The budget for the year 2020-2021 has created a lot of ripples of curiosity among the people due to its unusual features. In this budget, the Finance Minister has proposed the removal of about 70 different tax exemptions. This has made the tax calculation a much simpler and easier activity for many individuals. If you think your income is within the taxable regime, you need to keep in mind a few of the important things before you opt for a genuine income tax calculator 2020.
Choosing the Regime
The biggest thing that a person needs to do is to choose the right tax calculation regime. As per the recent budget regime, there is a relaxation in the tax rates but with the condition of a lesser number of deductions. In this case, the best option is to make use of the income tax calculator ay 2020 21 to check through the right regime. You can calculate the payable taxes individually as per both the regimes and can check which one is more profitable for you.
As per the new regime for 2020-21, there are 70 deductions that have been removed. Hence it becomes quite important for you to understand the deductions that will be made. The maximum amount of deduction that an employee can make is 10% of his or her salary. If you are choosing the new regime, the deductions will be made as per the 80CCD (2) of the Income Tax Act 1961. People who have chosen the old regime may have several deductions but have to pay a higher tax rate comparatively.
How is This Calculated?
In order to come up with the right payable tax, you need to calculate the net taxable income for the financial year.
Step – 1: The very first step in this calculation is to first accumulate the income of the financial year. This accumulation has to be the total taxable income for that financial year.
Step – 2: Now, you need to know the deductions that you can claim for that particular financial year. Here, you need to check through the list of deductions removed if you are calculating the payable tax amount as per the regime of 2020-2021.
Step – 3: When the deductions are made from the total income, you get the total taxable amount.
Step – 4: On this, you need to apply the tax rate based on the slab you belong to so that you can calculate the amount that you need to pay as tax.
Even though the method has been simplified after removing different exemptions, there are a number of people who might find it difficult to find out the exact amount that has to be paid as tax. They might either opt for a professional and pay a hefty commission or use the tax calculator AY 2020 21.
Choosing the Right Tax Calculator
If you are unable to make the calculation manually and wish to seek the help of the income tax calculator 2020, you should make sure to choose the right one. Go through the reviews of different calculators well and check the details that the calculator is asking for. Make sure that the calculator includes these eminent steps:
- Option to the financial year, gender, and age
- Providing the taxable salary and the deductions
- Providing other details such as interest income and others
- Providing other investment options such as under section 80D, 80C, and others if you wish to calculate as per the old slab
- Ability to compare results calculated as per the old slab as well as the new slab
These eminent steps in the calculator will help you in getting the right one.