The rules for income tax return seem complex and difficult but some online websites, software and tools have made it easy and convenient for every one to be aware of taxable amount before filing. If you want to calculate income tax which you have to pay for particular tax year, the following steps will help you.
• Calculate Income tax calculator your gross amount of income which you earned from different sources as a payment for services for example your salary and self-employed profits, commissions, fees, social security benefits, income from renting out apartment, pensions and interest from bank for the particular year.
Gross amount of income = monthly income *12
• To claim relief, calculate the amount which you have spent for charity, donations or funds for wellness of any organization over the year. Deduct this amount from your gross amount of income.
• Calculate your expanses which include certain qualified expenses for teachers, moving expenses, and student loan interest.
• To figure out your total taxable income, deduct your expanses from total income.
Taxable Income = Gross Income – (Donations/Charity + expanses)
• Calculate income tax which is payable according to Income Tax Rates for Assessment Year 2010-11 in the India because the tax deduction rates differ with the income of individuals.
Income Tax exemptions for Assessment Year 2010-11
Following individuals are exempted to file income return.
• Male citizens having income Up to Rs. 1, 60,000.
• Female citizens who earn up to Rs. 1, 90,000.
• Senior resident individual of 65 years or above having income Up to Rs.2,40,000
• All types of agricultural income is also exempted from income-tax
• Special Tax Exemption will be given for investment or contribution to the Central Government Health Scheme (CGHS).
• For investments in certain investment bonds the tax exemption of Rs. 20,000 is specified. This is an accumulation to already permitted exemption which is Rs. 1, 00,000 in certain savings bonds or other instruments.
Personal Tax Rates For individuals, HUF, Association of Persons (AOP) and Body of individuals (BOI)
• Tax rate is 10% if taxable income is between Rs.1, 60,001 to Rs. 5, 00,000.
• Tax rate is 20 % if income is between Rs.5, 00,001 to Rs. 8, 00,000.
• Tax rate is 30% if income exceeds from Rs. 8, 00,001.
• If total income increases from Rs 1,000,000 a surcharge of 10 per cent of the total tax liability is applicable.
• The basic tax rate is 35% with 2.5% surcharge for domestic corporations
• Foreign corporations pay tax at a basic tax rate of 40% with 2.5% surcharge.
• In addition, education excess is applicable at the rate of 3% on the tax.
• Wealth tax at the rate of 1% is applicable for Corporate if their net wealth exceeds Rs.1.5 million.
• Calculate tax according to the tax rate specified for you.
Payable tax = taxable income*tax rate
If you want to file your income tax return in the simplest, smartest and fastest method the best way is to calculate income tax online with the help of software which will save your precious time and money.