An unavoidable part of every earning individual’s life is paying taxes, be it for the salaried or the businessmen. In recent times the government has announced a new tax regime, and that has changed the tax slabs and calculation methods quite a bit. Now, of course, for people who don’t really belong to the finance and investment sector, it can get a bit difficult to do this, and that is where a tax calculator can step in to be your saviour, for free.
With the help of an income tax calculator, you longer need to worry about how to compute your taxes, whether the old regime is better for you or the new regime, how will you start investing towards your tax-saving, as this is free online calculator does all the work for you!
How Does An Income Tax Calculator Work?
Tax calculators are available online for free and can help you assess your taxes to plan your investments in no time. With the help of this calculator, any taxpayer can determine their tax outflow for years to come. Check out this step-by-step process that will show you exactly what fields need to be filled for the calculator to calculate your income tax online:
Table of Contents
1. Annual Income
The first step is where you must disclose your annual income, on a yearly basis. For this, you can even take the help of your salary slips that the company provides so that you can conclude with accurate earnings you made for that financial year.
2. Other Expenses
This is a very broad category as there are many expense categories you can claim a tax deduction against. For example, if you live in a rental place, then the rent of that apartment, any existing home loan, and the EMI you pay monthly, if you have a children’s education loan, then EMI payments of that loan, tuition fees for your kid, your medical expenses and that of dependant parents, if applicable, and the list could go on.
Simple enter whatever expenses are applicable in your case for the calculator to accurate run the numbers for you.
3. EPF & Existing Savings
Right from an Employee Provident Fund contribution to premiums you pay towards your insurance policies and from savings you have made in a tax fund (ELSS, ULIP) to your investment in National Savings Certificate or towards your pension plan (National Pension Scheme, for example), every saving you have made that can be counted towards tax deduction will have to be mentioned here.
Remember to disclose all your investments, savings and contributions as it makes your tax calculation that much accurate.
In the last step, the tax calculator will do the computing based on all the inputs you have made. You will be able to see the tax computation based on the old tax regime as well as the new tax regime.
Remember to list all your expenses and savings in the calculator for an accurate calculation. For example, most Indians opt for term life insurance policies and the policyholder not only gets financial security and desired coverage but also term insurance tax benefits. It is, therefore, vital that you add your annual premiums to the calculator for yearly tax deductions.
Benefits Of Using An Income Tax Calculator
Before you start with your investments, it is important to know how much you will need to invest to reach the desired sum and save your taxable amount. To achieve that, you can use a tax calculator and be ready with your tax planning in no time.
Check out the top benefits of a tax calculator:
- You can try various permutations and combinations with respect to the investment you want to make towards your taxable amount. Once you have found an ideal tax flow, you can simply start investing online.
- These tax calculators are completely free and mostly available on the websites and mobile applications of all major banks, portfolio management companies, fund houses etc.
- There is no scope for human error as a tax calculator can compute accurate results in under a few seconds.
- Calculators like these can save you ample time and efforts which would otherwise have been spent in doing tax calculations, running the numbers, and comparing investment schemes.
- Certain tax calculators also provide investment options for the users to choose from and use them to save further on their taxes.
- Tax calculators are also great in helping one plan their investments.
Calculating tax, like every other thing, has also become easily accessible online and for free at that!
According to the Income Tax Act of 1961, you can check how much of your earnings are eligible for a deduction and how much savings can be made to save tax further. It would be ideal if you get a head start on your calculations at the beginning of the financial year, as it will give you enough time to plan out your finances in advance.