.00% Rs. Nil
Income Tax Due Rs. 2,25,000
Educational Cess @ 3% Rs.6,750
Total Tax Payable Rs.2,31,750