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Income Tax Calculation – How To Calculate, Tax Slabs & Exemptions

Want to calculate your income tax, but don’t know where to start? Don’t worry, you are not alone. Most people seem to be unaware of how income tax is to be calculated and often consider it to be a difficult and tedious task. However, it does not have to be so. There are a few basic and simple things that you need to know and you can calculate the tax. Thanks to the online income tax calculator, you can do that in a quick and easy way, that too in just a few clicks.

Online Income Tax Calculator

Anyone who receives an income by means of the profession, business, or other sources is liable to pay a specific portion of his/ her income in the form of income tax to the central government.

The Income Tax Calculator is a tool online designed to help individuals in their income tax calculations for a financial year. The IT calculator asks for the employee’s data like salary, HRA, deductions, etc and calculates an approximate amount of the income tax liability that is to be paid by the person.

What are the steps involved in the income tax calculation?

To calculate your income tax liability for a financial year, you can follow the steps stated below:

  1. Select the assessment year for whichincome tax calculationis to be done.
  2. Choose your age bracket, as in India tax liability differs for different age groups.
  3. Next, click on the income field and enter your salary along with your other annual income such as income for interests, income from rent, the interest portion paid on home loans, any loan taken for rental property, etc.
  4. Next, you may want to enter the details of your investments for tax-saving U/S 80C, 80G, 80D, 80E as well as 80TTA in case you are following the old tax regime.
  5. Finally, click on the ‘Calculate’ button to find out your income tax liability to be settled.

Calculating income tax on salary with an example :

Income from salary is the inclusion of basic salary, house rent allowance, conveyance allowance, and other allowances, wherein some of the components of salary are eligible for tax exemption.

Here’s an example to understand income tax calculation for salaried employees:

Rahul Pathak is a 29-year-old male from Delhi, working in an IT Firm. Here’s the information of his annual salary with its components:

  • Basic salary: INR 12,00,000
  • HRA: INR 6,00,000
  • Special Allowance: INR 2,52,000
  • Leave Travel Allowance: INR 20,000

Rahul lives on rent and pays a monthly rent of INR 40,000

NatureAmount in INRDeductions in INRTaxable
(Old regime)
(New regime)
Basic Salary12,00,00012,00,00012,00,000
Special Allowances2,52,0002,52,0002,52,000
Leave Travel Allowance20,00012,0008,00020,000
Standard Deduction50,00050,000
Gross Total Income from Rahul’s salary16,50,00020,72,000

Rahul earns an annual interest from the following:

  • Savings accounts: INR 8,000
  • Fixed deposits: INR 12,000
  • He has also made some tax-saving investments:
  • PPF investment: INR 50,000
  • LIC premium: INR 8,000
  • ELSS: INR 20,000
  • Medical insurance: INR 12,000

Given below are the deductions that Rahul can avail:

NatureThe maximum deduction that can be madeEligible expensesAmount claimed by Rahul
Section 80CINR 1,50,000PPF investment: INR 50,000
ELSS investment: INR 20,000
LIC premium: INR 8,000
EPF deducted by Rahul’s company: INR 1,44,000 (1,00,000 * 12% *12)
INR 1,50,000
Section 80 DINR 25,000 for self
INR 50,000 for parents
Medical Insurance: INR 12,000INR 12,000
Section 80 TTA10,000Interest from savings account: INR 8000INR 8000

Gross taxable income calculation according to the Old Tax Regime:

NatureAmount in INRTotal
Income from salary16,50,000
Income from other sources20,000
Gross total income16,70,000
DeductionsSection 80C1,50,000
DeductionsSection 80D12,000
DeductionsSection 80TTA8,0001,70,000
Gross taxable income15,00,000
Total tax liability (including cess)2,73,000

Gross taxable income calculation according to the new regime :

NatureAmount in INRTotal
Income from salary20,72,000
Income from other sources20,000
Gross total income20,92,000
Total tax liability (including cess)3,79,704

Different Income tax slabs in India:

Income tax slabs in India are made to show the amount of income tax liability to be paid by an individual based on his total revenue. The tables below show the tax rates for the financial year 2020-2021:

Tax slab for Individuals, Hindu Undivided families (HUFs), and NRIs:

Income tax slabTax slab rates as per the new regime
Below INR 2.5 lakhsNil
INR 2.5 lakhs- INR 3 lakhs5% (tax rebate available)
INR 3 lakhs – INR 5 lakhs5% (tax rebate available)
INR 5 lakhs- INR 7.5 lakhs10%
INR 7.5 lakhs- INR 10 lakhs15%
INR 10 lakhs- INR 12.5 lakhs20%
INR 12.5 lakhs- INR 15 lakhs25%
Above INR 15 lakhs30%

For senior citizens (above the age of 60 years)

Income tax slabsTax slab rates as per the new regime
Below INR 2.5 lakhsNil
INR 2.5 lakhs- INR 3 lakhs5%
INR 3 lakhs – INR 5 lakhs5%
INR 5 lakhs- INR 7.5 lakhs10%
INR 7.5 lakhs- INR 10 lakhs15%
INR 10 lakhs- INR 12.5 lakhs20%
INR 12.5 lakhs- INR 15 lakhs25%
Above INR 15 lakhs30%

For super senior citizens (above the age of 80 years)

Income tax slabsTax slab rates as per the new regime
Up to INR 2.5 lakhsNil
INR 2.5 lakhs – INR 5 lakhs5%
INR 5 lakhs- INR 7.5 lakhs10%
INR 7.5 lakhs – INR 10 lakhs15%
INR 10 lakhs- INR 12.5 lakhs20%
INR 12.5 lakhs – INR 15 lakhs25%
Above INR 15 lakhs30%

What are the different sources of Income for an Individual?

