5 Common Mistakes People Make When Using an Income Tax Calculator

In this article, we will discuss

• What Is an Income Tax Calculator?
• Common Mistakes While Using an Income Tax Calculator
• How to Use an Income Tax Calculator Online?
• What Are the Benefits of Using an Income Tax Calculator?
• How to Understand Income Tax Slabs?
• How to Calculate Income Tax on Salary?
• Why Use Samco’s Income Tax Calculator?
• Final Words
• Frequently Asked Questions

Income tax return filing is essential and you must file it with utmost care. For this, you should have sound knowledge of taxation laws, including rules for deductions, exemptions and tax slabs. To ease the tax return filing process, you could use an income tax calculator.

The calculator functions based on the latest provisions of the Income Tax Act and makes your job much easier. However, you can still make mistakes, which can lead to penalties and legal proceedings.

That is why it’s important to know the common mistakes involved with using the calculator. We have listed everything you need to know to ensure accurate return filing.

What Is an Income Tax Calculator?

An income tax calculator is an easy-to-use tool that allows you to calculate taxes online on your taxable income. Using this calculator, you can easily manage your expenses for the current financial year and maximise your savings. With the proper use of an online \tax calculator, you can eliminate the hassles of manual calculations. This also saves you time and effort.

To use the calculator, you need to enter all necessary details including your annual income and expenses that qualify as tax deductions. Once you provide all these details, the tax calculator will show your tax liability within seconds.

Common Mistakes While Using an Income Tax Calculator

While the use of calculator makes it easy to file correct returns, many taxpayers end up making some mistakes. Here are the most common income tax calculator mistakes every taxpayer should know:

• Selection of Wrong Assessment Year

  To taxpayers, confusion arises between the terms 'Assessment Year' and 'Financial Year'. The year following a financial year when the filing of tax returns takes place is called the assessment year. For example, returns for the financial year 2023-2024 will be filed in the assessment year 2024-2025.

  This means that for income earned during any financial year, you file returns in the next year. However, some people may confuse between the two terms, resulting in rules being applied for the wrong year.

• Providing Incorrect Personal Details

  While using this online calculator, taxpayers often provide incorrect personal details including wrong account number, incomplete address, wrong mobile number, wrong spelling in name, etc.

  While filling up details in a tax calculator, double-check if you have provided all necessary details. Any mistake in personal and bank details will show you the wrong tax liability. Then, you will have to file a revised return and pay penalties if it’s outside the due date.

• Failing to Include Income from Investments

  While calculating income tax returns using an online calculator, taxpayers miss including incomes from investments such as mutual funds, capital gains from selling stocks, interest earned, and others. All these diversified sources of income are fully taxable.

  In addition, income from interest from savings accounts and fixed deposits must be marked under the head ‘income from other sources’. So, make sure you include your income under all different sources while computing taxes for the year.

• Missing Out Deductible Expenses

  Under Section 80D, health checkups are eligible for tax deductions of up to ₹5,000. However, all medical expenses of senior citizens are eligible for deductions. Furthermore, medical expenses for a disabled person are also tax deductible. While filing income tax returns, you need to go through the conditions and limits of each tax deduction/exemption. Else, you will make mistakes on your ITR form.

• Missing Out HRA Details

  HRA is an important component of your salary exempted from income taxes. As a taxpayer, if you miss out on mentioning proper HRA details in this calculator, it will provide you with an improper calculation of your taxable income. Most taxpayers often miss out on mentioning HRA details during tax calculations. As soon as you notice this, you must rectify the error.

How to Use an Income Tax Calculator Online?

Here is a detailed step-by-step on how to use the calculator online:

Step 1: Choose the Year

Select the year for which you want to check your tax liability. The chosen year will be following the financial year. For example, if the tax dues for FY 2022-23 need to be checked, the assessment year will be FY 2023-24

Step 2: Choose the Age Category

Select the age group you belong to. This is because the prevailing tax slabs differ for senior citizens, non-senior citizens, and super senior citizens.

Step 3: Income Details

Click on 'Next' to enter all details of your income including interest income, gross salary, income from other sources, home loan interest, and rental income

Step 4: Enter the Deductions Applicable

Again, click on 'Next'. This will take you to the deductions section. Here you will need to enter all details of tax deductions you are eligible for. This includes basic deductions under Section 80C, health insurance premiums under Section 80D, donations under Section 80G, interest on education loans under Section 80E, etc.

Step 5: Fill in the HRA Details

Here comes the last section namely, HRA exemption. Enter all the necessary details including annual HRA received, annual basic salary and rent paid per year.

Step 6: Calculate Your Tax Liability

Once you enter all the necessary details, click on 'Calculate'. Thus, you will be able to see your tax liability for the financial year under both old and new tax regimes. Comparing the values for both years, you can choose the tax regime that will be an ideal option for you.

