Income Tax Computation is calculation of total income and total tax liability of a person.
Computation of Income tax can be done at the beginning of the year or at the end of the year.
In the beginning of the year we calculate income tax based on estimated income to plan our taxes.
Income tax is also computed at the time payment of advance tax based on estimated income of the whole year.
And finally income tax is calculated at the time of filing of Income tax return.
In income tax act, 1961 the total income of a person is divided into five heads.
- Income from the head salary
- Income from the head house property
- Income from the head Business or profession
- Income from the head capital Gain
- Income from other sources ( other than above four heads)
The sum total of these five heads is called Gross total Income.
But to calculate the gross total income you need to calculate the income under each head.
You can claim income tax exemption under each head.
Then from Gross Total income, Chapter VI-A deductions (section 80C to 80U) are allowed (reduced).
The outcome is called Total Income.
On total income tax is calculated based on latest tax slabs.
If you do not have more complicated income sources you can use income tax calculator.
If you only have income from salary and interest income, then you can file ITR-1 online.
For correct and planed computation of income, contact your chartered accountant.
If you file ITR with wrong computation, it might lead heavy interest and penalty.