Know How You Can Calculate Your Liability with Tax Calculator

Understanding and calculating the tax liability in India is the most complicated thing which can make the annual tax return filing a real headache for all. There are several professionals who are working to help one in finding one’s net taxability. You too must be paying a huge sum of money in the form of fees to those professionals. But, do you know you can calculate the same on your own? The tax calculator in India which is available online can be used to compute the net tax liability for the financial year. Let’s understand how!

Features of Tax Calculator

There are various tax planning tools available on different portals which are focused on providing the best solutions for computing the tax liability. Here are some of its prime characteristics: 

• Cost Effective - These calculators are available online at different portals at no cost. One need not pay any sum of money to use them, rather can use as many times as one wants.
• Instant Calculation - It is the best tool to compute the instant results of the sum payable in the form of taxes. It takes just a few seconds to generate the exact results of the tax amounts payable to the taxman.
• Availability - The online tax calculator is available on various websites and can be utilised without any prior permission.
• Accuracy - They are designed by industry’s experts after considering all the important factors which are a must in computing taxes. Thus, the results generated by them are quite accurate and helpful in planning taxes easily.
• Time Efficient - It is quite important to plan taxes within time without wasting even a single moment. The tax calculator in India provides the same feasibility to everyone and can be used anytime. 

How Does Online Tax Calculator Work?

India has a typical tax system due to which it becomes quite difficult sometimes to compute the return liability. The tax planning calculator is quite helpful in this context and provides assistance to the users to compute their net liability. Let’s elaborate how does this tool work.

Adds All the Income Earned in the Previous Year

The first step toward computing the income tax liability is evaluating the total earnings or income in the previous year (PY). It is known to everyone that income is assessed in the Assessment Year (AY) which succeeds the previous year in which income is earned. So, first of all, whatever earnings are credited to one’s account in the PY is added up.

Deduct the Allowed Expenses to Fetch Net Income

There are various expenses which are genuinely paid by the assessee in the previous year and allowed by the income tax department. After deducting such expenses, the net taxable income is computed.

Calculate Total Deductions for the Year

The Income Tax Act provides various deductions on the income which are allowed to reduce the tax liability for a financial year. For example, the deductions allowed under section 80C, 80CCD, and many more. So it is a must to know such deductions to generate the taxable income.

Reduce the Net Income By Allowed Deductions

Once you get to know about the total tax deductible amount, then you need to deduct the same from the net income. This results in generating the net taxable income for the previous year on which the taxes are payable.

Compute the Tax Liability

At last, when you get the exact taxable income, you need to compute the liability or taxes payable as per the applicable slab rates. The taxes payable by the assessees are in accordance with the income slab in which they fall. For those having income less than 2.5 Lakh, there is nil tax liability.

The tax calculator is designed keeping all the above points in mind. It generates the exact taxable amount as well as the taxes payable to help the investors file tax return easily. Furthermore, there are some tax planning tools which help in reducing the liability as well by recommending the best tax-saving plans. So, it is the best way to generate the total taxability in a financial year.