Your ITR Returns are the most needed document in many cases. You can file your ITR by using an income tax calculator. When you apply for Credit Cards or Bank loans, you need an income tax return. You may think that your Income tax return is enough. But you also need ITR Computation Format with the acknowledgment. So Let’s understand all about ITR Computation and income tax calculator.
What is ITR Computation?
ITR Computation is a simplified Document that explains your source of income and tax liability which you have paid already.
Official Income Tax Return Form-1,2,3,4 are 8-15 Pages. So Banks do not use those documents to check your financial sources. They need an ITR Computation form that simplifies everything from Source of Income to basic details in 1-2 pages.
Why do you need ITR Computation?
ITR Computation is required mainly by the bank or for any other official purpose where your ITR is required. You will need ITR Computation Document in the below cases,
- When you apply for Home Loan or Car Loan or Mortgage Loan
- When you apply for Credit Card
- When you Apply for a VISA
How do you calculate income tax examples?
Income tax is the tax you are liable to pay the government on your income. The tax slabs are based on your income and age.
Taxable income is your gross income minus the tax exemptions, deductions, and rebates.
These processes are complicated with calculations and adjustments. So let’s only simply learn them.
Step 1- Calculate your gross income
Step 2 – Arrive at your net taxable income by removing deductions
Step 3 – Calculate Your Taxes
Step 4- Consolidate your net tax
Let us see this with an example
|Income Tax Calculation||AY 2020-21AY 2020-21|
|Gross Salary||₹ 15 lakh|
|HRA and LTA||– ₹ 2.5 lakh|
|Standard deduction||– ₹ 50,000|
|Net salary||₹ 12 lakh|
|Income from other sources||₹ 10,000|
|Gross taxable income||₹ 12,10,000|
|Deduction under Section 80C (ELSS + EPF)||– ₹ 1,50,000|
|Deduction under Section 80CCD(1B) for NPS||– ₹ 50,000|
|Deduction under Section 80D for health insurance premium||– ₹ 15,000|
|Deduction under Section 80TTA for interest on bank account||– ₹ 10,000|
|TOTAL INCOME||₹ 9,85,000|
Now let’s see how much money he has to pay as taxes this year
|Up to ₹ 2.5 lakh||0|
|5% on ₹ 2.5 lakh (₹ 5 lakh – ₹ 2.5 lakh)||₹ 12,500|
|20% on ₹ 4.85 lakhs (₹ 9.85 lakh – ₹ 5 lakh)||₹ 97,000|
Using these steps, you can calculate the net tax that you are liable to pay.
What is the tax computation worksheet?
The Computation Report displays your Income Tax Computation details in Form 16 format. Along with the Total Tax payable, it also displays the balance tax payable, tax already paid, and the tax amount for the subsequent month.
The format of the Tax Computation report differs for old and new tax regimes. The difference is due to the non-applicability of some deductions and exemptions in the new tax regime.
How can I download the computation sheet from the income tax site?
You can download the computation sheet of your ITR from the e-portal of the income tax site. It is simple and follows these steps,
- Go to incometaxindiaefiling.gov.in
- Login to your account with your PAN and password.
- Go to My Returns and select the acknowledgment number.
- You can download the computation sheet for your required year.
How do I get a previous employer tax computation sheet?
When you switch between another job, you should provide your previous salary, deduction, and exemption details to your new employer. If you fail, you will come into a situation where you should pay additional taxes for both employers.
To avoid this situation, you should provide all your financial details to your new employer. Form 12B comes to your rescue here.
When you leave your previous organization, ask for Form 12B. If they didn’t give it to you, you can download it from the income tax official website and fill it up by looking at your salary slip. You can submit this Form 12B to the new employer.
Form 12B contains all the information like your employer’s PAN and TAN details, salary paid to you, the tax deducted, professional tax paid on your behalf, etc. Based on this information, your new employer can work out your tax deductions for the remaining months of the financial year.
You will get a consolidated Form 16 from your current employer compiling all these details. If you have not submitted these details, both your past and the present employer will give you Form 16 that you need to reconcile. So, you save a lot of time.
So, you can ask your previous employer for your tax computation sheet otherwise you can download it from the e-file portal.
What is the formula to calculate taxable income?
Taxable income includes salaries, wages, bonuses, etc., along with unearned income and investment income. Taxable income determines your tax liability.
The procedure for the calculation of taxable income on salary is,
- Collect your salary slips along with Form 16 for the current year and add every compensation such as basic salary, HRA, TA, DA, DA on TA, and other reimbursements and allowances you are eligible as in your Form 16 (Part B) and salary slip
- You need to add the bonus received during the financial year as income for calculation.
- The total you arrive at is your gross salary. From the gross salary, you reduce the exemptions such as House Rent Allowance, Transport Allowance (for which the maximum exemption is Rs.19,200 per year), Medical reimbursement (for which the maximum exemption is Rs.15,000), and all other reimbursements. You should provide bills for all these reimbursements.
- The result you get is your net taxable income.
Based on your net taxable income, you will come under any of the tax slabs suggested by the Income Tax Department.
Taxable Income= Your Gross salary- Your deductions and exemptions.
What is the computation of income from salary?
Your salary has many components. It has allowances, deductions, exemptions, etc. You should pay income tax only for the taxable income at the end. You can be informed about this income from your salary as said below.
Income from salary is the aggregate of Basic salary + HRA + Special Allowance + Transport Allowance + any other allowance. Some components of your salary are exempt from tax, such as telephone and leave travel allowance. If you receive HRA and live on rent, you can claim an exemption on HRA.
From your income from your salary, you should pay the tax applied to you.
You need the ITR computation format on several occasions like while applying for a loan, while taking a visa, etc. You can easily download the format from the e-file portal and fill in your financial details. Using this format, you can calculate your taxable income and the tax you are liable to pay. The income tax calculator helps you calculate your tax.