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How to calculate income tax on CTC?

 

Guide to calculate income tax on salary

Income Tax Slabs 2020-21 - Revised Income Tax Slabs & Tax Rates in India FY 2020-21

CTC means Total Cost of an employee To The Company.

Tax is not calculated on CTC as there are some payment either to government on account if employer and provision for some differed payment

Gross salary figure is less than the CTC.

Gross Salary = CTC

Less :

Employer's PF contribution

Employer's ESIC contribution

Provision for payment of Gratuity at time of leaving and/or retirement

Gross Salary

Less : all allowable exemptions

HRA - House Rent Allowance,

Medical Reimbursement,

LTA/LTC Leave Travel Allowance

and such other perquisites

are deducted to arrive at taxable income and on such income, tax is calculated as per tax rates applicable for the relevant assessment year.


Find updated latest income tax slab rates in India for Individuals, Company, NRI, HUF, BOI, AOP, LLP, Local Authority, Co-operative society. 

What is the meaning of Income Tax Slab in India?
In India, we have a progressive method of taxation i.e. higher income higher the tax payable. To govern the same taxation in India is determined based on Income Tax slab which are defined by the tax department Earlier the applicability of Income Tax Slab depends on various factors such as - residential status, quantum of income, type of assessee and age.

What is the new regime of income tax?
In Budget 2020 the tax department has introduced the concept of new tax regime by way of insertion of new section 115BAC. From FY 2020-21(AY 2021-22) onwards the individual and HUF will have an option to choose between the new and old tax regime. Both regimes have separate tax slabs and rates along with separate deductions/exemptions. For the understanding of users, we have given a comparative chart of the income tax slab under the new and old regime on this page.

 


What are the changes in new Income tax slab rates for F.Y. 2020-21 (A.Y. 2021-22)?

1- No Tax on Taxable Annual Income up to Rs. 5 Lakh.

The limit of Rebate u/s 87A has been increased from Rs.3.5 Lakhs to Rs.5 Lakhs. Section 87A provides exemption on tax payment to a RESIDENT INDIVIDUAL. As per this provision, if an individual’s taxable income is upto Rs. 5 lakhs then he will get the benefit of Rs. 12500 or the amount of tax whichever is lower. If you are liable to pay tax upto the limit of rebate allowed, then after taking the rebate benefit, no payment will be required to be made for tax amount. For availing the full amount of rebate, the Total Taxable Income of return filer shall be up to Rs 5,00,000 for the Financial Year 2019-20, the Assessment year 2020-21.

2- Standard deduction increased from Rs 40,000 to Rs 50,000 for salaried class and pensioners. 3- No change in Income Tax slabs for individuals but a hike in surcharge

The new budget has hiked the surcharged rates to another level. It is as high as 35% for an individual earning income above 5 crore and surcharge of 27% for the income group of 2-5 crore and 15% for income group of 1-2 crore and 10% for 50lakh-1 crore income group individuals.

4- Those companies whose turnover does not exceed INR 400 crore is liable to 25% tax rate and above 400 crore turnover 30% tax.

 


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