Calculating Your Income Tax Liability 2010-11

The income tax which is charged to you is based on the tax slabs declared by the Government in its annual budget every year. The following table encapsulates the tax slabs applicable this year. (Financial Year 2010-2011)

Taxable Income Slab	Tax Slab
Upto Rs. 1,60,000 Up to Rs. 1,90,000 (for women) Up to Rs. 2,40,000 (for residents, 65 years or above)	Nil
Rs. 1,60,001 - Rs. 5,00,000	10%
Rs. 5,00,001 - Rs. 8,00,000	20%
Rs. 8,00,001 and above	30%
Note: In addition, an education cess of 3% is charged on the entire tax amount.

Please note that the taxable income is arrived at after adding all your different sources of income and subtracting the deductions that you have taken advantage of under Section 80C to 80U.

Lets take a few examples to illustrate how you can calculate taxes based on these slabs.

Example 1:

Sarita is a salaried employee, her annual income is Rs. 2,60,000. She has made no tax savings investments during the year. Let us calculate her income tax liability.

Heads		Amounts
Gross Total Income		Rs. 260,000
Deductions		Nil
Taxable Income		Rs. 260,000
Income Tax Calculations		Tax
Tax on Income upto Rs 1,90,000	0%	Zero
Tax on the remaining Rs 70,000	10%	Rs.7,000
Total Income Tax Due		Rs.7,000
Educational Cess @ 3%		Rs. 210
Total Tax Payable		Rs. 7,210

You will notice that Sarita has not used any deduction available to all taxpayers under section 80C (for example deductions related to insurance premium or ELSS investment or home loan principal repayment among other options). If Sarita would have used part of her income towards any tax related instrument under 80C, then she could have reduced her tax liability of Rs 7,210 through this deduction.

Example 2:

Rajiv is a salaried employee. His annual income is Rs. 4,25,000. His home loan interest payment is Rs 80,000 and his home loan principal repayment is Rs. 60,000. He has made an investment of Rs. 50,000 in NSC. Let us calculate Rajiv's tax liability.

Heads		Amounts
Income from Salary		Rs. 425,000
Income from House Property (Section 24 Deduction for Home Loan Interest Repayment)		(-) Rs.80,000
Gross Total Income		Rs. 345,000
Less: Section 80C Deductions		Rs.100,000
NSC Investment	Rs. 50,000
Home Loan Principal Repayment	Rs. 60,000
Total	Rs. 110,000
Taxable Income		Rs. 245,000
Income Tax Calculations		Tax
Tax on Income upto Rs. 1,60,000	0%	Zero
Tax on the next Rs 85,000 (Slab Rs. 160,001 to Rs. 5,00,000)	10%	Rs. 8,500
Income Tax Due		Rs. 8,500
Education Cess @ 3%		Rs. 255
Total Tax Payable		Rs. 8,755

In Rajiv’s case, he has taken advantage of two options under the 80C deduction available to him, namely principal repayment of Rs. 60,000 on his home loan and an investment of Rs. 50,000 in NSC. However, these total up to Rs. 110,000, and as shown above he can only take a deduction up to the statutory limit of Rs. 100,000.

Example 3:

Akhil is a salaried employee who earns Rs. 10,00,000 per annum. He has bought a health insurance policy for himself and his family worth Rs. 10,000. Akhil has also bought ELSS funds for Rs. 30,000 and has also paid a LIC premium of Rs. 70,000 towards an insurance policy. He has also donated Rs. 10,000 to the Prime Minister's Relief Fund. Let us calculate Akhil's tax liability.

Heads		Amounts
Gross Total Income		Rs. 1,000,000
Less: Section 80C Deductions		Rs. 100,000
LIC Premium	Rs. 70,000
ELSS Funds	Rs. 30,000
Total	Rs. 100,000
Less: Other Deductions		Rs. 20,000
Section 80D Health Insurance Premium	Rs. 10,000
Section 80G Donation to a Charity	Rs. 10,000
Total Taxable Income		880,000

Income Tax Calculations		Tax
Tax on Income upto Rs. 1,60,000	0%	Zero
Tax on the next Rs. 3,40,000 (Slab Rs. 160,001 to Rs. 5,00,000)	10%	Rs.34,000
Tax on the next Rs. 3,00,000 (Slab Rs. 5,00,001 to Rs. 8,00,000)	20%	Rs.60,000
Tax on next Rs. 80,000 (above Rs. 800,001)	30%	Rs. 24,000
Income Tax Due		Rs. 1,18,000
Surcharge on total tax (No Surcharge is payable from previous year 2009-10 onwards)	0%	Nil
Income Tax Due		Rs. 1,18,000
Educational Cess @ 3%		Rs. 3,540
Total Tax Payable		Rs. 1,21,540

In this case, Akhil is taking the full Rs 1 lakh deduction under 80C. Additionally, he is also taking a deduction for a health insurance policy and for a donation made to charity, for a combined sum of Rs. 20,000.

