Calculation of Income Tax in India

The Income Tax Act, 1961 states that every assessee in India, which includes individuals, companies and local authorities, is entitled to pay an annual income tax. However, not all assesses are required to pay income tax. The Indian government has setup a minimum exemption limit, which is revised periodically, typically every financial year. The assessee is only mandated to pay income tax when their income exceeds this limit.

How to Calculate Salary after Deducting Income Tax

The calculation of income tax is subject to a slab, wherein different income levels qualify for different income tax rates. Consequently, the larger your annual salary, the higher tax you pay. In India, income tax calculations vary for senior citizens, women and other individuals. 

Income Tax Calculation for Senior Citizens

Anyone over 65 years is eligible to be taxed as a senior citizen in India. For the financial year 2009-2010, a senior citizen with an annual income up to Rs.2,25,000 does not have to pay any tax. For those having an annual income above this amount, the income tax calculation is as follows:

Income Taxed Salary of Women

Women below the age of 65 years benefit from higher exemption limits than their male counterparts. This is done to emancipate and support women, who are presumed to be the weaker segment of the society. The exemption limit for salaried women during the financial year 2009-2010 is Rs.1,80,000.

Women earning more than this amount are taxed as follows:

Income Tax for Individuals

This group comprises of all individuals who do not qualify under the categories of senior citizens and women. This group has the lowest tax exemption limit, which is Rs.1,50,000 for the year 2009-2010. The tax slab for individuals not eligible for this exemption is: