How to calculate tax

Example 1: Let us take a case where the assessee's income is Rs. 2,10,000.

• According to the Income Tax Slab, the first 1,00,000 is not taxable.
• The next Rs. 50,000 is taxable @10%.
• 10% of Rs. 50,000 is Rs. 5,000.
• The remaining Rs. 60,000 i.e. 2,10,000 - (1,00,000+50,000) is taxable @20%.
• 20% of Rs. 60,000 is Rs. 12,000.
• Therefore, the net Income Tax Payable is Rs. 5,000 + Rs. 12,000 i.e. Rs. 17,000.

Example 2: Let us take a case where the assessee is women and whose taxable income is Rs. 2,40,000.

• According to the Income Tax Slab, the first 1,35,000 is not taxable.
• The next Rs. 15,000 is taxable @10%.
• 10% of Rs. 15,000 is Rs. 1,500.
• The remaining Rs. 90,000 i.e. 2,40,000 - (1,35,000+15,000) is taxable @20%.
• 20% of Rs. 90,000 is Rs. 18,000.
• Therefore, the net Income Tax Payable is Rs. 1,500 + Rs. 18,000 i.e. Rs. 19,500.

Example 3: Let us take a case where the assessee is senior citizen and whose taxable income is Rs. 2,90,000.

• According to the Income Tax Slab, the first 1,85,000 is not taxable.
• The next Rs. 65,000 is taxable @20%.
• 20% of Rs. 65,000 is Rs. 13,000.
• The next Rs. 40,000 i.e. 2,90,000 - (1,85,000+65,000) is taxable @30%.
• 30% of Rs. 40,000 is Rs. 12,000.
• Therefore, the net Income Tax Payable is Rs. 13,000 + Rs. 12,000 i.e. Rs. 25,000.

(If the assesse claims any rebate/ exemption, the claimed amount will be deducted from his income with reference to the law of Income Tax Act before calculating the tax.)

Note:

• Surcharge @ 10% applicable if total income exceeds Rs. 8.5 lakh for A.Y. 2005-06 and Rs. 10 lakh for A.Y. 2006-07.
• There is a new section 80C according to which a person can get rebate upto Rs. 1,00,000 against insurance premium, PF contributions and other such schemes.
• In case of higher education there is a deduction in tax for a maximum period of 8 years.
• Marginal relief would be provided to ensure that the additional income tax payable including surcharge, on the excess of income over Rs. 10,00,000 (Rs. 8.5 lakh for A.Y. 2005-06) is limited to the amount by which the income is more than Rs. 10 lakh (Rs. 8.5 lakh for A.Y. 2005-06).
• Education cess @ 2% on tax plus surcharge.