Here’s How An Income Tax Calculator Can Help
If you have been working for a while now, be it a salaried job or a business of your own, you will know what every financial year-end means – tax filing time!
While some earning individuals will already be ahead of the rest with their tax computed and tax-saving investments all in place, there are many out there who do not quite understand how to even get started in the first place.
Why approach professionals and pay them hefty charges to run numbers when you can do it at home by using an income tax calculator for absolutely zero cost.
Just a while ago, the government has announced a new tax regime that has different exemptions and different tax slabs applicable for salaried and businessmen. Now you may be wondering how you will possibly calculate taxes according to both the old and new regimes and determine which one suits you better.
Worry not, because the income tax calculator does the entire job for you, and it does it in less than a few seconds too.
Understanding How An Income Tax Calculator Works
Nowadays, it is not just investment plans and insurance policies but also calculators that are available online, and for free as well!
Just like the insurance and premium calculators, there are income tax calculators designed to compute your taxes for every financial year and help you plan your taxes accordingly.
By using an income tax calculator, you can determine how much tax you will have to pay for the ongoing financial year and start your tax-saving investments based on the calculations. This step-by-step guide will highlight some rules of the tax calculator and help you calculate your income tax in no time:
- Annual Income
The calculator asks for your annual income on the first step, which is the amount you earn or stipulate to earn in the ongoing financial year. If you aren’t sure about what your earnings will be for 12 months, then you can use your salary slips or add up invoices (if you are a professional or freelancer) and to calculate your earnings.
- Your On-Going Expenses
Right from the rent of your apartment to a home loan EMI and from paying your kids’ tuition feed to paying for children’s education loan, no matter what expenses you are incurring, be sure to mention them in the tax calculator.
- Savings & EPFs
There are many types of saving and investing instruments like ULIPs, PPFs, MFs, Gold, NSC, ELSS scheme, and even insurance plans, to name a few. Be sure to feed them all in the calculator, wherever asked, because it will make the calculator’s job easier in showing you how a tax deduction can be claimed.
For example, most Indians opt for term life insurance policies, and the policyholder not only gets financial security and desired coverage but also tax benefits of term insurance. However, what people forget is the fact that premiums paid towards this insurance plan can be claimed as a tax deduction yearly.
- Calculation
After you have filled in all the fields, the calculator will compute your taxes according to the old as well as the new regime. Moreover, some income tax calculators also show you different tax-saving tools and schemes where you can start investing.
How Can An Income Tax Calculator Benefit You?
Income tax calculators come in very handy when tax calculations have to be done for the entire financial year. Moreover, before you start investing towards your tax-saving plan, it is better to know how much deduction you can claim while filing your taxes and then start saving accordingly. Here are some of the ways in which an income tax calculator can benefit you when it comes to planning for your taxes-
- Income tax calculators are available online for free
- It does not take more than a few seconds to get the tax computation on the calculator
- Since it is automated, the chance of human error gets eliminated
- You can try various permutations and combinations on this calculator and compare between different investment options, in just a few clicks.
- Tax calculators can save you ample time and effort by not only computing tax according to the old and new regime but also by showing you investment tools to help you plan your tax-saving better.
Like everything else in the world that has become digital, income tax calculators are not left behind either!
According to the Income Tax Act of 1961, you can claim a deduction of up to Rs. 1,50,000 in your taxes. You can simply check your tax payable for the current financial year and know how much deduction applies to your tax bracket. Get a head start on your tax planning in the financial year, so you do not have to sweat it out to save tax when the year almost comes to an end.