Taxable Income: How to Calculate Taxable Income in India | HRMantra
4-6 minutes
Taxable income is the amount of income from an individual or company upon which the liability of tax is levied to be paid to the government by the entity in a particular year. Taxable income includes remuneration, salary, bonus, invested amounts, and other forms of declared unearned income.
Taxable Income Meaning
One of the most frequent questions is, ''What is taxable income?'' Taxable income meaning can be elaborated further as a proportion of an individual''s or company''s gross income that is liable to tax under the Income Tax Act of the Government of India. It contains both earned and unearned income, such as canceled debts, government benefits, and lottery payments. Income generated from selling appreciated assets in a given financial year also comes under taxable income.
In this glossary, we will further you about following topics related to taxable income:
Taxable Income Formula
The Income-tax Act, 1961, charges income tax on the following:
- Income from salary
- Income from business or property
- Income from capital gain tax
- Income from house property
- Income from other sources.
You can estimate your taxable income from salary with the help of Form 16 and salary slips. A formula to estimate the taxable income on salary is as follows:
Taxable income = Gross salary – tax exempted (House Rent Allowance Transport Allowance Medical Reimbursements) Reimbursements provided on actual bills
Taxable Income Calculator
The total taxable income depends upon tax deductions, filing ITR status, and standard deductions. Here are the steps for calculating your taxable income:
- Calculate adjusted gross income that is equal to Gross annual income with subtracted adjustments.
- From the amount of adjusted gross income, subtract any standardized or itemized deductions and entitled tax exemptions.
- The final sum after subtracting from gross income of form adjustments, deductions, and exemptions is equal to Taxable income.
Taxable Income Slab 2022-23
Any individual staying in India for 182 days or a minimum of 60 days during the preceding tax year or for at least 365 days during the previous 4 years will be levied with tax.
New Taxable Income Slab for 2022-23:
| Sl. No. | Income Tax Slab | Tax Rate |
|---|---|---|
| I. | Up to ?2.5 lakh | Nil |
| II. | From ?2,50,001 to ?5,00,000 | 5% of the total income that is more than ?2.5 lakh |
| III. | ?5,00,001 to ?7,50,000 | 10% of the total income that is more than ?5 lakh |
| IV. | From ?7,50,001 to ?10,00,000 | 15% of the total income that is more than ?7.5 lakh |
| V. | From ?10,00,001 to ?12,50,000 | 20% of the total income that is more than ?10 lakh |
| VI. | From ?12,50,001 to ?15,00,000 | 25% of the total income that is more than ?12.5 lakh |
| VII. | Income above ?15,00,001 | 30% of the total income that is more than ?15 lakh |
The above-mentioned tax slab is optional to be used by individuals. It''s up to individuals if they choose a new tax regime or the old one. If filing ITR, i.e., Income tax returns under slab 2022-23, then the above-mentioned tax slab should be used, i.e., the new regime.
Apart from this, in the one-time window, taxpayers can file updated returns in two years.
Taxable Income for Employees
For employees less than 60 years of age:
| Net Income | Income Tax Rate | Education Cess | Secondary and Higher Education Cess |
|---|---|---|---|
| Up to ?2.5 lakhs | Nil | Nil | Nil |
| ?2.5 lakhs to ?5 lakhs | 5% of (Total income – ?2.5 lakhs) | 2% of income tax | 1% of income tax |
| ?5 lakhs to ?10 lakhs | ?12,500 20% of (Total income – ?5 lakhs) | 2% of income tax | 1% of income tax |
| Above ?10 lakhs | ?1,12,500 30% of (Total income – ?10 lakhs) | 2% of income tax | 1% of income tax |
Income that is Taxable for Senior Citizens
For individuals who are between the age of 60 and 80 years:
| Net Income | Income Tax Rate | Education Cess | Secondary and Higher Education Cess |
|---|---|---|---|
| Up to ?3 lakhs | NIL | Nil | Nil |
| ?3 lakhs to ?5 lakhs | 5% of (Total Income – ?3 lakhs) | 2% of income tax | 1% of income tax |
| ?5 lakhs to ?10 lakhs | ?10,000 20% of (Total income – ?5 lakhs) | 2% of income tax | 1% of income tax |
| Above ?10 lakhs | ?1,10,000 30% of (Total income – ?10 lakhs) | 2% of income tax | 1% of income tax |
For individuals above 80 years of age:
| Net Income | Income Tax Rate | Education Cess | Secondary and Higher Education Cess |
|---|---|---|---|
| Up to ?5 lakhs | Nil | Nil | Nil |
| ?5 lakhs to ?10 lakhs | 20% of (Total Income – ?5 lakhs) | 2% of income tax | 1% of income tax |
| Above ?10 lakhs | ?1 lakh 30% of (Total income – ?10 lakhs) | 2% of income tax | 1% of income tax |
