The formula for calculating tax percentage is total tax payable divided by the total net taxable income for the financial year. For example- for the financial year 2021-22 the net taxable income is Rs 12,00,000 and the total tax payable is Rs 1,19,000.
Estimating a tax bill starts with estimating taxable income. In a nutshell, to estimate taxable income, we take gross income and subtract tax deductions. What's left is taxable income. Then we apply the appropriate tax bracket (based on income and filing status) to calculate tax liability.
it may be more beneficial to opt for old tax regime since the benefit of deduction/exemption can be availed in the old tax regime. Below is an illustration of how two taxpayers have the same gross income but are eligible for different tax deductions/exemptions.
Although it's a part of your salary, HRA, unlike basic salary, is not fully taxable. ... Thus, if you opt for the new income tax regime either in FY 2020-21 or FY 2021-22, then you will not be able to claim tax-exemption on HRA.
The tax regime defines the tax slabs and rates. In 2020 the government introduced a new tax regime with higher tax rates but more options for tax savings. The new tax regime also gives taxpayers the option to select either old or new regimes making taxation all the more complicated.
For FY 2021-22 and 2022-21, individual taxpayers will continue to choose between two tax regimes - the existing or old tax regime and the new, concessional one.
Individuals with business income will not be eligible to choose between the two regimes every year. Once they select a new tax regime, they have only once in a lifetime option for switching back to the old regime. Once they switch back to the old regime, they won't be able to choose a new regime anytime in future.
The above table shows that it is beneficial to opt for the New Tax Regime of Section 115BAC if your Income is more than Rs. 8,50,000 with your eligible Deduction under 80C. The selection of New Tax Regime of Section 115BAC is not advisable up to your income Rs.
For this financial year i.e. FY 2021-22, an individual can continue with the old or existing tax regime and avail common deductions such as section 80C, section 80D etc. of the Income-tax Act, 1961. Else, she/he can opt for the new, concessional tax regime without any commonly availed deductions and tax exemptions.
For a salary ranging between Rs 20 lakhs and Rs 25 lakhs, the applicable tax rate under the new tax regime would be the highest, that is 30%.
The 10% rate applies to income from $1 to $10,000; the 20% rate applies to income from $10,001 to $20,000; and the 30% rate applies to all income above $20,000. Under this system, someone earning $10,000 is taxed at 10%, paying a total of $1,000.