Finance & Taxes

[CrAnkit.13]

It seems very Common...but there is not Much Clarity about Income Tax that whether it is Calculated on Savings left after all spent of Financial Year or it's calculated on overall income earned throughout that Year..??

For Ex: Suppose I earned 15 Lacs & spent 14 Lacs in altogether expenses in 2022-23, so the Income Tax is Calculated on 15L or 1L left at last in Acc after all Spendings...??

 

[Ketan H.]

Income tax is calculated on your total income for the financial year, not on your savings left after all expenses. This means that you will have to pay tax on all of your income, including your salary, bonuses, commissions, rental income, interest income, capital gains, and any other income that you receive.

In your example, if you earned Rs. 15 lakhs in 2022-23 and spent Rs. 14 lakhs, your taxable income will be Rs. 15 lakhs. You will have to pay income tax on this amount, based on your applicable tax slab.

There are some deductions that you can claim from your taxable income, such as deductions for house rent allowance (HRA), leave travel allowance (LTA), medical expenses, and investments under Section 80C. However, even after claiming these deductions, you will still have to pay tax on your remaining taxable income.

To calculate your income tax liability, you can use the income tax calculator provided on the website of the Income Tax Department of India.

Here is an example:

Suppose your total income for the financial year 2022-23 is Rs. 15 lakhs and you claim the following deductions:

• HRA: Rs. 2 lakhs
• LTA: Rs. 1 lakh
• Section 80C deductions: Rs. 1.5 lakhs

Your net taxable income will be:

Total income: Rs. 15 lakhs
HRA deduction: Rs. 2 lakhs
LTA deduction: Rs. 1 lakh
Section 80C deduction: Rs. 1.5 lakhs
---------------------------------
Net taxable income: Rs. 10.5 lakhs
You will have to pay income tax on Rs. 10.5 lakhs, based on your applicable tax slab.

Note: If you are a senior citizen (aged 60 years or above) or a super senior citizen (aged 80 years or above), you are entitled to higher tax deductions.

 

[ShavirB]

It seems very Common...but there is not Much Clarity about Income Tax that whether it is Calculated on Savings left after all spent of Financial Year or it's calculated on overall income earned throughout that Year..??

For Ex: Suppose I earned 15 Lacs & spent 14 Lacs in altogether expenses in 2022-23, so the Income Tax is Calculated on 15L or 1L left at last in Acc after all Spendings...??

It's calculated on basis the total income earned (NOT on the Savings).

 

[Tax with Ria]

It seems very Common...but there is not Much Clarity about Income Tax that whether it is Calculated on Savings left after all spent of Financial Year or it's calculated on overall income earned throughout that Year..??

For Ex: Suppose I earned 15 Lacs & spent 14 Lacs in altogether expenses in 2022-23, so the Income Tax is Calculated on 15L or 1L left at last in Acc after all Spendings...??

The Income Tax Act, 1961.
As the name suggests, tax is collected on income we've earned not on the savings left after spending. Well, people think that tax should be charged on the net savings left and not on net income and condemn the current model of income tax, as already salaried individuals are claiming fake/bogus deduction under Chapter VI-A to evade taxes.
Well we must keep in mind that while formulating the income tax policies, government keeps in mind every bracket of income earning people.

If the net savings model is implemented then people who are earning less of income will be taxed on the net savings which they have saved for their future crises.
For eg- A earns 500000 p.a and his total expenses of rent, fooding, electricity, conveyance etc is 240000 p.a, IF HE'S NOT SPENDING ON LUXURIOUS ITEMS. Net savings are 260000. Then he might get taxed at 5% leaving him to saving of 19000 approx every month which is less.

On the other hand, B earns 1500000 p.a and his total expenses are 600000 p.a. But in order to save taxes he'll enter into extra expenditure of fake invoices showing expenditure which in return will harm the country's revenue and will create a mess.

So, it income tax is charged on net income after deducting expenses like LIC PREMIUM, HRA, ELECTRICITY etc. This model will not only regulate your expenses but will improve transparency of individual.

 

[Blogger]

It seems very Common...but there is not Much Clarity about Income Tax that whether it is Calculated on Savings left after all spent of Financial Year or it's calculated on overall income earned throughout that Year..??

For Ex: Suppose I earned 15 Lacs & spent 14 Lacs in altogether expenses in 2022-23, so the Income Tax is Calculated on 15L or 1L left at last in Acc after all Spendings...??

Okay so let me clarify it. It all depends on the source of income. Like if it's a business or professional income tax will be calculated on the profit, but if it's a salary income then after standard deduction it will be calculated on whole amount. For e.g. You earned salary of Rs. 1500000 so 50000 would be standard deduction and on remaining amount of Rs. 1450000 you have to pay tax.