Computation of Tax Liability - Assessment of Individual, Income Tax Laws Video Lecture | Income Tax Laws - B Com

[Music]
hello everyone welcome to Aetna
investment academy today we are going to
discuss how to calculate your income tax
if you think that calculating income tax
is a complex thing then you are wrong
for simple salaried individuals
calculating income tax is pretty simple
and straightforward apart from basic
Maps only thing you need to know is
about deductions and exemptions you are
claiming for and the relevant sections
and we will discuss all of them today
here income tax calculations require
following process computation of total
income by deducting all legal allowances
deducting valid income tax deductions
determination of tax payable based on
existing tax lapse and final tax
calculation to be paid based on TDS paid
first let's understand how to calculate
the total income total income is the sum
of all sources of income that you have
earned in a financial year it has to
fall into one of the five following
heads income from salary either income
from house property income from profits
and gains of business or profession you
have income from capital gains or income
from any other sources and we will
discuss each of them now first is income
from salary income can be charged under
this head only if there is an
employer/employee relationship salary
includes basic salary gratuity advance
of salary if you cut leaving catchments
all allowances you got bonus etcetera
the aggregate of all these incomes after
exemptions available in the way of clown
C's is known as gross salary and this is
put under the head income from salary
let's understand this better with an
example let's take an example where
Sunil gets rupees six lakhs per year as
salary before tax and god rupees two
lakhs before tax as bonus in the year
end so total salary is saved by him is
Okies 8 lakh in
financial year before tax now there are
many allowances which gives tax
exemptions here is the list of major
ones house rent allowance you get on the
rent you pay it is maximum up to fifty
percent of your salary more details in
our HR a video conveyance allowance for
your travel to work it is maximum of two
rupees nineteen thousand two hundred per
year medical allowance you get on your
medical related expenses in the year if
you submit the bills it is maximum up to
rupees fifteen thousand per year
similarly these are others so for our
example let's assume Sunil lives in a
rented apartment in Mumbai and pays
rupees 10,000 per month as rent and get
HRA benefit on whole amount he also gets
full conveyance allowance exemption and
gave Bills of rupees five thousand for
medical reimbursement allowance as well
so this is how we can calculate his
gross income which will be put under
salary head remember all these details
would be part of suni's form 16 as well
so this is his total monthly salary plus
bonus and this becomes his cross salary
then we need to reduce the allowances he
got acharya conveyance and medical so
this becomes his balance cross salary
here we also reduced the professional
tax which is a state-specific tax so
after reducing we got gross income which
will be Sunil's income from salary for
income tax calculations now let's talk
about second source of income head that
is from house property income from house
property constitutes the income earned
from a property by its owner property
hereby refers to any residential or
commercial building or land attached
this head of income taxes notional
income - let me explain the taxability
may not necessarily be the actual rent
or income received but the potential
income which the property is capable of
yielding this is a complicated topic and
we are working on a separate video on
let's understand here with one simpler
scenario taking Sunil's example if Sunil
has one property in his name but he is
living in different location and his
property is earning him a rent of rupees
20,000 per month we also assume that
Sunil has taken a loan for his property
and his paying annual interest of rupees
1 lakh on it and is also paying rupees
10,000 per year as municipal tax in that
case following will be the income of
house property for sony total annual
rent will be monthly rent multiplied by
12 months then we can deduct municipal
tax paid from this income that is rupees
10,000 so net annual rent value is this
much now there are two deductions
available under section 24 first is
standard deduction standard deduction is
30 percent of the net annual rent value
calculated above this deduction is
irrespective of the actual expenditure
you may have incurred on insurance
repairs electricity water supply etc so
in this example standard deduction is 30
percent of this amount which is oke
69,000 second is deduction of interest
on home loan for the property in case
you have taken a home loan for purchase
construction repair or reconstruction of
your house house property the interest
is allowed as a deduction from the net
annual rent value now we have discussed
