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An Income Tax is a tax that is levied on the income earned by working individuals. Most governments impose taxes on financial income generated by all entities within their jurisdiction. This is the primary source of funds for the government to finance all its activities. All businesses and individuals must file an income tax return every year to determine whether they owe any taxes or are eligible for a tax refund.
This income tax that you need to pay depends on a number of parameters that include the type of income, the amount of income, your age, and the investments that are considered under tax deduction. Your income tax is usually deducted by your employer. By declaring your taxes in advance, you don’t need to apply for the tax refunds later.
In India, a slab system is based on the tax rates fixed in the budget. For salaried individuals, these income tax slabs are divided into three categories:
On 1 February 2020, the Finance Minister presented Union Budget 2020, with a new and optional income tax regime for individuals willing to forgo certain deductions and exemptions, such as those available through Section 80C. This simplified regime has concessional slab rates and you can choose to file taxes as per this regime from Financial Year 2020-21 onwards. This new system will co-exist with the old and the income tax slab for 2020-21 applicable to you will depend on which system of taxation you opt for.
Below are the new tax slabs (FY 2020-21, AY 2021-22) and their corresponding tax rates.
Income Tax Slab | Tax Slab Rate |
---|---|
Up to Rs.2.5 lakh | Nil |
Exceeding Rs.2.5 lakh and up to Rs.5 lakh | 5% |
Exceeding Rs.5 lakh and up to Rs.7.5 lakh | 10% |
Exceeding Rs.7.5 lakh and up to Rs.10 lakh | 15% |
Exceeding Rs.10 lakh and up to Rs.12.5 lakh | 20% |
Exceeding Rs.12.5 lakh and up to Rs.15 lakh | 25% |
Exceeding Rs.15 lakh | 30% |
Here:
The tax due, calculated as per the new income tax slab 2020, will be subject to 4% cess
A rebate of up to Rs.12,500, as per Section 87A, is available for taxable incomes of up to Rs.5 lakh
Annual Income | Tax Rates | Health and Education Cess |
---|---|---|
Up to Rs.2.5 lakh* | Nil | Nil |
Rs.2,50,001-Rs.5 lakh | 5% | 4% of Income Tax |
Rs.5,00,001-Rs.10 lakh | 20% | 4% of Income Tax |
Above Rs.10 lakh | 30% | 4% of Income Tax |
Annual Income | Tax Rates | Health and Education Cess |
---|---|---|
Up to Rs.3 lakh* | Nil | Nil |
Rs.3,00,001-Rs.5 lakh | 5% | 4% of Income Tax |
Rs.5,00,001-Rs.10 lakh | 20% | 4% of Income Tax |
Above Rs.10 lakh | 30% | 4% of Income Tax |
Annual Income | Tax Rates | Health and Education Cess |
---|---|---|
Up to Rs.5 lakh* | Nil | Nil |
Rs.5,00,001-Rs.10 lakh | 20% | 4% of Income Tax |
Above Rs.10 lakh | 30% | 4% of Income Tax |
Annual Income | Tax Rates | Health and Education Cess |
---|---|---|
Up to Rs.2.5 lakh* | Nil | Nil |
Rs.2,50,001-Rs.5 lakh | 5% | 4% of Income Tax |
Rs.5,00,001-Rs.10 lakh | 20% | 4% of Income Tax |
Above Rs.10 lakh | 30% | 4% of Income Tax |
Annual Income | Tax Rates | Health and Education Cess |
---|---|---|
Up to Rs.2.5 lakh** | Nil | Nil |
Rs.2,50,001-Rs.5 lakh | 5% | 3% of Income Tax |
Rs.5,00,001-Rs.10 lakh | 20% | 4% of Income Tax |
Above Rs.10 lakh | 30% | 4% of Income Tax |
Annual Income | Tax Rates | Health and Education Cess |
---|---|---|
Up to Rs.5 lakh* | Nil | Nil |
Rs.5,00,001-Rs.10 lakh | 20% | 3% of Income Tax |
Above Rs.10 lakh | 30% | 3% of Income Tax |
Tax deductions help you to reduce the overall tax that you pay on your total income. You can claim a tax deduction on the money you spend on tuition fees, medical expenses, and charitable contributions. There are certain investments that also help you bring down that overall tax that you pay. These investments include life insurance plans, health insurance plans, retirement savings schemes, and national savings schemes, etc.
You can easily compute the Income Tax that you need to pay on your salary by using the Income Tax calculator.
An Income Tax Return is a a tax form prescribed by the Income Tax department with a set format wherein income figures will be used to calculate the tax liability. These returns need to be filed every year for sources of income earned by an individual and or a business. These returns need to be filed before a specified date.
If the return shows excess tax has been paid in a year, you can be eligible for a ‘tax refund’, subject to the department’s interpretations and calculations.
The due date for income tax filing for your Income Tax Returns for the financial year 2019 – 2020 is 31st July 2020 for individuals and 31th October 2020 for businesses as proposed in india’s union budget 2020.
A financial year for filing for your income tax is the year in which you earn an income. In India, this financial year begins from the 1st of April to the 31st March. An assessment year for your Income Tax filing is the year following the financial year for which your income is being assessed.
For example, the income you earn in the financial year 2019 – 2020 (between 1st April 2019 – 31st March 2020) will be assessed in the financial year 2020-2021, making it the assessment year.