Under the new budget, as of April 1 2010, individuals can get an additional deduction of Rs. 20,000 under 80CCF if they invest in certain stipulated long-term infrastructure bonds. So, if Akhil wanted to reduce his tax liability further, and if he had the capital to invest in these bonds, he can also take advantage of this new deduction that is available in tax year 2010-11.

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Srinivasu said : 04/02/2012	Whether Interest received on 10%NPS CONTRIBUTION is taxable for this year?
MEGNATH SANA said : 14/01/2012	received order without refund paid
Madhav said : 12/01/2012	It is very good example and explaination
Abhishek Joshi said : 09/01/2012	Very Help Full, simple and easy to understand calulation presentation found so far.....
D.UDAYACHANDER said : 05/01/2012	I request you to quote examples for arriving service taxes on different heads. Thanking you sir, D.UDAYACHANDER
venugopal said : 03/01/2012	Thanks for the valuable information.
Garima said : 21/12/2011	Many thanks for the valuable information. Its the best I have found so far.
anuj said : 25/11/2011	if my company deducts TDS, do I still have to pay income tax??
SWAPNIL BHOSALE said : 23/11/2011	good knowledge for career
vijay said : 22/11/2011	Awesome information.......Could you also please let us know that apart from 80c and 80d benifit ....how can we save the tax......and what the max limit to invest the money to save the tax.....
SAHIL said : 22/09/2011	Sir ...how much will b salary? that tax will requirement...
A S SOMAYAJULU said : 21/08/2011	Please show calculation with all the allowable exemptions for e.g Employer's contribution to NPS beyond Rs 1,00,000 under 80C, Rs 20,000 in infrastructure bonds for Gross Salary of Rs 10,00,000
shri ram dhiman said : 21/08/2011	RESPECTED SIR , THIS IS A VERY SIMPLIFIED VERSION OF EXPLAINING THE CALCULATION. PLEASE ADD HOME LOAN INTEREST /INCOME EXAMPLES. THANKS
Rajkumar Thanabal Arasan said : 14/08/2011	It is very clear explanation. If you provide more examples we will be more beneficial.
Gopal Krishan said : 10/08/2011	Thanks you
Gourab said : 09/08/2011	Excellent description
preety singh said : 30/07/2011	what about bonds for 20 000,how much interest i have to pay if i do not buy them
pankaj said : 29/07/2011	my net income is 850007/- after deduction of Ch VIA I M a senior citizen what is my tax liabilty
Sudhindra Madi said : 27/07/2011	1.good informative site 2.Recently heard that *even on website) finance minister has declared tax exemption up to Rs. 5,00,000/-. Is it so ?
Hem Raj said : 26/07/2011	great solution abt tax calculation
Pinaki said : 26/07/2011	amazing explanation
Prashant said : 23/07/2011	quite crisp and acts like a diy guide
shamshad said : 20/07/2011	till now the best tutorial i got....thanks a lot..
mohanjit said : 19/07/2011	very-2 helpful--thanks
Hamed said : 18/07/2011	Awesome, helpful
Faisal Sayed said : 14/07/2011	Thanks for the clear picture and to the point explanation.
Ramesh Kumar said : 14/07/2011	Clear Explanation Thank you
rajesh goud said : 14/07/2011	very good example
anil kumar jatana said : 09/07/2011	very good detail, even an layman can understand easily.
pavan said : 08/07/2011	very very clear explanation
Pandi said : 05/07/2011	In the Example 2, is the amount 80,000 recution is applicable for buying a new property too??
indu said : 04/07/2011	Easily understandable examples. Learned many things. and cleared some doubts. Thank you to the person who has created these examples.
yash said : 01/07/2011	Very good example, easy to understand
s.koduri said : 23/06/2011	Thanks.very usefful.very nicely interpreted...
derb said : 21/06/2011	very good
indrajeet said : 21/06/2011	really the explanation is amazing.
vivek said : 20/06/2011	Hats off for ur explanation
Atma Ram said : 19/06/2011	It was really useful. First time i knew that how tax system works. I hope everyone will find it very usefull. Thanks a lot.
Pallav agarwal said : 13/06/2011	Thanks a lot
Krishnan said : 10/06/2011	Thank you so much. It helped me to calculate how much IT i need to pay. Thanks again
amar said : 07/06/2011	thanks
