Here is an easy formula that shows you how to calculate income tax on salary with an example for the old tax regime.
Basic Salary + HRA + Special Allowance + Transport Allowance + any other allowance + perquisites = Gross Income from Salary
From this Gross Income, minus any Deductions and Professional Tax (if any).
This will give you the Net Taxable Income.
For example:
Kavita Shrivastava earns a basic salary of ₹ 1,00,000 per month
House Rent Allowance (HRA) of ₹ 45,000 per month
Special Allowance of ₹ 20,000 per month
Leave Travel Allowance (LTA) of ₹ 20,000 per Annum
Her taxable income would be calculated as follows:
Components | Amount |
---|
Basic Salary
| 1,00,000 x 12 = 12,00,000
|
House Rent Allowance (HRA)
| 45,000 x 12 = 5,40,000
|
Special Allowance
| 20,000 x 12 = 2,40,000
|
Leave Travel Allowance (LTA)
| 20,000
|
Total Annual Salary (Income)
| 20,00,000
|
Kavita’s salary is above Rs. 15 lakhs. If you calculate income tax online with the tax calculator old regime and new tax regime calculator, this is what you will get:
Particulars | Old Tax Regime | New Tax Regime |
---|
Total Annual Salary
| ₹ 20,00,000
| ₹ 20,00,000
|
Gross Total Income
| ₹ 20,00,000
| ₹ 20,00,000
|
(now deduct all the applicable deduction, allowances, and exemptions) | |
Less: Standard Deduction
| – ₹ 50,000
| – ₹ 75,000
|
Less: Deductions under Section 80C
| – ₹ 1,50,000
| –
|
Less: Deductions under Section 80D (For Self/Spouse as well as Parents maximum up to Rs. 50,000)
| – ₹ 50,000
| –
|
Less: House Rent Allowance (out of 5,40,000 deduction of)
| – ₹ 3,00,000
| –
|
Less: Leave Travel Allowance (out of 20,000 deduction of)
| – ₹ 10,000
(bills must be submitted)
| –
|
Total Taxable Income
| ₹ 14,40,000
| ₹ 19,25,000 |
Total Tax Payable
| ₹ 2,54,280
| ₹ 2,78,200
|
Under the old tax structure, investment in tax saving schemes further reduce Kavita’s tax liability.
HRA and LTA are subject to fulfillment of various condition.