this in detail in our section 24 video
the total amount allowed towards the
deduction is rupees 2 lakhs in case of a
rental property the entire interest is
allowed as deduction under section 24
till financial year 2016 to 2017 however
there is a change from financial year
2017-18 deduction for interest on rent
out property is allowed only up to
rupees 2 lakhs
so after reducing both the deductions we
get this amount as income from house
property for Salim next is income on
to your profession or business is
charged under the head profits and gains
of business or profession the income
chargeable is the difference between the
revenue received on running the business
and expenses incurred the deductions
allowed our depreciation of assets used
for business rain for premises insurance
and repairs for machinery and furniture
advertisements traveling and many moves
here we are assuming Sunil does not have
any income under this head next is
income from capital gains any gain or
loss arising from transfer of capital
effect held as investments is put to tax
under the head capital gains gain can be
a short term or long term a capital gain
arises only when a capital asset is
transferred for example selling a
property or a stock or a mutual fund
unit etc for more details on this please
refer to our video on this topic for
simplicity sake we are considering that
Sunil does not have any income from
capital gains next is income from other
sources any income that does not fall
under any of the four heads of income
above is taxed under the head income
from other sources an example is
interest income from bank deposits
winning from lottery any sum of money
exceeding rupees 50,000 received from a
person as a gift we are assuming no
income of Sunil under this head so total
gross income for Sony is income from
salary plus income from house property
which is rupees seven lat fourteen
thousand four hundred rupees now after
knowing your gross income next step is
to calculate tax deductions which is a
way to reduce taxable income and
therefore the tax that one needs to pay
you can claim the deductions under
different heads popular ones are shown
in the table here if you invest in any
of these places you can get tax
deduction of maximum of two rupees 1.5
lakhs on your gross income similarly if
you invest money in NPH Tire one you get
maximum rupees fifty thousand per years
strattice direction and similarly for
others all these deductions and many
moves are discussed in detail in our tax
saving playlist now for our Sunil's
example let's assume sony has invested
rupees 50,000 in employee Provident Fund
rupees 50,000 in tax saving mutual fund
also called as a LSS and rupees 50,000
he has paid back his home loan principal
payment in the financial year under
consideration let's also assume he has
taken health insurance which has premium
of rupees 20,000 per years he has not
used any other deduction so he has
appreciatively utilised his maximum
limit of section 80 C that is rupees 1.5
lakhs
plus deduction under Section ATT so
total deduction for Sunil is rupees 1.7
lakhs which should be reduced from his
gross income for tax calculation and
therefore his taxable income becomes
this much now once we have the final
taxable income next step is to determine
the tax payable based on tax lab first
is to identify the relevant tax lab for
calculation so if your income
calculations are for the year 2016-17
that is 1st April 2016 to 31st March
2017 then we need to take tax lab
relevant for same financial year
following is the 2016-17 financial year
tax lab and we will calculate the income
tax of Sunil based on this now assuming
Sunil to be a male below 60 years and
taxable income is rupees five lakh forty
four thousand four hundred so he falls
under twenty percent tax bracket and
this is how his income tax will be
calculated he will not pay any tax on
his first rupees 2.5 lakhs of taxable
income for next rupees 2.5 lakh
he will pay 10 percent of tax and for
the amount above rupees 5 lakhs which is
44 thousand four hundred he will pay 20
percent of
so after adding education says to the
total income tax will be this much so
rupees thirty four thousand eight ninety
six is Sunil's total tax liability for
the year please remember there is a
change in tax lab for year twenty
seventeen to eighteen this has become
five percent and there is an additional
surcharge of ten percent for income
between fifty lakh to one Guru rest all
remains same now final step is to know
how much TDs you have paid and
determining final tax to be paid
TDS amount deducted can be checked in
your form sixteen or form twenty six
years
if total TDS paid is more than your tax
liability calculated before then you can
apply for tax refund during return
filing and if TDS is lower then
difference need to be paid while filing
the returns that is all we have on this
topic hope you have understood how
income tax is calculated if you have any
question please do write in the comment
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