Step By Step Guide On How To Calculate Income Tax In 2022-23

People are unsure of which tax system to use after reading the Union Budget. Before committing to either the current or the previous tax system, a thorough evaluation is necessary. Use the new income tax calculator FY 2022-23 to get a feel for how each system would affect your take-home pay. Use this tax calculator to get a rough idea of how much of your income will go toward various tax obligations.

What is an Income Tax Calculator?

An income tax calculator can be used to determine how much tax one must pay under both the current and previous tax laws. To determine a user’s tax burden, the calculator takes into account standard pieces of data such as their annual earnings, housing costs, educational costs, interest accrued on student loans, and savings.

The total tax due under both the old and new systems is shown. It also provides investment advice for individuals based on their tax liability. It’s easy to use and doesn’t cost anything, the online tax calculator is a great resource. It’s easy to use, and anyone may use it to determine their tax burden.

Using Piramal Finance’s Income Tax Calculator

Let’s have a look at how to use the online Income Tax calculator available on Piramal Finance website –

Step 1:  “Annual Income,” you’ll enter all of the money you made last year. This includes your salary and any interest you got from your savings or checking accounts. Any profits you made from selling assets, any rent you got from your home, and any other taxable money.

Step 2:  Enter exemptions, or deductions that can be taken from your yearly earnings. Compensation, personal property, and rental property are all eligible for this kind of tax break.

Step 3: Deductions Describe any investments, medical costs, NPS contributions, and student loans. Or charitable contributions that qualify for a tax break under Section 80C.

Step 4: Providing the Bare Essentials – please include your age and your tax payments for the fiscal year. The amount of tax you owe is based in part on your age.

How Do you calculate your Income Tax?

Step 1:  add up all of the money that was earned grossly.

You need to add up all the money you made in each category of earnings.

Gross remuneration received from an employer throughout the year should be added to other sources of income. Your gross pay will be listed in Box 1 of your Form 16. As soon as the fiscal year closes, you can expect a Form 16 from your company.

Consider increasing your gross income by the sum of your long-term and short-term capital gains. A flat tax rate applies to some types of capital gains but not all. Due to this, you need to pay close attention to the actual tax rate.

Consider increasing your total income by the amount of money you receive as a result of renting out a home. Be sure to deduct any applicable municipal taxes, standard deduction amounts, house mortgage interest, etc.

Make sure to include any money you bring in from running a business or practising a vocation. It is important to deduct the costs associated with such a business or profession. When figuring out how much money you may expect to make under this category.

Additional Sources of Money: Include all additional forms of income you’ve received. Income from sources other than a regular job. For instance, interest on a savings account or a fixed deposit is considered an “alternative source of income.”

Step 2: File for Tax Deductions and Exemptions

Subtract from your gross income now any exemptions, allowances, or deductions that apply to your financial situation.

1. Allowances, Exclusions, and Taxes on Wages

The standard deduction, the deduction for entertainment allowance, and employment/professional tax as outlined in Section 16; The leave travel concession outlined in Clause (5) of Section 10; The house rent allowance outlined in Clause (13A) of Section 10; A portion of the allowance outlined in Clause (14).

2. Deductions for Rent Received from Private Residences

• Section 24 interest paid on a mortgage. For either owner-occupied or unoccupied homes, mortgage interest can be deducted.
• The renter’s housing-related losses cannot be deducted from other sources of income but can be carried forward by current law.

3. Costs Incurred While Running Your Business That Must Be Subtracted From The Revenue You Receive From The Business That Provides You With This Income

• depreciation of assets and further depreciation of such assets.
• Allowable tax write-offs for contributions to and costs of conducting scientific research
• Cost of maintenance, utilities, insurance, and repairs to the building
• Payments made to workers in the form of bonuses or commissions
• A monetary or in-kind contribution made to a recognised provident fund, superannuation fund, or gratuity fund on behalf of an employee.

4. Subtractions From Total Earnings

• Contributions to a 401(k), a 403(b), a 457 plan, a Section 529 college savings plan, a Section 529 college savings plan, a Section 80C retirement plan, a Section 1035 exchange, or a Section 87 mortgage interest deduction. Included in the broad category of “Section 80C” investments are things like NSCs, ELSS mutual funds, and the cost of a child’s education.
• Medical insurance premiums for the self, spouse, and dependent children. Including payment into the National Pension System (NPS).
• Cost of Education Loan Repayment
• Financial support for a good cause

Step 3: Taxable income net amount should be determined.

Subtract these from your gross income to get your taxable income. The sum above represents your after-tax earnings for the fiscal year. Using this net taxable income, you must determine the tax due.

Step 4: Calculating the Tax Due/ Net Taxable Income 

Use the income tax brackets for FY 2022-23 to determine the total amount of tax due for the fiscal year. TDS, advance tax, and self-assessment tax payments made during the fiscal year should be added together. The net tax payable for the year can be calculated by deducting any taxes already paid from the total tax due.

Final Words 

The abovementioned process is all you need to know about the process of calculating Income Tax in 2022-23. For more information visit Piramal Finance an Indian financial services company that is making its foray into retail lending. Which include personal loans, business loans, housing loans, and other consumer-focused finance products