Ease Up Your Tax Planning with Online Tax Calculator

"Income Tax Returns", whenever we hear these words we start getting a feeling of uneasiness and the main reason behind that is the untimely calculation and lack of tax planning. This happens mostly because either we don't have the resources or the time to do such tasks. But now with the help of a new tool known as tax calculator, you can do the above things with a click of a few buttons. So let's see what tax calculator is and how you can easily plan your tax with this tool.

What Is Tax Calculator & How it Works?

Income tax calculator is a simple tool which was developed for making the tax calculation and planning a stress-free experience. With this tool, even a person who doesn't have much knowledge about the taxation system of India can easily calculate his/her tax. Now, let's have a look at the process, following which you can calculate your tax returns.

1. The first step is to search for an authentic online tax calculator, which you can easily do by performing a search on the Google. Remember to choose one which follows the Indian Taxation rules.
2. After searching for the calculator, the first thing that you have to input is your current age. Remember to enter the same exact age, as the taxation criteria are different for different age groups.
3. In the next step, you will have to input your present residential status, which you have to choose from 3 available options which are resident, non-resident, and not an ordinary resident.
4. After that, you will be asked your annual income, so there put the total income which you make in that financial year. Remember to enter the same exact amount as the tax is calculated at different rates for different income slabs.
5. In the last step, you will be asked that if you have an investment in any tax saving instruments (ELSS, PPF, LIC, etc). So if you have made any such investments, then enter the amount that you have invested otherwise leave the space blank.

Now, as soon as you hit enter, the total taxes that you have to pay in that year will be shown on your screen. The whole process will not take more than 2-3 minutes and the best thing is you can easily do this even with your smartphones. Further, let's have a look at how you can plan tax saving with the help of this tool.

How Can it Make Tax Saving Easy?

We already discussed above that Tax calculator can help you in saving in taxes, but how? Let's have a look.

As we know that the government has included several investment options under sec 80c, investing in which can grant you tax exemption on the invested amount. Now, through income tax calculator you can know the optimal investment amount by which you can save the maximum tax. For e.g., let's say your annual income is Rs 5,30,000, which make you liable to pay a tax of Rs 19,055. In the above amount Rs 2,50,000 is exempted from taxation (as per government norms), the next Rs 2,50,000 are taxable at 5% and the remaining Rs 30,000 are taxable at 20%. Now, you make an investment of Rs 30,000 in the ELSS schemes. So, the new taxable income comes down to Rs 5,00,000 from which Rs 2,50,000 are exempted and the rest will be calculated at 5%. No amount will now be calculated at 20%. So the new tax returns that you will have to pay are Rs 12,875, which is Rs 6,180 less than your previous amount and the returns you will make from the above investment are additional benefits.

Now, you have complete information about how a tax calculator works and how you can plan tax saving with this tool. Remember to use it when you plan your taxes for the next financial year and save yourself from the hassles of visiting your financial advisor.

Dishika is well-versed with the ups and downs of the financial market and has published articles on mutual fund and SIP. She is associated with MySIPonline.com, which is an AMFI registered mutual fund company.