How to Compute Income Tax on Salary?

How to compute income tax?

•     Income tax is calculated through a certain percentage that applies for the tax. This percentage is calculated on the entire salary of an individual and it includes the basic salary as well as other allowances.

•     There are different income tax percentages for different levels of the salary income. There are also different percentages of income tax for different age groups that people fall under. So, the income tax percentage is decided upon the age as well as the salaries income of an individual and one can compute income tax by suing the particular values.

•       While calculating your income tax on your salary, you have to choose the particular percentage that applies to you. All the options are given below in accordance with different salaries and ages to let you compute income tax.

Following are the categories and age brackets for which a particular percentage of income tax is applied:

1^st Category: General

The general category has individuals under the age of 60 years

Salary of an individual per annum	Income Tax percentage to be applied on the salaried income
Below the amount of INR 2.5 lakhs	No tax is to be applied on this salary income
INR 2. 5 lakhs to the amount of INR 5 lakhs	5 %
INR 5 lakhs to INR 10 lakhs	20 %
More than the amount of Rs. 10 lakhs	30 %

2^nd Category: Senior Citizens

The senior citizen category has individuals between the ages of 60 years to 80 years

Salary of an individual per year	Income Tax percentage to be applied on the salaried income
Below the value of 3 lakh rupees	No tax shall be applicable on the salaried income
Between INR 3 lakhs to INR 5 lakhs	5 %
Between INR 5 lakhs to INR 10 lakhs	20 %
More than the value of 10 lakh rupees	30 %

3^rd Category: Super Senior Citizens

The super senior citizens category has individuals above the age of 80 years

Salary of an individual per annum	Income Tax percentage to be applied on the salaried income
Below 5 lakhs rupees	No tax shall be applicable on the salaried income
Between the value of Rs. 5 lakhs to Rs. 10 lakhs	5 %
More than 10 lakh rupees	30 %

You can use the Income Tax Calculator that is provided by the Income Tax Department to calculate the income tax on your salary by just click on the link below:

What is a salary income?

A salary comprises of the sum amount that an employee has earned by providing the employee of a company that they work for with the services that they render through a period of time. A salary is usually paid to an employee for a month but it can also be calculated for 15 days or even weekly. It is basically a remuneration that the person who provided the company with their work and contributed to the growth of the company gets.

Who is subjected to a salary?

An individual, who provides their services to a company, organization or institution, is subjected to getting an income which is called a salary. A salary income is taxed and the individual also has to pay the income tax for the salary that they receive from their employers. The income tax is usually paid per annum. There are also many tax benefits, deduction and exemptions depending on the nature of the type of the salary income. There are tax exemptions available on certain allowances that an employee gets.

What are the inclusions of your salary?

A salary income has many parts that it comprises. The base salary is the main part but amounts that are received as allowances, additional benefits, bonuses, commissions, etc. are also included in the salary when tax has to be calculated. Many of these amounts are taxable and many are partially taxable and many are not taxable at all. Let us see what all amounts are parts of the total salary that an employee working in a company gets.

Salary income of an employee =
Basic salary income + bonus / commissions + allowances

Base Salary

The base salary is sum amount of money that an employee receives from their employee for providing them with their services in their job for a particular duration of time. The base salary is given to the employee for the basic purpose that they were hired for to do the job.

Allowances

Employees of companies get various allowances during the course of their job at the company. It is given by the employer. Some of these allowances are entirely taxable whereas some of the allowances are partially taxable and some of them are even completely exempted from being taxed, all depending on the nature of the allowance. All these amounts are a part of the salary of an individual.

Allowances that are completely exempted from being taxed:

•     Allowance for international posting allowance

•     Allowance for employees of United Nations

•     Allowance for High court as well as Supreme court judges

Allowances those are partially taxable:

•     Allowance for house rent

•     Allowance for research

•     Allowance for uniform

•     Allowance for entertainment

•     Allowance for instant travel

•     Allowance for children’s education & hostel

Allowances those are entirely taxable:

•     Allowance for deputation

•     Allowance for domestic help

•     Allowance for over time

•     Allowance for metro city

•     Allowance for dearness

Bonus

Commissions or bonuses are the amount of money that an employee receives from their employer as additional benefits. Bonuses might be given for festivals, new financial years, times when the company has gotten an extra income, etc.

Salary income tax has to be computed carefully. You can compute it yourself with all the percentages for the income tax that are available below. You can also use the Income Tax Calculator to compute income tax. You can calculate it yourself first to have an idea of what exactly to expect.