Sure, N Mohan. Here's a simple step-by-step guide on how to calculate income tax for salaried individuals in India:
1. Calculate Gross Salary: This is the sum of your basic salary, dearness allowance, house rent allowance, transport allowance, and other allowances.
2. Deduct Exemptions: Certain components of your salary are exempt from tax, such as house rent allowance and leave travel allowance. Deduct these from your gross salary.
3. Calculate Net Salary: Subtract the exemptions from your gross salary to get your net salary.
4. Deduct Deductions: Deductions under sections 80C, 80D, 80E, etc. of the Income Tax Act can be subtracted from your net salary. The maximum limit under section 80C is 1.5 lakhs.
5. Calculate Taxable Income: Subtract the deductions from your net salary to get your taxable income.
6. Calculate Tax: The tax is calculated as per the income tax slabs announced for the financial year. For the financial year 2020-21, the tax slabs are as follows:
- Up to ₹2.5 lakhs: Nil
- ₹2.5 lakhs to ₹5 lakhs: 5% of income exceeding ₹2.5 lakhs
- ₹5 lakhs to ₹10 lakhs: ₹25,000 + 20% of income exceeding ₹5 lakhs
- Above ₹10 lakhs: ₹1,25,000 + 30% of income exceeding ₹10 lakhs
Please note that if your taxable income is below ₹5 lakhs, you are eligible for a tax rebate under section 87A, which can be up to ₹12,500 or the amount of tax, whichever is lower.
Remember, these steps are a simplified version of the process and there might be other factors to consider based on your individual circumstances. You might want to consult with a tax advisor or use online tax calculation tools for a more accurate calculation.