Confused About Income Tax: Is It Based on Gross Salary or Net Pay? Can You Help?

Hi, I am Venkat, and I have a question regarding whether income tax is calculated on Gross Salary or Net pay.

Income Tax Calculation on Salary

If an employee receives an increment in November 2013, increasing their salary to 20k gross per month from 14k gross, will they be liable for income tax deduction if their take-home pay is 18.5k per month? Note that the employee does not receive any other monetary benefits besides Salary and Bonus.

Kindly assist with this query.

Regards,
Venkat

Tax Calculation on Gross Income

Tax is calculated on gross income, not on take-home pay. The arrears of increment are considered income and are therefore subject to tax.

Regards,
Pon

Income tax is calculated on the gross salary that you are receiving, minus the allowances that are exempted as per the Income Tax Act. The salary amount after deducting these allowances will be considered for the entire financial year, and tax will be deducted based on this amount.

If you receive any type of increment, it will be taken into account accordingly, and your income tax will be adjusted accordingly.

I hope this clarifies things for you.