[VIDEO] Senior Citizens: How To Calculate Income Tax in FY 2020-21 Excel Calculator Examples

In Budget 2020, we were informed about the New Slab Rates that will be introduced from FY 2020-21. Many have the questions in mind about the conditions of using New Slab Rates that were introduced and How the Income Tax will be Calculated. These Old and New Tax Slabs will also be applicable for Senior Citizens between age 60 years to 79 years. Let's see how your Income Tax will be calculated

Income Tax Calculator Video:

Here is a video that calculates Senior Citizens Income Tax using Excel Calculator. Watch to know how your Income Tax will be calculated in FY 2020-21 using some Excel Examples:

WATCH: All Excel Calculators Videos

In this video, we have seen How to Calculate Income Tax based on Old and New Tax Slab Rates and which one you should choose to pay less Income Tax.

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Overview:

• New Tax Slab Rates are Reduced Tax Slab Rates
• You will have to forgo all the Deductions if opting for New Tax Slab Rates. This means you will not get benefits of various investments under Section 80C, Section 80D, Standard Deduction and any other deduction you used to claim in previous years with Old Tax Slab Rates

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Here are the Old & New Tax Slab Rates for Senior Citizens:

Senior Citizens Old and New Tax Slab Rates

As we can see in above table, if someone's income is Rs. 8 Lakhs in a Financial Year, he/she falls under 15% Income Tax bracket based on New Tax Slabs whereas he/she falls under 20% Income Tax Bracket based on Old Tax Slabs.

Now, it depends on you which Tax Slab Rates you want to choose to calculate your Income Tax for FY 2020-21. The only point you need to remember is that you need to forgo all Investment options or Deductions in case you want to opt for New Tax Slab Rates. This means you cannot claim Deductions under any Section, if opting for New Tax Slab Rates.

Choosing Old Tax Slab rates gives you the benefit of claiming deductions that will help in reducing Income Tax.

Tax Rebate u/s 87a:

Another important point is, your Tax Liability (Income Tax) becomes Rs. 0 if your Net Taxable Income is below Rs. 5 Lakhs.

Many should take advantage of this Rebate that we get under Section 87A which helps us in reducing our Tax Liability. In case your Net Taxable Income is below Rs. 5 Lakhs, you need not have to pay any Income Tax.

Example: Let's say your Net Taxable Income equals Rs. 5 Lakhs in FY 2020-21

Based on Old and New Tax Slab Rates, you are liable to pay Rs. 12,500 as Income Tax based on your Net Taxable Income.

But we also have Tax Rebate u/s 87A which provides us a maximum rebate of Rs. 12,500, thus making our Income Tax = Rs. 0.

Note: This Rebate is applicable with both Old and New Tax Slab Rates

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How to Get your Net Taxable Income below Rs. 5 Lakhs:

There are 2 conditions based on which you will be eligible for Tax Rebate u/s 87a:

1. In case your Total Income is below Rs. 5 Lakhs. You will be directly eligible to get this Tax Rebate u/s 87a. Income Tax becomes Rs. 0
2. In case your Total Income is above Rs. 5 Lakhs, you need to choose Old Tax Slab Rates while calculating Income Tax and make required Investments in such a way that your Net Taxable Income becomes less than 5 Lakhs

Watch this video to know How to reduce your Net Taxable Income to save Income Tax:

FORMULA:

Net Taxable Income = Total Income - Investments you make

You can make investments under Section 80C (Provident Fund, Public Provident Fund, Fixed Deposits, Equity Linked Savings Schemes, etc), Section 80D (Medical Insurance), Section 80CCD (1B) (National Pension Scheme) and many other options. 

To know more about these Investment options and check their interest calculation, you can WATCH this playlist (Click Here) on YouTube I have created for you

In this way, if you can get your Net Taxable Income to below Rs. 5 Lakhs in FY 2020-21, by investing in various investment options, you need not have to pay any Income Tax.

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Examples used in Videos and Excel Calculators are for Illustration purpose. The creator of this channel or blog shall not be held responsible in any way by the user of this channel or blog information. Seeking professional help before taking any decision is advised.