Aware of Income Tax Calculator? Know How to Use It for Smart Investment and Financial Planning

It is very important to have clarity in concepts like investment, earnings, savings and tax liability to make a good financial decision. When you are aware of these terms properly, you are able to make a decision confidentially. By using an income tax calculator, you can be more organised in this sense. This calculator can be used for the purpose of financial planning, along with suitable investment plans that align with our aims.

Using the calculator, one can track their taxable income, check the impact of deductions, can get a rough idea about how much money can be safely allocated towards long-term goals. Choosing the right approach can help you balance your expenses, savings and investments.

Now, let us understand what we mean by an income tax calculator. So, it is basically a digital tool that helps in making an estimation of a taxpayer’s tax liability for a particular financial year. To use this calculator, taxpayers are just required to enter some details like total income, deductions. and exemptions and calculator in the second will show you the result of how much your estimated tax liability is under the Old and New Tax Regime. Several calculators also help in showing a comparison between the New and Old Tax Regime as per your income, which helps you choose the most suitable regime, opting which you are able to save your maximum income.

Here are the steps following which one can use an income tax calculator. Three key steps are followed in most calculators

Step 1: Enter basic information like your age group (since senior citizens have different tax slabs under the old regime), residential status, income sources, and choice between the old regime and the new regime.

Step 2: In the second step, you will be required to navigate to the deductions section. There you have to enter values for:

• Annual life insurance premium
• Public Provident Fund investments
• Employee Provident Fund contributions
• Tax-saving fixed deposits
• Home loan principal repayment
• ULIP and/or other tax-saving investment plans
• Equity Linked Savings Scheme
• Employee contribution to NPS under section 80CCD(1)
• Yearly tuition fees for children
• Other eligible investments under Section 80C
• Deductions under 80D (health insurance premiums), 80G (donation to charitable institutions), and others

Step 3: This is the final or last step where the calculator demonstrates your tax liability. This included taxable income, total deductions, and the final tax payable under the chosen regime. Some calculators even display the difference between the two regimes. Accordingly, you can choose the best regime to lower your maximum tax liability.

Income Tax Calculator