Process of Income tax calculation for the Salaried Persons for F.Y. 2020-21 As per Budget 2020
Income from salary is the sum of Basic salary + HRA + Special Allowance + Transport Allowance + any other allowance. Some components of your salary are exempt from tax, such as telephone bills reimbursement, leave travel allowance. If you receive HRA and live on rent, you can claim exemption on HRA. Calculate exempt portion of HRA, by using this HRA Calculator.
On top of these exemptions, a standard deduction of Rs 40,000 was introduced in budget 2018. This has been increased to Rs 50,000 in budget 2019.
In case you opt for the new tax regime, these exemptions will not be available to you.
Let's understand income tax calculation under the current tax slabs and new tax slabs (optional) by way of an example. Mira receives a Basic Salary of Rs 1,00,000 per month. HRA of Rs 50,000. Special Allowance of Rs 21,000 per month. LTA of Rs 20,000 annually. Mira pays a rent of Rs 40,000 and lives in Delhi.
Nature | Amount | Exemption/Deduction | Taxable(Old regime) | Taxable(New regime) |
Basic Salary | 12,00,000 | - | 12,00,000 | 12,00,000 |
HRA | 6,00,000 | 3,60,000 | 2,40,000 | 6,00,000 |
Special Allowance | 2,52,000 | - | 2,52,000 | 2,52,000 |
LTA | 20,000 | 12,000 (bills submitted) | 8,000 | 20,000 |
Standard Deduction | - | 50,000 | 50,000 | - |
Gross Total Income from Salary | 16,50,000 | 20,72,000 |
To calculate Income tax, include income from all sources. Include:
- Income from Salary (salary paid by your employer)
- Income from house property (add any rental income, or include interest paid on home loan)
- Income from capital gains (income from sale purchase of shares or house)
- Income from business/profession (income from freelancing or a business or profession)
- Income from other sources (saving account interest income, fixed deposit interest income, interest income from bonds)
Mira has income from interest from savings account of Rs 8,000 and a fixed deposit interest income of Rs 12,000 during the year. Mira has made some investments to save income tax. PPF investment of Rs 50,000. ELSS purchase of Rs 20,000 during the year. LIC premium of Rs 8,000. Medical insurance paid of Rs 12,000. Here are the deductions Mira can claim under the old tax regime.
Nature | Maximum Deduction | Eligible investments/expenses | Amount claimed by Neha |
Section 80C | Rs.1,50,000 | PPF deposit Rs 50,000, ELSS investment Rs 20,000, LIC premium Rs 8,000. EPF deducted by employer(Neha’s contribution) = Rs 1,00,000 *12% *12 = 1,44,000 | Rs 1,50,000 |
Section 80D | Rs 25,000 for self Rs 50,000 for parents | Medical insurance premium Rs 12,000 | Rs 12,000 |
Section 80TTA | 10,000 | Savings account interest 8,000 | Rs. 8,000 |
Nature | Amount | Total |
Income from Salary | 16,50,000 | |
Income from Other Sources | 20,000 | |
Gross Total Income | 16,70,000 | |
Deductions | ||
80C | 1,50,000 | |
80D | 12,000 | - |
80TTA | 8,000 | 1,70,000 |
Gross Taxable Income | 15,00,000 | |
Total tax on above (including cess) | 2,73,000 |
Nature | Amount | Total |
Income from Salary | 20,72,000 | |
Income from Other Sources | 20,000 | |
Gross Total Income | 20,92,000 | |
Total tax on above (including cess) | 3,79,704 |
Up to Rs 2,50,000 | Exempt from tax | 0 |
Rs 2,50,000 to Rs 5,00,000 | 5% (5% of Rs 5,00,000 less Rs 2,50,000) | 12,500 |
Rs 5,00,000 to Rs 7,50,000 | 10% (10% of Rs 7,50,000 less Rs 5,00,000) | 25,000 |
Rs 7,50,000 to Rs 10,00,000 | 15% (15% of Rs 10,00,000 less Rs 7,50,000) | 37,500 |
Rs 10,00,000 to Rs 12,50,000 | 20% (20% of Rs 12,50,000 less Rs 10,00,000) | 50,000 |
Rs 12,50,000 to Rs 15,00,000 | 25% (25% of Rs 15,00,000 less Rs 12,50,000) | 62,500 |
More than Rs Rs 15,00,000 | 30% (30% of Rs 20,92,000 less Rs 15,00,000) | 1,77,600 |