komal said : 05/06/2011	these examples helped me to contribute in my exams. thanks a lot.
Govindan. S said : 04/06/2011	The examples are very much useful. Thanks a lot.
Sunil Amonkar said : 04/06/2011	The Examples were really helpful. Keep up the good work
RAJAN said : 04/06/2011	Really useful
Vikas Gupta said : 03/06/2011	worthwhile
Vidya said : 30/05/2011	Very useful info..thanks a lot
ishitha said : 28/05/2011	thanks a lot for good explanation can you do the same for house property....
priyadharsini said : 27/05/2011	very nice..i need tax calcultions for company ie.textile company.And also for all companies.plz .
mangesh said : 27/05/2011	thanks
vinotkumar said : 27/05/2011	Really helpful. Thanks a lot.
Rahul said : 26/05/2011	really good
SRINIVASAMOORTHY R said : 24/05/2011	VERY USEFUL AND VERYNICE
Thangaraj  said : 20/05/2011	VERY USEFUL EXPLANATION
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suman said : 20/05/2011	quite a useful...
SYED SHOUKATH ALI said : 15/05/2011	Good options It helps to students and employes thanks
nani said : 11/05/2011	wow... good explanation.. i am able to calculate income tax now
J R MAGARE said : 04/05/2011	NICE EXPLANATION.
manil said : 04/05/2011	its gud.....very easy and simple approach,easy to understand.thnaks alot
Rajesh said : 27/04/2011	A timely help. Nice article. Thanks so much
santhosh said : 26/04/2011	Very useful article,,.thanks
Devendra said : 25/04/2011	good one
Vijay said : 19/04/2011	very helpful
Parul said : 13/04/2011	First time i could understand of income tax calulation, thanks
K soundararajan said : 01/04/2011	very use ful for me.
nirav said : 01/04/2011	please also put one example for interest calculation...
Raju said : 01/04/2011	Really well written, I try to calucate on various site, but it's so simple to understand. Thanks
Mitesh Kansara said : 31/03/2011	Very well written article. Thanks
Rashmi Ranja Das said : 31/03/2011	its a very good and simple example to understand,how to calculate tax, really good.
Uday Kr. Jha. said : 29/03/2011	Ya, i am really thankful to you for providing the such a information about the calculated the taxable income on the salary, With regards, Uday- 91 9759988025.
Rahul said : 25/03/2011	Very good information...tnx
Joseph M Rodrigues said : 24/03/2011	Thanks a lot.. I was struggling to calculate my tax
mukesh rajput said : 24/03/2011	i m really thankful to u to provide us helpful informations.
San said : 23/03/2011	Excellent demonstration.
Deepak Baloni said : 21/03/2011	This information proved very beneficial for me.Thanks a lot
Manas said : 21/03/2011	Very helpful info. Examples helped a lot.
prakash chand said : 10/03/2011	realy usefull to everyone, we can calculated their income tax previosly.
Ranjeeth said : 05/03/2011	Grt Info....
Boopathiraja said : 04/03/2011	want to know fully
Boopathy said : 04/03/2011	really useful information
sv said : 01/03/2011	Really excellent and very much usefull. thanks a lot.
BIPLAB said : 01/03/2011	thanks for the examples!I want's More
shalu said : 01/03/2011	really its very helpful
D.Prasad said : 25/02/2011	Really informative....thanks..
Atul singfh said : 23/02/2011	Completely understand the thing
Gaurav said : 23/02/2011	very simple to understand and very helpful for me........
vps baghela said : 22/02/2011	easy.....simple examples in gradual step by step.....thank you
Ashish dahale said : 22/02/2011	really helpful
payal said : 21/02/2011	can u elabroate wid HRA and medical allowance
harish dobhal said : 20/02/2011	IT WAS VERY EASY TO UNDERSTAND HOW TO CALCULATE INCOME TAX FOR THE FINANCIAL YEAR 2010-2011. THANKS.
Arun said : 20/02/2011	Thanks...it is easy to understand and clear
pankaj said : 19/02/2011	Thanks for the clarification
Eli said : 18/02/2011	Thanks for the clear picture and to the point explanation. i loved it.
janu said : 15/02/2011	wow superb
Elango said : 11/02/2011	Useful information
sharav said : 10/02/2011	superb work
Shekhar said : 09/02/2011	Very helpful...excellent work done!
aswinikumar said : 09/02/2011	thanx a lot
Kunal Pawale said : 09/02/2011	Article is very useful and examples helps for better understanding
Aveek said : 07/02/2011	Very informative. Thanks.
