How to calculate Taxable Income

Step 1: Open the Income Tax Calculator

Step 2: Fill in Basic Details

Step 3: Key in your Salary Details

Copy the earnings and deductions from your payslip to appropriate salary heads listed.

Step 4: Calculate Taxable Income

Click button ‘Compute’ to calculate Income tax which also calculates the taxable income.

Step 5: Taxable Income

View calculation summary for details on how the Taxable Income is calculated.

Step 6: Taxable Income in New Regime

In New Regime of Income Tax, Taxable Income is calculated as

Gross Salary + Bonus + Other income – Deductions under Chapter 6A

Step 7: Calculation of Taxable Income in New Regime

Gross Salary is the total earnings from your payslips.

Bonus is an annual payment received from your employer.

If you have any other income besides your salary, you should declare it.

If your employer is contributing to your NPS account, you are eligible for deduction under Section 80CCD(2) which is under Chapter 6A.

Step 8: Taxable Income in Old Regime

In Old Regime of Income Tax, Taxable income is calculated as

Gross Earnings + Bonus – Professional Tax – Standard Deduction – Exemptions under section 10 & 17 + Other income – Deductions under Chapter 6 and 6A – Housing Loan interest.

Step 9: Calculation of Taxable Income in Old Regime

Professional Tax should appear in your payslip.

Standard Deduction is a deduction provided to all by the income tax authority.

If you want to claim exemptions under Section 10 & 17 you should declare it under the declarations section.

Similarly, you should make declarations against Chapter VI and VIA

You can also declare your Housing Loan interest under Section 24(b) and Housing Loan principal under Section 80C.

Step 10: Taxable Income with Declarations

Let’s compute tax again with the declarations made

As you see, the calculator takes care of each declaration and puts them under respective heads.