Income Tax liabilities calculation for FY2017-18: How to do; all you need to know

Published: March 27, 2018 11:25:10 AM

This is the time when the most common thing most of the taxpayers might be doing is calculating their tax liability for FY2017-18, if they have already not done that. Here's a help.

At this point of the year when the Financial Year 2017-18 is about to end, the most common thing most of the taxpayers might be doing is calculating their tax liability for this year, if they have already not done that. This will enable the taxpayers to know how much investment is required to be done before the current financial year ends in order to avail the various tax deductions and save tax. If you want to understand the method of calculating taxable income and the tax amount that you will need to pay for FY17-18, here’s a help:

Let’s first understand how to compute the total taxable income:

The steps to determine taxable income are as under:

1. Sum up all your incomes from these five heads after the available exemptions, viz. Salary Income, Business Income, House Property Income, Capital Gains Income, and Income From Any Other Source.

2. Subtract all deductions available under Section 80C, Section 80D and other deductions under Chapter VI-A from the above calculated gross income.

3. The resultant income would be the total taxable income on which tax will be levied.

Hope while going through the above process you must have calculated your total taxable income, but now the question arises: how do I calculate tax on this income? No worries. For that, we will have to know how to calculate tax. The basic step for this is to get the quick overview of the personal income tax structure.

The amount of income tax is calculated on the basis of tax slabs. There are various Income Tax Slabs specified by the government. In case of individuals, the Income Tax Slabs have been formed on the basis of age. They are discussed as under:

1. Slab for individuals below the age of 60 years (Male & Female Both):

 Income Slab Tax Rate Up to Rs 2,50,000 Nil Rs 2,50,000 – Rs 5,00,000 5% Rs 5,00,000 – Rs 10,00,000 20% Above Rs 10,00,000 30%

2. Slab for senior citizens – 60 years or More than 60 years but less than 80 years (Male & Female Both):

 Income Slab Tax Rate Up to Rs 3,00,000 Nil Rs 3,00,000 – Rs 5,00,000 5% Rs 5,00,000 – Rs 10,00,000 20% Above Rs 10,00,000 30%

3. Slab for super senior citizens – 80 years or More than 80 years (Male & Female Both):

 Income Slab Tax Rate Up to Rs 5,00,000 Nil Rs 5,00,000 – Rs 10,00,000 20% Above Rs.10,00,000 30%

Note: The below pointers are common for all the above Slabs.

1. Cess: Education Cess and Secondary and Higher Education Cess @ 3% is levied on total income tax payable, including surcharge, if any.

2. Rebate under Section 87A: For individuals with income of up to Rs 3.5 lakh, tax rebate of Rs 2,500 or 100% of tax amount, lower of the two.

3. Surcharge:

# For income exceeding Rs 50 lakh but up to Rs 1 crore, surcharge @ 10% on Income Tax shall be levied.

# If the total income is above Rs 1 crore, then surcharge @ 15% on income tax shall be levied.

4. Total Tax Liability = Income Tax – Rebate + Surcharge +Cess

Keeping in mind the above discussed slabs, let’s compute the tax liability for FY17-18 on various incomes, say Rs 5 lakh, Rs 10 lakh, Rs 15 lakh and Rs 25 lakh for your reference:

 S.No. Income Below 60 Years Senior Citizen Super Senior Citizen 1. If you earn Rs 5 lakh: Taxable Income 5,00,000 5,00,000 5,00,000 Tax after relief 12,500 10,000 Nil Cess Amount 375 300 Nil Total Tax Liability 12,875 10,300 Nil 2. If you earn Rs 10 lakh: Taxable Income 10,00,000 10,00,000 10,00,000 Tax Amount 1,12,500 1,10,000 1,00,000 Cess Amount 3,375 3,300 3,000 Total Tax Liability 1,15,875 1,13,300 1,03,000 3. If you earn Rs 15 lakh: Taxable Income 15,00,000 15,00,000 15,00,000 Tax Amount 2,62,500 2,60,000 2,50,000 Cess Amount 7,875 7,800 7,500 Total Tax Liability 2,70,375 2,67,800 2,57,500 4. If you earn Rs 25 lakh: Taxable Income 25,00,000 25,00,000 25,00,000 Tax Amount 5,62,500 5,60,000 5,50,000 Cess Amount 16,875 16,800 16,500 Total Tax Liability 5,79,375 5,76,800 5,66,500

After the computation of tax, let’s switch to the savings part so that you can invest accordingly before 31st March, 2018.

Tax can be saved by making investments or tax deductible expenses and availing the benefit of deductions like 80C, 80D, 80E etc. For example, if a person earns Rs 8 lakh and avails the whole limit of Sec 80C, then his total income shall be Rs 8 lakh – Rs 1.5 lakh = Rs 6.5 lakh. This total income amounting Rs 6.5 lakh is the income on which tax shall be levied. However, it is advisable that while investing, you should not only keep in mind the tax benefit but also focus on a safe and secure future.

(By CA Abhishek Soni, Founder, tax2win.in)

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