How to Calculate Income Tax?

To be able to pay our taxes, we need to first find out how much we need to pay.

Don’t worry, follow this simple guide to understand how to calculate taxable income:

Start by understanding the source of your income. It can be from one of these heads:

Salary

Income from our monthly salary or pension
Income from house property

Rent from property you own
Profits and gains from business & profession

Income from your business or independent practice
Capital gains

Income from sale of property or land, mutual funds, government securities, shares and bonds
Income from other sources

Income that does not fall under the above four categories

Calculate your income under each of the above heads.

Apply all the tax deductions applicable to you.

Example. Premium paid for health insurance, health and education cess of 4 percent, etc.

After that, Apply any tax exemptions applicable to you.

Example. Income from life insurance policy, income from EPF, income from agriculture, etc.

Then, Arrive at the amount after deductions and exemptions are applied.

Understand the tax slab or tax bracket applicable to you.

How much tax you are liable to pay depends on how much income you have earned in that year. Use this table to figure out where your income range falls:

Income Range/ Tax Slab	Tax Rate
₹ 2.5 Lakh to ₹ 5 Lakh	5% of income
₹ 5 Lakh to ₹7.5 Lakh	10% of income
₹ 7.5 Lakh to ₹ 10 Lakh	15% of income
₹ 10 Lakh to ₹ 12.5 Lakh	20% of income
₹ 12.5 Lakh to ₹ 15 Lakh	25% of income
₹ 15 Lakh and above	30% of income

Let us understand how the income tax slab rates work with the help of this example.

Confused about what exemptions and deductions apply to you?

Don't worry, we have a solution!

Simply go to our guide on Exemptions and Deductions to learn all about it.

Bravo!

You have now learnt how income tax payable is calculated.

To track your progress