Don't let your tax return take you by surprise! Estimate your taxes before you prepare your 2014 Tax Return. Find out if you will owe taxes or how much of a tax refund you will get in 2015. Estimating your taxes before you file your tax return is an essential part of tax planning.The time has arrived when you must be busy evaluating your taxable income. The income tax that one has to pay depends on the tax slab under which he or she falls. Interestingly the tax slabs are different as per your gender, so you need to be watchful of that as well. The tax slabs are changed at the time of budget announcement in February every year.
The Income Tax Act has categorized all income tax payers into 3 different types that include Ordinary Individuals, Female Citizens and Senior Citizens. The modified tax slab for the current fiscal (2008-09) stand as:
|Taxable Income Slab||Tax Rates||Surcharge||Education Cess|
Upto Rs 1.5lakh (Ordinary Citizen)
Upto Rs 1.8 lakh (Female Citizens)
Upto Rs 2.25 lakh (Senior Citizens or above 65 years of age)
Rs 1.5 lakh upto Rs 3 lakh
3% on tax
Above Rs 3 lakh upto Rs 5 lakh
3% on tax
Above Rs 5lakh upto Rs 10 lakh
3% on tax
Above Rs 10 lakh
10% on tax
3% on tax
The surcharge and the education cess are levied on the tax payable computed after considering the deduction under various sections of the income tax act.
For instance an individual has an annual income of Rs 6 lakh. His home loan interest payment is Rs 1,20,000 and his home loan principal repayment is Rs. 80,000. He has also paid a LIC premium of Rs. 20,000 and has bought a health insurance policy for himself worth Rs 10,000. At the same time investment of Rs 50000 is made on NSC and has also donated Rs 20,000. Let us now calculate his tax liability based on the slab.
Gross Total Income: Rs 6,00,000
a) Home Loan interest payment under Section 24: Rs 1,20,000
b) Section 80 C deductions
i) LIC premium: Rs 20,000
ii) Home Loan Principal Repayment: Rs. 80,000
iii) NSC: Rs 50,000
Maximum deduction will be Rs 1,00,000 subject to a limit.
c) Health Insuance Premium under Section 80D: Rs 10,000
d) Donation made under Section 80G: Rs 20,000
Total taxable income: Rs 3,50,000
Income Tax Calculations
Tax on income up to Rs 1,50,000 lakh: zero
Tax on the next Rs 1,50,000: 10% or Rs 15,000
(slab Rs 1.5 lakh upto Rs 3 lakh)
Tax on the remaining Rs 50,000: 20% or 10,000
(slab above Rs 3 lakh upto Rs 5 lakh)
Income Tax Due: Rs 25,000
Educational Cess @ 3%: Rs 750
Total Tax Payable: Rs 25,750
The fundamental rule of income tax is that tax becomes due as soon as income is earned. So in the case of salaried employees, tax is deducted every month after estimating the total income for the year after considering the deductions. It is very important to arrive at the taxable income and account for deductions to calculate the tax.
Also if the tax already deducted by your employer is more than you are liable to pay then you are eligible to get a refund of the excess amount. But do not forget to mention your bank account in the tax form so that the refund gets credited to the account.
Meanwhile if an individual is paying taxes on a monthly basis and does not have any liability left towards the end of the year, he is still liable to file a return of income. It is a legal obligation for every individual to file a return of income, whose taxable income during the year has exceeded the exemption limit of Rs 1.5 lakh in case of Ordinary citizen.