Tamilselvan said : 04/02/2011	Thanks a lot.
Rajeev Srivastav  said : 03/02/2011	thank u sir it is very important knowledge for me sir i am working in a ca firm i don't no about income tax if u send more knowledge on my mail plz sir
yogesh sawant said : 02/02/2011	Can i show principle interst stamp duty and rejestration as well as HRA. if im living in rented house and also i owned a house(w.r.t. home loan) in other city.
j.pugazhendi said : 02/02/2011	It is useful
lalchandra said : 01/02/2011	Thank you Very much.It is very usefull information
jarshad said : 30/01/2011	most valuable information
Zulfeqar said : 26/01/2011	Very helpful, please complete this by including various components like HRA, Medical allowance, TA, LTC etc
Afroz said : 24/01/2011	Found it useful.But please include HRA also in another example.
Kumar said : 22/01/2011	It is very useful
manisha said : 20/01/2011	really helpful thanx a lot
Raghu Bainsla said : 20/01/2011	very helpfull thanks alot
Ajit said : 20/01/2011	Its is simple and easy to understand i have little bit problem to understand but because of this chart i understand the income tax slab
ruchi said : 20/01/2011	very usefull.. thanks a lot
T.Rajendran said : 18/01/2011	Very useful Thanks many
pradeep said : 15/01/2011	very helpful , thanx alot
Raghupathi said : 11/01/2011	Given Illustration is simply Superb A lay man can Undestand this easily
MuralidharG said : 11/01/2011	Very good work ,Nice information,If you provide information about HRA.That could be help full.
Narendra said : 08/01/2011	thanks for valuable informatiom
Ankit Malik said : 07/01/2011	great work guys..!! thanks a lot
shruti said : 07/01/2011	very helpful....
Vasundhara said : 05/01/2011	Being a zero in calculating tax I learned a lot..Thank u so much
Ramesh said : 04/01/2011	Good explanation. Its very helpful.
Niren said : 02/01/2011	Wonderfull.. Thanks aloottt
Ashish Sharma said : 31/12/2010	It is ossam
Vijay said : 30/12/2010	Found it very useful...Excellent Job
Rajeev said : 29/12/2010	it's very useful thanks for the whole team
bibek said : 23/12/2010	Excellent.............
A. Roy said : 22/12/2010	What about one time invest ments(e.g. in case of LIC if every scheme are deductable?)
karthik said : 21/12/2010	gud explanation, it is very useful to me, thanks
kamal said : 16/12/2010	it is very nicely expalined in simple language, but please also describe about HRA
pramod said : 14/12/2010	very nice information in easy sentence.
Yugandhara said : 14/12/2010	easy to understand this exp thank u so much
sivan said : 14/12/2010	Very informative.. Siply explained.. Found very easy to understand.. Thank you so much..
any said : 10/12/2010	please through some light,how is HRA deducted from tax? Thanks.
mkumar said : 10/12/2010	thanks......
any said : 10/12/2010	Excellent
Praveen said : 09/12/2010	But where is HRA??
Praveen said : 09/12/2010	To the point
pramod said : 04/12/2010	i was very impressed with all the working details which is easy to be understood
rekha said : 02/12/2010	good explanation
Alex.T said : 23/11/2010	Very useful information with proper illustrations. Thanks !!!
bhanu said : 20/09/2010	Today only I hv visited ur site and i found it to be very informative and useful. Keep it up.
shiv gaur said : 15/09/2010	Many thanks for the examples! It makes the whole thing very clear.
m r k prasad said : 04/09/2010	your illustrations are siple and kucid that can easily be comprehended and implemented
Jijesh P C said : 26/08/2010	I have gone thru the docs related to tax liability ,which is very much helpful for me to calculate my tax details.Good work.
Bijoy Roy said : 22/07/2010	Today only I hv visited ur site and i found it to be very informative and useful. Keep it up.
Nishi Kurian said : 08/07/2010	Exteremely useful bit on Income calculation. I used to think IT was such a headche but the explanation brought out in a table in logical sequence made a lot of sense. Thanks a million!
Candida said : 21/06/2010	Good and detailed explantion. i think a layman will not find difficult to understand the tax structure. Thanks a lot.
Hemant said : 19/05/2010	Which bonds qualify for additional exemption under he newly introduced section 80 CCF?