How much Income Tax do I need to pay?

Last Updated: 29 Jun 2022

You may have rummaged Google in an attempt to find the right answer, all for naught. The amount of income tax to be paid depends solely on how much you earn and your total taxable income. Under the Income Tax Act, 1961, the Income Tax department has specified in detail the technicalities of paying income tax and the process of calculating the tax liability.

This article will provide and simplify the answer to ‘How much income tax should I pay by detailing the Income Tax system in India. The best way to understand your tax liability is through gaining knowledge about the tax system.

Who should pay Income Tax in India?

As an Indian citizen, if you belong to one of the following entities, you are liable to pay income tax. These include:

• Individuals
• Hindu Undivided Family (HUF)
• Body of Individuals (BOI)
• Association of Persons (AOP)
• Local Authorities
• Corporate Firms
• Companies
• All Artificial Juridical Persons

But how much income tax is to be paid? The answer moves a step forward to the five Income heads.

How to calculate total income: The five income heads

The Income Tax Act has broken down the process of calculating your total income through the following five heads. The sum of your earnings from the following five sources is your total income.

• Income from salary: Includes salary or pension earned in case you are/were a salaried employee.
• Income from business/profession: Income earned from business and profession undertaken at personal capacity.
• Income from house property: The amount earned as rent on an owned property that is not being used for business purposes.
• Income from capital gains: Income earned through investments in capital assets such as gold, mutual funds, SIPs, stocks, etc.
• Income from other sources: Earnings from the interest in a savings account, FDs along with income from lotteries, cash gifts, etc.

Tax Deductions and calculating your total taxable income

The next step is to identify tax deductions mentioned under various income tax sections. If you have made tax-saving investments in any of the sections mentioned below, you are liable to claim tax deductions up to the eligible limit. The sections and the limits are as follows:

Tax Deduction Limit	Applicable Section
Up to Rs 1,50,000	80C
Up to Rs 1,50,000	80CCD
Up to Rs 1,50,000	80CCD(1)
Up to Rs 1,50,000	80CCD(2)
Up to Rs 1,50,000	80CCG
Up to Rs 1,00,000	80D and 80E
Up to Rs 1,00,000	80EE
Up to Rs 1,00,000	80G
Up to Rs 1,00,000	80TTA
Up to Rs 50,000	80CCD(1B)

Once you claim these tax deductions, you can subtract the claimed amount from your total income. For example, if your total income is Rs 10,00,000 and you have made investments under section 80C and 80CCG, you can claim tax deduction of Rs 3,00,000, making your total taxable income Rs 7,00,000 (Rs 10,00,000-3,00,000). This is the amount on which you have to pay taxes. But how much?

This amount is decided through the Income Tax slabs.

Current Income Tax Slabs in India

Here are the current tax slabs in India:

Net Income Range (Annually)	Rate of Income Tax
Up to Rs 2,50,000	NIL (0%)
Rs 2,50,000 to Rs 5,00,000	5%
Rs 5,00,000- Rs 7,50,000	10%
Rs 7,50,000- Rs 10,00,000	15%
Rs 10,00,000- Rs 12,50,000	20%
Rs 12,50,000- Rs 15,00,000	25%
More than 15,00,000	30%

After calculating your total taxable income, you can cross-check with the table above to understand which tax bracket you belong to and how much percentage of the taxable income you would pay as tax.

Knowing how much income tax to pay, the next step is to know how to file your income tax.

How to file an Income Tax return?

Income tax filing requires you to fill out certain applicable forms, which include:

• ITR Form 1: For any individual who receives a regular salary or pension or earns through house property or other sources.
• ITR Form 2: For Hindu Undivided Family that earns from any source, expect profits from business or profession.
• ITR Form 3: For Hindu Undivided Family that earns from business or profession.
• ITR Form 4: For Hindu Undivided Family, resident Indians and firms (other than LLP) earn up to Rs 50 lakh through business or profession.
• ITR Form 5: For anyone that does not fall under the category of HUF, individual, company, and persons filing the ITR Form 7.
• ITR Form 6: For anyone liable to file income tax under sections 139(4A) or 139(4B) or 139(4C) or 139(4D) of the Income Tax Act.

By subtracting the deductions from your taxable income, you will know the income tax to be paid. Furthermore, you can read the following FAQs to get a better understanding of the whole concept.

Frequently Asked Questions

What are the important dates to remember when paying Income Tax?

Important Dates	Tax-Related Activity
Before January 31st	Provide proof of investments
Before March 31st	Investments under section 80C must be made
Before 31st July	Due date to file Income Tax returns
Between October and November	Due date to verify tax returns

Can I file the return of income even if my income is below taxable limits?

Yes, you can file the return of income if you want, even when your income is below taxable limits.

Knowing how much income tax you need to pay is vital in understanding your tax liability and ensuring you save tax wherever possible. As your tax liability and savings depend on numerous personal factors, it is wise to review your finances or consult a financial advisor before paying your taxes.