#3 - How To Calculate Income Tax For Beginners | EXAMPLES Of Income Tax Calculation | FinCalC [VIDEO]

Hello guys, today in this post we are going to see the basics of Income Tax calculation method, with the help of examples. It is very important to know how the Income tax is calculated based on the Income Tax Slab Rates. 

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Let's consider the Tax Slab rates for the people of age below 60 years: 

• No Tax if your Income is less than Rs. 2.5 lacs. 

• 5% Tax if your Income is between Rs. 2.5 lacs to Rs. 5 lacs.

• 20% Tax if your Income is between Rs. 5 lacs to Rs. 10 lacs. 

• 30% Tax if your Income is above Rs. 10 lacs.

Let's now see Calculation examples for each Tax slab rate. 

EXAMPLE 1:
Let's say if your income is Rs. 2 lacs. In this case, you need not have to pay any income tax since your Income is below Rs. 2.5 lacs, so your Income tax is equal to Rs. 0. 

EXAMPLE 2:
Let's say your income is Rs. 4 lacs. So based on the Income Tax Slab rate, you are supposed to pay 5% Income Tax between Income of Rs. 2.5 lacs to Rs. 4 lacs. This calculation is done in the following way. Rs. 4 lacs minus Rs. 2.5 lacs, which is equal to Rs. 1.5 lacs. Now 5% Income Tax is applicable on this Rs. 1.5 lacs, which makes it equal to Rs. 7,500. 
This is how Income Tax is calculated based on Income Tax Slab rates. There are some other things such as Tax rebate and cess which comes into picture while calculating actual Income Tax, which we will see in upcoming videos. 

In this video we have just considered the Tax slab rates for Income Tax Calculation purpose to make it easy for you in a step by step process. Follow our YouTube video series for better understandability of Income Tax Calculation and related topics. 
You can also download our free android APP FinCalC to calculate your actual Income Tax based on your Incomes and Investments, the link to which is in the description section. 

EXAMPLE 3:
Let's now see another example where income is Rs. 7 lacs. 
In this example, 5% and 20% Slab rates will be applicable in following way. 5% Tax on income between Rs. 2.5 lacs to Rs. 5 lacs, and 20% Tax on income from Rs. 5 lacs to Rs. 7 lacs. So 20% Tax on Rs. 7 lacs minus Rs. 5 lacs is equal to Rs. 40,000. And 5% Tax on Rs. 5 lacs minus Rs. 2.5 lacs is equal to Rs. 12,500. So your Income Tax becomes equal to Rs. 40,000 plus Rs. 12,500, which is equal to Rs. 52,500 This is the way how income Tax is calculated for income belonging to higher Tax slab rates. 

EXAMPLE 4:
Similar to this, if the income is above Rs. 10 lacs, we will also have 30% Tax applicable on above Rs. 10 lacs of income that would also come into picture. Let's say your income is Rs. 12 lacs. So 30% Tax on Rs. 12 lacs minus Rs. 10 lacs is equal to Rs. 60,000. 20% Tax on Rs. 10 lacs minus Rs. 5 lacs is equal to Rs. 1 lac. and 5% Tax on Rs. 5 lacs minus Rs. 2.5 lacs is equal to Rs. 12,500. 
So your Income Tax becomes equal to Rs. 60,000 plus Rs. 1 lac plus Rs. 12,500, which is equal to Rs. 1,72,500 

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