Income Tax

An income tax is a tax charged by the govt. on the income of individuals or businesses. When the tax is levied on the income of companies, it is often called a corporate tax. When the tax is levied on the income of Individuals it is called income taxes (with some deductions permitted), Various systems define income differently, and often allow national reductions of income (such as a reduction based on number of children supported).

Step by step income tax calculation on income of individual.

Step i: - Determine your Gross Income (Gross Income = Monthly Income * 12)

Step ii: - Calculate your Donation/Charity amount (if any)
Step iii:- Calculate your Savings

Step iv:- Assess your Taxable Income (taxable Income = Gross Income – (Donations/Charity + Savings)
Step v:- Calculating the Income Tax
Now that you have calculated your taxable income, you may refer to the Income Tax Slab for calculating the income tax. 

Step VI: - Add Surcharge (Add a surcharge of 15% of your annual income 50 lakh)

Step vii: - Adding the Education Cess
Make an addition of 3% of your taxable income (as the education Cess) to the new income tax figure that you have calculated in Step VI above. 

Deductions:

Deductions for your taxable amount are available under various sections of the Income Tax Act, 1961

Section 80C ,: Deductions under this section are only available to individuals and HUF. This section allows for certain investments like:-

·         Life Insurance Premium

·         Provident Fund

·         Subscription to certain equity shares

·         Tuition Fees

·         National Savings Certificate,      

·         Housing Loan Principal

·         Other various items

Total deduction limit on all above is  Rs. 1, 50,000.

Section 80CCC: Deductions under this section are on payments made to LIC or any other approved insurance company under an approved pension plan. The pension policy must be up to Rs.1,50,000 and be taken for the individual himself out of the taxable income.

Section 80CCD: Deduction towards payments made to Pension Scheme of Central Government, excluding deduction claimed under 80CCD (1) (Deduction limit of ₹ 50,000 )

Section 80D: This is the section that deals with income tax deductions on health insurance premiums paid. In the case of individuals, the insurance policy can be taken to cover himself, spouse, dependent children – for up to Rs. 25,000 and parents (whether dependent or not) – for up to Rs. 15,000. An additional deduction of Rs. 25,000 is applicable if the insured is a senior citizen. In the case of HUF, any member can be insured and the general deduction will be for up to Rs. 5, 0000.

Section 80DD:- Deduction towards payments made towards Maintenance or Medical treatment of a Disabled Dependent or Paid / deposited any amount under relevant approved scheme (Flat deduction of ₹ 75,000 available for a person with Disability, irrespective of expense incurred)

Section 80DDB: This section is for deductions on medical expenses that arise for treatment of a disease or ailment as specified in the rules (11DD) for the assessed, a family member or any member of a HUF. (Deduction limit of ₹ 40,000 or (₹ 1, 00,000 if Senior Citizen))

Section 80E: This section deals with the deductions that are applicable on the interest paid on education loans for an education in India.

Section 80EE: Deduction towards interest payments made on loan taken for acquisition of residential house property where the loan is sanctioned between 1st April 2016 to 31st March 2017. (Deduction limit of₹ 50,000 on the interest paid on loan taken)

Section 80GGC: Deduction towards Donations made to Political Party or Electoral Trust.

 Section 80TTA: This section deals with the tax savings that are applicable on interest earned in savings bank accounts, post office or co-operative societies. Individuals and HUFs can claim a deduction on an interest income of up to Rs. 10,000.

Section 80TTB: Deduction on interest received on deposits by Resident Senior Citizens (Deduction limit of ₹ 50,000/-)

Section 80U: Deductions for a resident individual taxpayer with Disability Flat ₹ 75,000 deduction for a person with Disability, irrespective of expense incurred, Flat ₹ 1, 25,000 deductions for a person with Severe Disability (80% or more), irrespective of expense incurred