According to the regulations made under Section 14 of the Income Tax Act, 1961 an individual can only have a total of five sources of earning revenue at all points of time. These sources as fixed by the Income Tax Department of India are:

  • Income from salary
  • Income from capital gains
  • Income from house property
  • Income from business
  • Income from other sources

Income from Salary:

The first head of the sources of income allowed is the income from salary. The Income Tax calculator can be used efficiently to calculate the entire amount for you.

Every employee is provided with Form 16 by the employer which includes a TDS certificate. This TDS certificate can be used to calculate your income from salary. The process is as follows:

  1. Collect all your salary slips and Form 16 for the ongoing financial year. Look for all the stipends and allowances (basic salary, TA, DA, HRA, other allowances) provided to you in your salary slips and Form 16 and add them together. Also, add your bonus to the final amount.
  2. The total amount after the summation of all these values will be your gross income.
  3. Deduct HRA exemption and transport allowance from your gross income amount.
  4. The resulting amount will give you your net income.

Income from House Property:

The second head of the sources of income allowed is income from house property. This is the computation of earnings of an individual from the rental income if he owns a land and house property. An individual will calculate his income from the property, where he only possesses the ownership of single property and that too is self-occupied.

To calculate the Gross Annual Value (GAV) for your rented house :

  1. Find out the Fair Market value (FMV) and the valuation estimated by the Municipal Corporation, and then choose the amount with a higher value. This will be the expected rent for your property.
  2. Compare the above-mentioned expected rent with the actual rent you receive. This will give you the gross annual value for your property.
  3. The net annual value for the property can be computed by deducting the already paid taxes for the property from the gross annual value.

Explain Income from Capital Gains:

A property that is held by an assessee for professional or business purposes is called capital gains. When the assessee sells or transforms his capital asset which was held as an investment, he gains profit.

Calculations of income from capital gains can be done through the following steps:

  1. Compute your long-term capital gains from your total sale of assets.
  2. Compute your short-term capital gains from your total sale of assets.
  3. Claim your deductions after these steps.

Income from Business:

Income from business and profession simply translates to any revenue shown by an assessee in the profit and loss account of a business entity after considering all the expenditures. Any revenue earned whether positive or negative is taxable. It’s mandatory for all business entity holders to file their income tax returns before 31st July of the ongoing assessment year.

Income from other sources:

  1. Income that is not eligible for exemption but cannot be placed under heads like salary, income from capital gains, house property, business/profession is kept under the heading of income from other sources.
  2. All the dividends received are mentioned under this head
  3. Interest earned from deposits and bonds are mentioned under this heading
  4. One-time income like winning a lottery, game, racing, gambling, or betting is mentioned under this head.
  5. Gifts received in the form of money or property and are eligible for taxation are kept under this head

What are the exemptions on total income tax?

A rebate in the total income tax liability can be availed of, under the following sections:

  1. Section 87A
    A rebate of INR 12,500 on income below INR 5 lakhs.
  2. Section 80 C
    A rebate up to INR 1.5 lakhs on investing in any tax-saving fixed deposits, PPF, National Saving Certificate, etc.
  3. Section 80 CCD
    Individuals who have invested in the National Pension Scheme are eligible to avail of a tax exemption up to INR 2 lakhs.
  4. Section 80 D
    Tax exemptions on the payment of medical insurance premium, wherein INR 25,000 is applicable for self and INR 50,000 for parents.
  5. Section 80 E
    If contributing to charity, the amount will be fully exempted from tax calculations.
  6. Section 80 G
    A rebate of 100% on the interests of an education loan for a period of 8 years.
  7. Section 80 TTA
    Interest earned from a savings account would be eligible for tax benefits up to INR 10,000. Seniors would be eligible for tax waivers of interest income up to INR 50,000.
  8. Section 80 GG
    Tax exemption on the House Rent Allowance.


To calculate the tax to be deducted from your salary you would need to refer to the Income-tax slabs of India for the ongoing financial year. You can use the online Income Tax calculator to compute the income tax liability.

Yes, if your total annual income is above the basic exemption limit then it is mandatory for you to file an income tax refund. However, there is no requirement to pay an income tax liability if your income is less than INR 2.5 lakhs.

  • PAN card details, Aadhar card details, and your current address.
  • All details of your bank account
  • Proof of income like current salary details, earnings from investments (FDs, savings account, etc)
  • Details of all the deductions claimed under Section 80.
  • Details for tax payments, such as TDS or advance tax payment.

Yes, it is absolutely a free facility for you to calculate your income tax liability easily.

  • Log on to the official website of the Income Tax Department
  • Look for the ‘Tax Calculator’ option under the “Important links’ section
  • Click on the tax calculator button and you will be redirected to a new page
  • Fill in the required details and calculate your income tax liability easily.