How Much Will My Tax Refund Be This Financial Year?

income tax calculator

Income Tax Computation

A tax refund is a rebate on taxes, when the tax liability is less than the taxes paid for the given financial year. In such cases, taxpayers can get a tax refund on their income tax. If the taxes you owe is less than the total amount of TDS (tax deducted at source) collected or the estimated taxes that you have paid, then you are eligible for a refund.

There are many instances wherein an individual taxpayer affirms more tax amount at the start of the financial year than the authentic liable amount. Mostly this could be because of an investment decision made mid-year or at later or due to investments that you have not declared as a valid tax exemption. In these cases, the taxpayer can claim for a tax refund by filing Form 16 and get back the excess tax paid.

In this article, we will see how income tax is calculated using the Income tax Calculator using an example and what is the various tax saving investments that will qualify for tax refund.

Income Tax Calculator

How much income tax do I need to pay? The income tax calculator is calculated on the basis of the following tax slabs

Income tax rates for individuals under 60 years for FY 2016-2017:

Slab Tax Rate
Up to Rs.2,50,000 No tax
Rs.2,50,000 to Rs.5,00,000 10%
Rs.5,00,000 to Rs.10,00,000 20%
Rs.10,00,000 and above 30%

 

For FY 2017-2018, the tax rate for income tax slab of Rs.2,50,000 to Rs.5,00,000 is reduced to 5%.

How to Calculate Income Tax Using Example

Income from salary is divided into several components such as basic salary, HRA (House Rent Allowance), Transport allowance, LTA and other allowances. Certain components of the salary are exempt from tax like HRA, transport allowance, medical reimbursements.

Let us apply the income tax calculator to an example. Mr. A receives a basic salary of Rs.50,000 per month, HRA of Rs.20,000 per month, transport allowance of Rs.8,000 and special allowance of Rs.5,000 per month. He also gets an LTA of Rs.20,000 annually. He pays a house rent of Rs.20,000 per month.

 

Salary Component Amount (Annual) Tax Exemption Taxable Income
Basic Salary 6,00,000 None 6,00,000
HRA 2,40,000 1,80,000 60,000
Transport Allowance 96,000 19,200 76,8000
Special Allowance 60,000 None 60,000
LTA 20,000 Bills submitted for 15,000 5,000
Medical Bills 15,000 Bills submitted for 15,000 _
Gross Income from Salary 8,93,000

 

In order to further calculate income tax, income from all other sources need to be added. These can include

  • income from house property – rental income
  • income for capital gains – sale purchase of shares or house
  • income from business
  • income from fixed deposit, savings account       – interest accrued from FDS, bonds and more

In the above example, Mr A has the following income from other sources

Savings Bank Account Interest 8,000
FD Interest 10,000
Capital Gains 20,000
Total 38,000
Total Income Including All Sources- Gross Total Income 9,31,000

Mr. A has also made some tax saving investments that qualify as an exemption. The following are his eligible tax deductions

Section Maximum Tax Deduction Investments made Amount Claimed by Mr. A
Section 80C Rs.1,50,000 PPF Deposit of 50,000 + NSC Certificate 20,000+ Employee Provident Fund deducted as his contribution 72,000 Rs.1,50,000
Section 80D Rs.25,000 for under 60 years and Rs.30,000 for  senior citizens above 60 years Medical Insurance Premium of Rs.12,000 Rs.12,000
Section 80TTA Rs.10,000 Savings Bank Interest Accrued of Rs.8,400 Rs.8,400
Total Deductions 1,70,4000

So final taxable income becomes the gross total income minus the total tax deductions. So 9,31,000 – 1,70,400 = 7,60,600

Income Tax Calculator for Mr. A

Slab Tax Rate Amount
Up to Rs.2,50,000 No tax 0
Rs.2,50,000 to Rs.5,00,000 10% – 10% of maximum 5,00,000 minus 2,50,000 25,000
Rs.5,00,000 to Rs.10,00,000 20% – 20% of 7,60,600 minus 5,00,000 52,120
Rs.10,00,000 and above 30% Nil
Cess 3% of total tax 2313.60
Total Income Tax Rs.79,433.60

Mr.A would be liable to pay for Rs.70,433.60 as income tax as computed. If the TDS deducted by his employer is greater than this amount , then he can file for a tax refund.

If you have not declared your tax saving investments at the beginning of the financial year or end up making any investments during the course of the year, then you can file for a tax refund and get a tax rebate.

 

About Sashi 58 Articles
Sashi Singh is content contributor and editor at IP. She has an amazing experience in content marketing from last many years. Read her contribution and leave comment.

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