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What is Income Tax and How to Calculate it ?

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What is Income Tax and How to Calculate it ?

What is Income Tax ?  

  Suppose if you see your City,  There are some roadways, railways, airways, water tanks, government schemes,  who afford those. Do you think its a single persons efforts or affords to build or to start those things. Its Highly Impossible. So To develop it's (their's) Country Every Central / State Government collects some tax (income for government) from People (who purchases things or who avails services by others) of that country.

Do you think Is this New Idea i.e, Collecting Tax?

   If you think yes your guess is wrong. Why because, From our ancient days we have this system of collecting taxes. In olden days all kings collects taxes from people who earns money from crops and selling / purchasing goods.

How to Calculate Income Tax ?

    We can easily understand  how to calculate income tax with an example. So if you are ready we can start, Lets start below,

>>> Mr. Subba Rao's earning are   6,00,000 /- . So what is his income tax ?

>   We understand that Mr. Subba Rao's Income is 6 Lakh rupees P.A
    

 First we will divide these income into groups to easily understand.

 (As per our latest Income tax rules)

₹ 0                        ------         ₹ 2,50,000 /-          No Income Tax

₹ 2,50,001 /-        ------         ₹ 5,00,000 /-                10%

₹ 5,00,001 /-        ------         ₹ 10.00,000 /-               20%


    So Now Let us come to our  question,

Upto ₹ 2,50,000 /- Income tax is NIL

For ₹ 2,50,000 /-  to ₹ 5,00,000 is 10% 
So, (5,00,000-2,50,000=2,50,000) 10% of 2,50,000/- is 25,000 /- (income tax)

For ₹ 5,00,001 to ₹ 6,00,000 /- is 20%
So,  (₹ 6,00,000 - ₹ 5,00,000 = ₹ 1,00,000 /-) 20% of ₹ 1,00,000 /- is 20,000/- (income tax)

So total income tax of ₹ 6,00,000 /- is  ₹ 45,000 /- ( NIL + ₹ 25,000 /- + ₹ 20,000 /- )

I think Now you understood how to calculate Income tax.


In upcoming posts we will discuss how (ways) to save (hide) our earnings from income tax and some advanced income tax calculations.....!!!!1

Thank you Friends.....!!!!!!!!  Keep Smilling.......!!!!!!!!!!

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