new Delhi. Now only a week is left for the end of the current financial year (2021-22) and the income tax payers are already worried about their tax liability. By taking some simple information, you can avoid the confusion of CAs and experts.
First of all, you have to understand that which tax slab you choose to file your income tax return. If you opt for the old tax slab, then you will get the benefit of tax exemption on various investments under the Income Tax Act. At the same time, in the new tax slab, the government has abolished all exemptions. However, keeping in view the convenience of the income tax payers, the rates of the new tax regime have been reduced. This dual option is present from 2020-21 only.
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If you opt for the new tax slab then…
Suppose you have selected the new tax slab while filing the return in which the Income Tax Department has abolished almost all the exemptions. Now the tax liability on your income will be zero up to 2.5 lakhs, while it will be 5 percent from 2.5 to 5 lakhs. 10 percent from 5 lakh to 7.5 lakh, 15 percent from 7.5 to 10 lakh, 20 percent from 10 lakh to 12.5 lakh, 25 percent from 12.5 to 15 lakh and 30 percent on income above 15 lakh.
Discount is also available here in new slabs
Under Section 80CCD (2) of the Income Tax Act 1961, the salaried person is also being exempted from the new tax slab on his NPS account. This exemption will be applicable on the Tier-1 account of NPS, in which the contribution is made by the employer. A person can claim tax exemption up to a maximum of 10% of his basic salary.
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Now see the maths of tax calculation
Suppose your total taxable income in the current financial year is Rs 18 lakh and your employer has contributed Rs 80 thousand in Tier-1 NPS account. You can also claim tax exemption on this. This will reduce your taxable income to Rs 17.20 lakh.
Now out of Rs 17.20 lakh, you will get direct tax exemption on income of 2.5 lakh. After this, the total taxable income will be Rs 14.70 lakh.
Since the income tax rate is 5 percent from 2.5 lakh to 5 lakh, then out of 14.70 lakh, the next 2.5 lakh will be taxed at the rate of 5 percent, which will be Rs 12,500.
Now we have to see the tax liability on 12.20 lakh rupees, in which the next 2.5 lakh rupees will have a tax liability of 10 percent i.e. 25 thousand.
Now your tax liability has been reduced to Rs 9.70 lakh, in which the next Rs 2.5 lakh will be taxed at the rate of 15 percent. It will be Rs 37,500.
After this, your tax liability will be 7.2 lakhs, in which tax will have to be paid at the rate of 20 percent on the next 2.5 lakhs. It will be 50 thousand rupees.
Now the tax will be calculated on the remaining 4.70 lakh, in which the next 2.5 lakh rupees will be taxed at 25 percent. This amount will become Rs 62,500.
Now tax will be calculated on the last Rs 2.20 lakh, which will attract income tax at the rate of 30 percent. This amount will come to 66 thousand rupees.
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See the total liability created
If we look at the above calculations, then your total tax liability will be decided by adding the deductions made in different stages. That is, your total liability will come to Rs 2,53,500. On this amount, you will also have to pay 4% health and education cess which will be Rs 10,140. After adding this amount, your final tax liability will be made which will be Rs 2,63,640. This calculation is for the taxpayers opting for the new tax slab.
Tags: income tax, income tax department, ITR filing
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