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 2008-2009 )
| Taxable Income Slab | Tax Slab |
| Upto Rs. 1,50,000 | Nil |
| Rs. 1,50,000 – Rs. 2,50,000 | 10% |
| Rs. 2,50,001 – Rs. 5,00,000 | 20% |
| Rs. 5,00,001 – Rs. 10,00,000 | 30% |
| Above Rs. 10,00,001 | 30% + 10% surcharge on tax |
| Note: In addition, an education cess of 3% is charged on the entire tax amount including surcharge | |
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 80.
Lets take a few examples to illustrate how you can calculate taxes based on these slabs.
Example 1:
Sarla is a salaried employee, her annual income is Rs. 2,40,000. She has made no tax savings investments during the year.
Let us calculate her income tax liability.
| Heads | Amounts | |
| Gross Total Income | Rs. 240,000 | |
| Deductions | Nil | |
| Taxable Income | Rs. 240,000 | |
| Income Tax Calculations | Tax | |
| Tax on Income upto Rs 180,000 | 0% | Zero |
| Tax on the remaining Rs 60,000 | 10% | Rs.6,000 |
| Total Income Tax Due | Rs. 6,000 | |
| Educational Cess @ 3% | Rs. 180 | |
| Total Tax Payable | Rs. 6,180 | |
Example 2:
Vinod is a salaried employee. His annual income is Rs. 3,25,000.His home loan interest payment is Rs 1,20,000 and his home loan principal repayment is Rs. 80,000.He has made an investment of Rs. 50,000 in NSC.
Let us calculate Vinod's interest liability.
| Heads | Amounts | |
| Income from Salary | Rs. 325,000 | |
| Income from House Property | Rs.120,000 | |
| Gross Total Income | Rs. 205,000 | |
| Section 80 C Deductions | Rs.100,000 | |
| NSC Investment | Rs. 50,000 | |
| Home Loan Principal Repayment | Rs.80,000 | |
| Total | Rs. 130,000 | |
| Taxable Income | 105,000 | |
| Total Tax Due | Rs. 0 | |
Example 3:
Ram is a salaried employee who earned Rs.12,00,000. He has bought a health insurance policy for himself worth Rs 10,000. Ram has also bought ELSS funds for Rs. 80,000 and has also paid a LIC premium of Rs. 20,000.He has also donated Rs. 20,000 to the Prime Minister's Relief Fund.
Let us calculate Ram's tax liability.
| Heads | Amounts | |
| Gross Total Income | Rs. 1,200,000 | |
| Section 80 C Deductions | Rs.100,000 | |
| LIC Premium | Rs. 20,000 | |
| Home Loan Principal Repayment | Rs. 80,000 | |
| Total | Rs. 100,000 | |
| Other Donations | Rs. 30,000 | |
| Section 80D Health Insuance Premium | Rs. 10,000 | |
| Section 80G Donation To A Charity | Rs. 20,000 | |
| Total Taxable Income | 1,070,000 | |
| Income Tax Calculations | Tax | |
| Tax on Income upto Rs 150,000 | 0% | Zero |
| Tax on the next Rs 100,000 | 10% | Rs.10,000 |
| Tax on the next Rs 250,000 | 20% | Rs.50,000 |
| Tax on the Tax on next Rs. 570,000 | 30% | Rs. 171,000 |
| Income Tax Due | Rs. 231,000 | |
| Surcharge on total tax | 10% | Rs. 23,100 |
| Income Tax Due | Rs. 254,100 | |
| Educational Cess @ 3% | Rs.7,623 | |
| Total Tax Payable | Rs.261,723 | |
