The Gross Total Income of an individual comprises of the income under all the various heads. After arriving at the gross total income, adjustments are made for set-off and carry forward provisions as applicable. Section VI-A, of the Income Tax Act, specifies the deductions allowed from the total income of an individual. These deductions are provided under sections 80C to 80U of the Income Tax Act. Such deductions are allowed only against specific expenditures and payments made during the financial year. Deductions allowable under the Income Tax Act cannot exceed the total income of the individual.
Rates of Taxation After arriving at the net income liable to tax, after taking into account all deductions allowable, one needs to apply the respective tax rate to arrive at the income tax payable. Rates of taxation are different for different types of assesses and are declared each year in the Finance Bill which is further approved and passed as the Finance Act. Income tax rates are structured slab wise, based on lower tax for lower income and higher rate of tax for highest of income. Rates applicable to financial year 2014-15 are as follows:
|Income Level / Slabs||Income Tax Rate|
|Where the total income does not exceed Rs. 2,50,000/-||Nil|
|Where the total income exceeds Rs. 2,50,000/- but does not exceed Rs. 5,00,000/-||5% of amount by which the total income exceeds Rs. 2,50,000/-.|
|Where the total income exceeds Rs. 5,00,000/- but does not exceed Rs. 10,00,000/-||Rs. 12,500/- + 20% of the amount by which the total income exceeds Rs. 5,00,000/-|
|Where the total income exceeds Rs. 10,00,000/-||Rs. 112,500/- + 30% of the amount by which the total income exceeds Rs. 10,00,000/-|
Tax rebate of Rs 2,000 for income levels less than Rs 5,00,000. 10% surcharge for incomes above Rs 1 crore. Education Cess: 3% of the Income-tax.
For example, if you earn Rs 10 lacs, then you would calculate your tax liability as: Rs. 25,000 + 20% X Rs. 5,00,000 = 1,25,000 + Education Cess 3% = Rs 128,750.
If you have a simple Form 16 from your employer and no other income, you can file your taxes yourself at https://incometaxindiaefiling.gov.in/. All the above calculation will automatically be done when you fill the information. However, if your income sources for a particular year are complicated, for example trading loss in shares, capital gain from the sale of your house etc. then you can engage a tax filling professional.