Employee Income Tax Calculation and Deduction in Bangalore

Employee Income Tax Calculation and Deduction in Bangalore

Income tax calculation and deductions for employees in Bangalore, India, are governed by the Indian Income Tax Act, 1961. The tax liability is based on the individual's total income, which includes salary, house property income, capital gains, business or profession income, and other sources.

Here's a simplified guide to understanding income tax calculation and deductions for employees in Bangalore:

Income Tax Calculation:-

1. Salary Income: Salary includes basic salary, allowances, bonuses, and perquisites.

Income from salary is taxable after deducting exemptions like HRA (House Rent Allowance), standard deduction, and professional tax.

2. Other Income: Includes income from house property, capital gains, business or profession, and other sources.

Deduct applicable exemptions and deductions.

3. Gross Total Income (GTI): Add up salary income and other income.

4. Deductions under Chapter VI-A: Deduct eligible deductions under sections like 80C, 80D, 80G, etc.

Common deductions include investments in Provident Fund, Life Insurance Premium, National Pension Scheme (NPS), and more.

5. Taxable Income: Subtract deductions from GTI to get the taxable income.

6. Income Tax Calculation: Apply the tax slabs applicable to individual taxpayers based on age (normal, senior, super senior).

Calculate income tax as per the applicable rates.

Income tax slabs (In Rs)

Income tax rate (%)

From 0 to 2,50,000

0%

From 2,50,001 to Rs 5,00,000

5%

From 5,00,001 to 7,50,000

10%

From 7,50,001 to 10,00,000

15%

From 10,00,001 to 12,50,000

20%

From 12,50,001 to 15,00,000

25%

From 15,00,001

30%

Deductions and Exemptions:

HRA (House Rent Allowance): Partially exempt based on actual HRA received, rent paid, and the city of residence. Fully taxable if not living in rented accommodation.

Standard Deduction: A fixed deduction from salary income (as per government announcements).

Professional Tax: Deducted from salary and allowed as a deduction.

Section 80C: Investments up to a specified limit in instruments like Provident Fund, PPF, NSC, ELSS, etc.

Section 80D: Deduction for premiums paid for health insurance policies.

Section 10(14): Exemptions on certain allowances like conveyance allowance, medical allowance, etc.


Created & Posted by Navneet Kumar
CA  Article at TAXAJ

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