Cess | 4% of total tax (4% of Rs 12,500 + Rs 25,500+ Rs 37,500 + Rs 50,000 + Rs 62,500 + Rs 1,77,600) | 14,604 |
Total Income Tax | Rs 12,500 + Rs 25,500+ Rs 37,500 + Rs 50,000 + Rs 62,500 + Rs 1,77,600 + Rs 14,604 | Rs 3,79,704 |
Individual or HUF opting for taxation under the newly inserted section 115BAC of the Act shall not be entitled to the following exemptions/deductions:
(i) Leave travel concession as contained in clause (5) of section 10;
(ii) House rent allowance as contained in clause (13A) of section 10;
(iii) Some of the allowance as contained in clause (14) of section 10;
(iv) Allowances to MPs/MLAs as contained in clause (17) of section 10;
(v) Allowance for the income of minor as contained in clause (32) of section 10;
(vi) Exemption for SEZ unit contained in section 10AA;
(vii) Standard deduction, deduction for entertainment allowance and employment/professional tax as contained in section 16;
(viii) Interest under section 24 in respect of self-occupied or vacant property referred to in sub-section (2) of section 23. (Loss under the head income from house property for the rented house shall not be allowed to be set off under any other head and would be allowed to be carried forward as per extant law);
(ix) Additional deprecation under clause (iia) of sub-section (1) of section 32;
(x) Deductions under section 32AD, 33AB, 33ABA;
(xi) Various deduction for donation for or expenditure on scientific research contained in sub-clause (ii) or sub-clause (iia) or sub-clause (iii) of sub-section (1) or sub-section (2AA) of section 35;
(xii) Deduction under section 35AD or section 35CCC;
(xiii) Deduction from family pension under clause (iia) of section 57;
(xiv) Any deduction under chapter VIA (like section 80C, 80CCC, 80CCD, 80D, 80DD, 80DDB, 80E, 80EE, 80EEA, 80EEB, 80G, 80GG, 80GGA, 80GGC, 80IA, 80-IAB, 80-IAC, 80-IB, 80-IBA, etc). However, deduction under sub-section (2) of section 80CCD (employer contribution on account of the employee in notified pension scheme) and section 80JJAA (for new employment) can be claimed.
Following allowances shall be allowed as notified under section 10(14) of the Act to the Individual or HUF exercising option under the proposed section:
a) Transport Allowance granted to a div yang employee to meet the expenditure for the purpose of commuting between place of residence and place of duty
b) Conveyance Allowance granted to meet the expenditure on conveyance in performance of duties of an office;
c) Any Allowance granted to meet the cost of travel on tour or on transfer;
d) Daily Allowance to meet the ordinary daily charges incurred by an employee on account of absence from his normal place of duty.
Download All in One TDS on Salary for Govt.& Non-Govt. Employees for the F.Y. 2020-21 With H.R.A. Exemption Calculation U/s 10(13A) + Automated Income Tax Arrears Relief Calculator U/s 89(1) with Form 10E + Automated Revised Form 16 Part B and Form 16 Part A&B for F.Y.2020-21
The feature of this Excel Utility is the following:-
1) This Excel Utility can prepare automatic Tax Calculation as per new Finance Budget 2020 (New Tax Regime & Old Tax Regime, both you can calculate in the same Excel Utility)
2) The Salary Structure as per the All of Govt & Non-Govt(Private) employee’s Salary Pattern
3) Automated Individually Salary Sheet for each Employee
4) Automated Income Tax Salary Sheet for each Employee
5) This Excel Utility calculate your House Rent Exemption Calculation U/s 10(13A)
6) Automatic Arrears Relief Calculator U/s 89(1) with Form 10E from F.Y. 2000-01 to F.Y. 2020-21
7) Automated Income Tax Revised Form 16 Part A&B for F.Y. 2020-21 in Excel
8) Automated Income Tax Revised Form 16 Part B for the F.Y. 2020-21 in New Format
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