Income Tax Calculation for Salaried Individuals

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About Income Tax

Income Tax Calculation for Salaried IndividualsIncome tax is one of the crucial aspects of an individual’s economic issues. An Income Tax is basically a tax that is foisted on the income generated by individuals both salaried and self-employed who are running businesses of their own. As per the rules and regulations imposed by India, Government  Taxpayers must file an income tax return yearly to evaluate their tax commitments. Income tax is basically a source of revenue for the government. It is collected to serve the general public in terms of funds or providing them with certain facilities, paying government contracts, etc.

Calculation of the Income Tax:

Income Tax is a much broader concept today. There is a certain process need to be followed stepwise in order to calculate the Income Tax of an individual. The tax calculation process may vary for salaried and self-employed individuals.

The income tax calculation for Salaried Individuals:

Income from the salary of an individual is the sum of the Basic Salary, adding to it is the Special Allowance, HRA plus the Transport Allowance and any other allowance. Some of the components from your salary are exempted from your tax, for the sake of example reimbursement of the telephone bills, leave travel allowance. If you are residing on rent and receive an HRA, you can claim for the exemption on the HRA. The exempt portion of the HRA can be calculated by using the HRA calculator. 

Apart from these exemptions, a standard amount of Rs 40,000 was introduced as a deduction amount in the previous year’s budget which has been increased to Rs 50,000 in the 2019 budget.

Understanding the Concept of Income Tax Calculation for Salaried Individuals:

Let’s go through an example in order to understand the concept of Income Tax Calculation.

Sonia is a salaried individual who receives a Basic Salary of Rs 50,000 per month; HRA of Rs 25,000; LTA of Rs 20,000; A Special Allowance of Rs13,000; She lives in a rented apartment paying Rs 20,000 for the same in Delhi, India.

Let’s understand the income tax calculation by means of an example.





Basic Salary 6 Lakh  – 6 lakh
HRA 3 Lakh 1.80 lakh 1.20 Lakh
Special Allowance 1.56 Lakh  – 1.56 lakh
LTA 20,000 12,000 (bills submitted) 8,000
Standard Deduction  – 50,000  –
Gross Total Income from Salary     8.34 lakh

The income Tax Calculation includes a record of income coming from all sources namely:

1.    Income on the basis of the  Salary (Salary paid by your employer)

2.    Income from Capital Gains (income from houses or sale purchase of shares)

3.    Income from House Property (which includes rental income, the interest rate paid against a home loan)

4.    Income based on personal Business or any other modes similar to  freelancing or any other profession that you are running from your home itself)

Sonia who lives in Delhi has income from interests coming from the savings account of Rs 8,400, and a fixed deposit interest income of Rs 10,000 is a Year’s duration. Sonia, in order to manage her savings wisely, has made certain investments to save income tax in the form of ELSS purchase of RS 20,000 during the year, PPF investment of Rs 50,000, Medical insurance of Rs 12,000 being paid during the year, LIC premium of Rs 8,000. Let’s have a view of the deductions that Sonia can claim.


Maximum Deduction

Eligible investments/expenses

Amount claimed by Sonia

Section 80 C Rs 1.50 lakh PPF deposit Rs 50,000, ELSS investment Rs 20,000, LIC premium Rs 8,000. EPF deducted by employer(Sonia’s contribution) = Rs 50,000 *12% *12 = 72,000 Rs 1.50 Lakh
Section 80 D Rs 25,000 for self Rs 50,000 for parents Medical insurance premium Rs 12,000 Rs 12,000
Section 80TTA 10,000 Savings account interest 8,400 Rs 84,00

Calculation of the Gross Taxable Income in India:




Income from Salary 8.34 lakh  
Income from other Sources 18,400  
Net Total Income  – 8,52,400
Deductions  –  
80C 1.50 Lakh  
80D 12,000  
80TTa 84,00 1,70,400
Total Income   6,82,000

Calculation of the Income Tax for Sonia in India:

Up to Rs 2,50,000

Liability from tax


Rs 2,50,000 to Rs 5,00,000 5% (5% of Rs 5 Lakh less than Rs 2.5 Lakh) 12,500
Rs 5,00,000 to 10,00,000 20% (20% of Rs 6.82 Lakh less than Rs 5 Lakh 36,400
More than Rs 10,00,000 30% (Nil) 0
Cess 4%of the total Tax (4%of Rs 12,500+ Rs 36,400) 1,956
Total Income Tax Rs 12,500+Rs 36,400+1.956 Rs 50,856

Hence the gross income tax that Sonia will pay has to be Rs 50,856. The above-discussed example gives us a clear idea about the calculation of the Income Tax for a salaried individual. In the current era where the internet has brought over advancements in almost every sector of industrialization especially the financial industry. The problems related to tax issues can easily be solved and looked into just by a single click. Everyone is keeping their fingers crossed to have the new Indian budget to be favoring them Let’s hope for the best to happen.