For tax calculation, deductions are amounts that can be subtracted from your taxable income and will not incur any tax on the subtractions. There are few basic components on your salary slip that you will need to understand for income tax calculation and deductions.
Category: The tax slabs have some rebates for women and senior citizens. Hence, based on which category you fall in, the tax rates will differ for you.
Gross Taxable SalaryThis is the overall salary that is taken into consideration for taxation. This is the amount before subtracting the deductions.
HRA ExemptionHouse rent allowance in your salary is exempt from tax. Usually, up to 50% of your salary can be considered HRA if you stay in a metropolitan city. In other cities, up to 40% of your salary can be HRA.
Transport allowanceIf your employer gives you transport allowance, then you won't have to pay tax for that. Transport allowance up to a certain annual limit can be exempt from income tax.
Other Exemptions allowedThere are few other costs that are eligible for tax deductions. Here are few that you can claim as deductions
- Medical insurance premium under Section 80D
- Interest paid on home loan under Section 80EE
- Education loan under Section 80E
- Donations to charity 80G
- Other deductions 80C and 80CC
Following are the new tax slabs for the financial year 2019-20
|Taxable Income Slabs||Tax Rates & Cess|
|Up to ₹ 2.5 lakh||Nil|
|₹ 2,50,001 to ₹ 5,00,000||5% of (Total income less ₹ 2,50,000) + 4% cess|
|₹ 5,00,001 to ₹ 10,00,000||₹ 12,500 + 20% of (Total income less ₹ 5,00,000) + 4% cess|
|₹ 10,00,001 & above||₹ 1,12,500 + 30% of (Total income less ₹ 10,00,000) + 4% cess|
Wherever it is mentioned ‘total income less’ that means the given tax percentage is calculated on the amount remaining after subtracting the specified sum.
Don’t forget to take advantage of all the deductions to make the most of your hard-earned money.
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The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.
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