The Indian Law mandates every eligible citizen of the country to pay income tax if their annual income exceeds a certain threshold. However, calculating this tax amount manually is a tedious and time-consuming process and may provide erroneous results.
In such a scenario, one can use an income tax calculator, an online tool that helps evaluate the taxpayer’s liability for the financial year accurately and instantly.
How to use an income tax calculator?
Individuals have the flexibility to choose between the old and new tax regimes.
While the old regime has a higher income threshold exempt from being taxable, the new regime specifies comparatively lower tax rates for the same incomes. For instance, the new regime exempts incomes below Rs. 5 lakhs, while the limit under the old regime is Rs. 2.5 lakhs.
On the other hand, the tax rate for someone with an annual income of Rs. 6 lakhs is 10% under the new tax regime and 20% under the old regime.
As per calculations, the taxable income of Rs. 6 lakhs according to the new regime is Rs. 1 lakhs (Rs. 6 lakhs- Rs. 5 lakhs = Rs. 1 lakhs).
The total tax will amount to 10% of Rs.1 lakhs, calculating which can be a long-drawn process.
Instead, one can use an income tax calculator in the following simple steps for instant and efficient results.
Step 1: Navigate to the income tax website
Step 2: Select the option ‘income tax calculator’ and choose the assessment year to file your tax
Step 3: Fill in essential details such as salary, rent from house property, and income from investments
Step 4: Submit the exemption details against the earned income during a financial year. These exemptions are applicable against the lent-out property, interest paid on a home loan, and self-occupied property
Step 5: Input the deduction details applicable under Section 80 (C), expenses and investments, education loan etc.
Step 6: Input your age and payment details for a financial year. Your age will be the primary determinant of the payable tax amount
The calculator then evaluates the overall tax per the new and old regimes. Furthermore, taxpayers can alter the entered values as per their requirements.
Moreover, this calculator also suggests an effective investment option for individuals to save on tax.
Tax beneficiaries must note that those who have opted for a home loan would have to pay a lower income tax due to certain exemptions.
Few Benefits of using an income tax calculator
The several benefits of using an income tax calculator are as follows:
- Saves time
The calculator is fast and can provide accurate results in a short period, saving time considerably.
- Pick the best tax regime
As per the Union Budget, individuals can select between the old and new tax regimes. With the help of this calculator, individuals can develop a fair idea of the tax amount and avail maximum tax exemptions, benefits etc.
- Input minimal information
The calculator requires an individual to provide basic information and allows them to use it for free without paying anything. In addition, taxpayers can use this multiple times without paying anything.
Moreover, knowing this amount beforehand can help borrowers estimate the tax amount while paying the home loan.
Besides, individuals can also find pre-approved offers extended by leading financial institutions on a wide range of financial products such as home loans, loans against property etc.
These exclusive offers ensure accelerated loaning procedures and reduce the hassle of documentation. Therefore, check your pre-approved offers by mentioning your name and contact information.
Tax benefits on home loan
The Income Tax Return is a crucial document which acts as income proof and is a determinant of the repayment capacity of an individual.
Underlined below are some of the tax benefits of a home loan:
- Section 80 (C)
Under this section, an individual can claim a home loan tax benefit of Rs. 1.5 on principal repayment annually.
Moreover, individuals must note that this benefit can be availed during the construction and purchase of any residential property. Not only is that, but tax benefits are also provided on stamp duty and registration charges.
- Section 80 EE
Additional tax exemptions of Rs. 50,000 are provided. However, it is applicable for residential properties that are under Rs. 50 lakhs.
It must be noted that the loan amount must not exceed Rs. 35 lakhs.
- Section 24B
Anyone can claim maximum tax exemption of Rs.2 lakh. However, under section 24 B, the tax exemption can only be claimed under the interest payment of a home loan.
Thus, individuals can use the income tax calculator from a trustworthy website and ensure accurate calculation.
Besides, it allows borrowers to save both money and time.