Understanding Salary After Tax: How Much Should Be Deducted for Income Tax?

When the income tax is deducted from the salary, how much should the amount of salary be?

Salary Range Amount: How much should be deducted as income tax?

Hi,

If your salary is above Rs. 2.00 lac, then the Income Tax will be "NIL" because Rs. 1.00 Lac you can save on several instruments for saving purposes like LIC, House Rent, HBA, Bonds, Mutual Funds, etc., and Rs. 1.00 lac of income is treated as Nil for income tax.

Here are the rates of income tax for male employees:

1) where the total income does not exceed Rs. 1.00 lac - Nil

2) where the total income exceeds Rs. 1.00 lac but does not exceed Rs. 1.50 lac - 10% of the amount by which the total income exceeds Rs. 1.00 lacs

3) where the total income exceeds Rs. 1.50 lacs but does not exceed Rs. 2.50 lac - Rs. 5,000 + 20% of the amount by which the total income exceeds Rs. 1.50 lac

4) where the total income exceeds Rs. 2.50 lac - Rs. 25,000 + 30% of the amount by which the total income exceeds Rs. 2.50 lac

In the case of a lady employee below the age of sixty-five years, the rates for income tax are:

1) where the total income does not exceed Rs. 1.35 lac - Nil

2) where the total income exceeds Rs. 1.35 lac but does not exceed Rs. 1.35 lac - 10% of the amount by which the total income exceeds Rs. 1.50 lac

3) where the total income exceeds Rs. 1.50 lac but does not exceed Rs. 2.50 lac - Rs. 1,500 + 20% of the amount by which the total income exceeds Rs. 1.50 lac

4) where the total income exceeds Rs. 2.50 lac - Rs. 21,500 + 30% of the amount by which the total income exceeds Rs. 2.50 lac.

In the case of a person who is sixty-five years or older, the rates of income tax are:

1) where the total income does not exceed Rs. 1.85 lac - Nil

2) where the total income exceeds Rs. 1.85 lac but does not exceed Rs. 2.50 lac - 20% of the amount by which the total income exceeds Rs. 1.85 lac

3) where the total income exceeds Rs. 2.50 lac - Rs. 13,000 + 30% of the amount by which the total income exceeds Rs. 2.50 lac.

Above this Income Tax, a Surcharge is levied, which is around 2% on the Income Tax.

I hope this gives you some kind of idea about what Income Tax really is.

With regards,

RK Sinha

Hi Mr. Sinha,

It's really something very knowledgeable, but I have one query. If a company is not showing an employee's salary in records but only incentives are kept in company records, then what will be the procedure in this case? Whether the salary will be counted in annual income or not.

Regards,
Jyoti

Hi Jyoti, I can't get your question. The company has to show some amount as a basic salary to everybody. Whereas incentives are concerned, the tax rules state that incentives are taxable only when they are not reimbursement. For example, if you are getting a conveyance allowance, you have to submit the bill or undertaking that you have spent an amount on petrol for office purposes; in this case, it is not taxable. However, if you are receiving an allowance like education allowance, then it is considered taxable income. I hope this is what you want. RK Sinha

Hi there,

Please find attached the Income Tax PDF file. I hope this will be helpful. You can download the same from www.hsbc.co.in.

Warm regards,
Rohit Kumar

Hi there,

The tips and ideas you provided regarding how tax is applicable and how much your salary needs to be for tax purposes were extremely useful, simple, and invaluable. I am sharing this information with dozens of my friends who have similar queries. Looking forward to having more such articles from you, and many of our readers. Thanks again.

Prem Waidande
Pune

Hi Jyoti,

I hope your problem regarding the Income Tax over the Salary and Incentives is resolved. I also don't have full knowledge regarding Income Tax, but I have shared with you what I know.

With regards,

RK Sinha
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Hi,

Please find attached the tax calculation template.

Hi friends,

The following site shall be of help: http://www.ynithya.com/taxcalc/.

In simple terms, first calculate the taxable income:
- Basic - Fully
- Conveyance - Exempted up to 800/-pm
- HRA - Exempted up to certain conditions

Calculate the total taxable salary. Next, 1 lac employee can invest in 80C. Contributions to PF, LIC, and certain other things. Thus, from the balance taxable salary, up to 1 Lac is free. Tax will be charged for the next 50,000/- up to 10%, the next 1 Lac up to 20%, and the next 1 Lac and above 30%. Please note that a 2% education cess shall also be charged on all.

Also, reduce the Professional tax deducted and income tax if deducted.

I hope this will be simple and useful.

Thanks,
Ravi

Hello,

Thank you for providing valuable information. We are also looking for a few details on EPF, as well as payroll management. Could you please provide some basics on the above?

Thank you.

Regards,
Vishwanath.

Dear Sinha,

The information was very useful for all the people. In what way do the tax policies help the HR manager to frame HR policies?

Regards,
Arun

Mr. Sinha,

Kindly solve this case for me.

A person is a contractor. He decides to take up a job instead. He joins a company in mid-May 2006. His salary is 12000/-. Later, he joins a different company in mid-August 2006. His salary is 28000/-, so he gets a full salary from September 2006.

What is the tax to be deducted by the present company from the salary? Can the company deduct tax from March 2006? Because he is in the company only from August 2006. He has rent receipts of 7k pm since August 2006. He has a mediclaim policy of 2600/-. What is the total investment he has to make to save tax?

I would be grateful if you could explain in detail along with calculations.

Slight correction:

1. A 10% surcharge is applied whenever income exceeds 10 lakhs (10% on the balance tax payable after Section VI A deductions).
2. A 2% + 1% Cess, totaling 3%, is levied on the total net tax payable by any individual (after rebates, deductions, exemptions, etc.) as Education Cess + Higher Education Cess.

With these two corrections, everything else is fine.

Warm Regards,
Pradeep

Hi, can anyone help me out?

An employee joined my organization on 5th October; he is eligible for TDS. He has not paid any tax in his previous organization, so he can't provide Form 16 to us. Now, in this situation, how do I need to compute tax for the financial year 07-08 for this particular employee?

1) Do not consider the past, just calculate based on what we pay him.
OR
2) Consider his previous compensation and present compensation to calculate tax for the total amount?

If I am taking the first option, can I get the proofs of investments he made during April 07 - Sep 07... Is that viable?

Thanks in advance,
Pradepa