What Are the Benefits of Using an Income Tax Calculator?

This online tool helps in managing taxes effectively. It meets the needs of taxpayers regarding simplifying tax-related planning and calculations. Here are the following benefits:

• The calculator helps in facilitating proactive tax planning. By knowing your tax liabilities in advance, you can adopt strategies and make tax-saving investments. Alongside, this will also enable you to make your expenses and income more structured.
• Using an online calculator eases your tax estimation process. Submission of annual income details and investment and expenses gives you an accurate calculation of your income tax.
• Income tax slabs and rules keep on changing over time. Thus, it becomes challenging to stay aware of the latest regulations. Use our calculator to know the latest tax rates and rules.
• Filing tax returns may seem daunting at times. The use of this online calculator breaks down the process of filing tax returns into easy steps and enables you to manage your finances systematically. This also lowers the chances of errors in your tax returns.
• The calculator enables taxpayers to make income tax calculations with ease. Because of the online availability of the calculator, you can access it from anywhere and anytime.

How to Understand Income Tax Slabs?

In India, income tax is based on slab systems. The tax rate progressively increases for higher brackets of income, ensuring that people with lower incomes are not overburdened.

The term 'tax slabs' refers to the different rates of taxes charged on individual taxpayers for different categories of income. In other words, the more you earn, the more you will have to pay taxes. However, these slabs do not stay constant and they can be changed with the announcement of the Union Budget.

Here are the tax slabs under the old regime (for individuals below 60 years):

Here are the tax slabs under the new regime (for individuals below 60 years):

How to Calculate Income Tax on Salary?

To calculate income tax on salary, you need to follow the below-mentioned steps:

Step 1: Calculate your gross salary. Gross salary includes your allowances, basic salary, bonus as well as other taxable components.

Step 2: Some of the components of your salary might get exempted from income taxes. The exemptions include leave travel allowance, standard deduction, and house rent allowance. You will derive your taxable salary after deducting these exemptions from your gross salary.

Step 3: You can claim for deductions under different sections of the Income Tax Act including Section 80D, Section 80C, and Section 24b. To know your net taxable income, subtract these deductions from your salary.

Step 4: Calculate the taxes applicable to your taxable income. While filing your income tax returns, you can determine your slab rates and corresponding tax rates, as per your income.

Step 5: Considering each slab, calculate your tax liability and sum up to determine your total income tax liability.

Step 6: Consider the rebates or any surcharges based on your specific circumstances. For instance, individuals with taxable income of up to ₹7 lakh are eligible for a rebate under Section 87A (which reduces their tax liability).

Step 7: Calculate the health and education cess on your total tax liability.

Step 8: Tax Deducted at Source (TDS) is deducted from an employee’s salary every month. This is however applicable if you are a salaried individual. You need to reduce the TDS already deducted from your tax liability.

Step 9: If your income is taxable, it is mandatory to file an Income Tax Return (ITR) with the Income Tax Department. For this, report your tax payments, deductions, and income on time.

Why Use Samco’s Income Tax Calculator?

At Samco, we offer all sorts of tools and facilities to help you manage your investments and trades. You can use Samco’s Income Tax Calculator to get an accurate estimate of your tax liability.

Our calculator is an easy online tool and consider using the tool from the Samco Trading App. The app will provide you with a detailed guide while filing income tax returns and prevent you from making mistakes.

Final Words

By now, you must have a clear understanding of this online handy tool. You should file your income tax returns before the due date. Filing at the last moment might create a negative impact on the results of return filing. Also, ensure that all details you enter are correct. These are some of the most common mistakes for tax you should avoid.

Frequently Asked Questions

1. What are the different types of income included in the income tax calculator?

Ans. The calculator takes into consideration different types of income including rental income, salary income, business/professional income and capital gains. It also includes other various types of income earned including interest income and gains from lottery winnings, etc.

2. Does the income tax calculator calculate TDS?

Ans. No, this calculator does not calculate TDS. You need to deduct the TDS you have already paid from your net tax liability for the financial year.

3. Is it mandatory for everyone to file their income tax returns?

Ans. Every senior citizen, individual and super senior citizen must file their income tax returns if their earning exceeds the basic exemption limit. However, if your earnings are less than the exemption limit, you only need to file your income tax returns to claim tax refunds.

4. Should I use the Income Tax Calculator tool on the official website of the Income Tax Department of India?

Ans. Yes, you can access this online tool on the official website of the Income Tax Department of India. Alongside, you can also use the tax calculator, income, and tax calculator on the website.

5. Who is eligible to use income tax calculators in India?

Ans. Any salaried or self-employed individuals eligible to pay taxes during the financial year can use the calculator in India.

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