Know the best tax-saving tricks for your current tax slab!

The financial world is always evolving in order to adapt to the globe’s progress; this also implies that something new is continually occurring without folks being aware of it. Individuals widely recognise the concept of professional tax in the upper echelons of society. In India, the literacy rate for such information is often poor.

It is preferable to educate them on what an income tax is and what it is for this year to assist them in grasping this. The income tax slab was not changed in the Union Budget 2022. In this manner, a person will understand the professional tax system and what the government intends to accomplish with it.

What is Income Tax?

Income tax is a sort of professional tax levied by the central government on the income produced by people and corporations during a fiscal year. The government generates income via taxes. This money is used by the government to fund infrastructure development, healthcare, education, farmer/agriculture subsidies, and other government welfare programs.

Types of Income Tax Payers

The Income Tax Act categorises taxpayers so that various professional tax rates may be applied to different groups of taxpayers. Taxpayers are classified as follows:

• Individuals
• Hindu Undivided Family (HUF)
• Association of Persons(AOP)
• Body of Individuals (BOI)
• Firms
• Companies

Individuals are further classed as residents or non-residents. Residents are required to pay professional tax on their worldwide income in India, which includes money generated both in India and overseas.

Non-residents, on the other hand, must pay professional taxes solely on income earned or accumulated in India. For professional tax reasons, the residence status must be decided independently for each fiscal year based on India’s unique tenor of stay. For tax reasons, residents are further categorised into the following categories:

• Individuals under the age of 60
• Individuals above the age of 60 but under the age of 80
• Individuals above the age of 80

Taxpayers and Income Tax Slabs

Under Indian income tax legislation, each of these taxpayers is taxed differently. Individual, HUF, AOP, and BOI taxpayers are taxed depending on the income bracket they fall under, while businesses and Indian corporations have a set rate of professional tax computed on their taxable earnings.

People’s earnings are classified into professional tax brackets or tax slabs. And the tax rate varies according to the tax slab. With an increase in income, the rate at which income is taxed rises.

Income Tax Slabs Under New Tax Regime

Individuals and HUFs will be able to take advantage of a new professional tax system with reduced tax rates and zero deductions/exemptions beginning in the fiscal year 2022-23. Individuals and HUF choose to opt for the new regime or stick with the old.

The new professional tax system is voluntary, and the decision should be made when submitting the ITR. If the previous system is maintained, the taxpayer will be able to make use of all applicable deductions and exemptions.

Most deductions, such as deductions and exemptions, are not available if taxpayers choose the New Tax system. However, the following exclusions and deductions are allowed under the new regime:

• Allowances for transportation in the event of a disabled individual.
• Conveyance allowance earned to cover transportation costs incurred as part of the job.
• Any remuneration paid to cover the expense of a trip or transfer.
• Daily stipend paid to cover routine normal charges or expenses incurred as a result of his absence from his usual place of employment.

Income Tax Calculation

Individuals should compute income tax based on the nature of their earnings. Salary earners might make use of the available exclusions for different allowances.

Individuals and HUFs may claim a deduction under Sections 80C through 80U, subtract it from their total gross income, and then calculate their income tax due using the income tax calculator. In addition, the total income tax obligation should be adjusted for taxes paid, such as advance tax, TDS, and so on.

In addition, the taxpayer should apply the impact of the rebate under Section 87A and relief under Sections 89, 90, and 91 to determine the net amount of income tax due.

The income tax calculator is a simple online application that allows you to estimate your taxes depending on your earnings once the Union Budget is released. We have updated our tool to reflect the planned income tax adjustments in the Union Budget 2022-23.

How to use the Income tax calculator for FY 2022-23 (AY 2023-24)

Following are the steps to use the income tax calculator:

1. Select the fiscal year for which you want your taxes computed.
2. Choose your age wisely. In India, tax duty varies according to age group.
3. Click the ‘Go to Next Step’ button.
4. Enter your taxable salary, which is your pay after subtracting different exemptions like HRA, LTA, standard deduction, and so on. (If you want to see what your tax burden would have been under the former tax slabs)
5. Alternatively, input your salary without any exemptions such as HRA, LTA, standard deduction, professional tax, and so on. (If you want to find out what your tax burden would be under the new tax slabs)
6. Along with your taxable salary, you must include information such as interest income, rental income, interest paid on a leased house loan, and interest paid on a loan for a self-occupied property.
7. Enter the net income (sale consideration minus cost of acquisition) under Income from Digital Assets; such income is taxed at 30% plus any relevant surcharges and cess.
8. Click ‘Go to Next Step’ once more.
9. If you wish to compute your taxes using the old tax slabs, you must input your tax-saving investments under sections 80C, 80D, 80G, 80E, and 80TTA.
10. Click the’ Calculate’ button to calculate your tax due with the income tax calculator. You will also be able to compare your pre-budget and post-budget tax obligations (old tax slabs and new tax slabs).

Wrapping It Up

Knowing what rate you will wind up paying depending on your income is critical for effective tax preparation. Although these rates are the same at present, they may change throughout the following fiscal year. As a result, Canara HSBC Oriental Bank of Commerce Life Insurance makes certain that every one of their customers is aware of what they pay as professional taxes to preserve the income tax bracket rates.