How to Calculate Total Tax Under Both Regimes Using TaxBuddy

Calculating total tax liability is a crucial step in managing finances effectively and ensuring compliance with the Income Tax Act. Both salaried individuals and professionals need to understand how their income, deductions, and exemptions affect the total tax payable. With multiple components contributing to the final tax, including salary, capital gains, interest income, and other heads, it can quickly become complex. Moreover, the choice between the old and new tax regimes, along with the proper utilisation of deductions, directly impacts the tax outcome. Accurate calculation helps avoid underpayment or overpayment and ensures timely refunds if eligible. Platforms like TaxBuddy simplify this process by providing automated, AI-driven calculations, helping taxpayers understand their total tax liability efficiently while minimizing errors.

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Table of Contents

• Overview of Old vs New Tax Regime

• Understanding Total Tax Components

• Using TaxBuddy to Calculate Total Tax

• Step-by-Step Calculation of Total Tax

• Impact of Investments and Deductions on Tax

• Practical Example: Total Tax Calculation

• Common Mistakes to Avoid While Calculating Tax

• Conclusion

• Frequently Asked Questions (FAQs)

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Overview of Old vs New Tax Regime

The Indian tax system offers two main regimes: the old tax regime and the new tax regime. The old tax regime allows taxpayers to claim various deductions such as Section 80C investments, HRA, medical insurance under Section 80D, and other exemptions. This regime is generally preferred by those with significant deductions and exemptions.

The new tax regime, introduced under Section 115BAC, offers lower tax rates but removes most deductions and exemptions, providing a simplified structure. Taxpayers need to evaluate their income, eligible deductions, and personal circumstances to choose the regime that results in the lowest total tax liability.

Understanding Total Tax Components

Total tax is calculated by combining several components:

• Income Tax on Salary: Tax applicable on income from salary after deductions.

• Income from Other Sources: Includes interest, dividends, and rental income.

• Capital Gains Tax: Tax on profit from the sale of assets such as stocks or property.

• TDS and Advance Tax: Tax already deducted or paid during the year.

• Surcharge and Cess: Additional charges based on income levels, including health and education cess.
  

Understanding each component ensures accurate calculation and helps taxpayers plan investments or payments strategically.

Using TaxBuddy to Calculate Total Tax

TaxBuddy offers a seamless, AI-driven platform to calculate total tax liability. By entering income details, deductions, and exemptions, taxpayers can instantly view their total tax under both the old and new regimes. TaxBuddy also automatically factors in TDS, advance tax payments, and applicable cess, reducing manual errors and providing a clear picture of tax payable or refundable.

Step-by-Step Calculation of Total Tax

Gather All Income Details The first step in calculating total tax liability is to consolidate all sources of income for the financial year. This includes:

• Salary Income: Collect Form 16 issued by your employer, along with salary slips and details of any allowances received.

• Interest Income: Include interest earned from savings accounts, fixed deposits, recurring deposits, and bonds. Bank statements or Form 26AS can be used to confirm these amounts.

• Capital Gains: Include gains from the sale of property, stocks, mutual funds, or other investments. Ensure both short-term and long-term capital gains are accounted for.

• Other Income: Include rental income, freelance or professional income, and any other taxable income.
  

Having all income details ensures that the total taxable income is accurate and prevents errors during filing.

2. Choose Tax Regime Next, decide whether to calculate your taxes under the old tax regime or the new tax regime.

• Old Regime: Allows standard deductions, HRA exemptions, and deductions under sections such as 80C, 80D, 80E, etc.

• New Regime: Offers lower tax rates but does not allow most exemptions and deductions.
  

Selecting the appropriate regime can have a significant impact on the total tax payable.

3. Apply Deductions and Exemptions Once the tax regime is chosen, apply all eligible deductions and exemptions:

• Section 80C: Investments in PF, PPF, ELSS, NSC, life insurance premiums, and principal repayment of home loans (up to ₹1,50,000).

• Section 80D: Health insurance premiums for self, family, and senior citizens.

• HRA (House Rent Allowance): Applicable if you live in rented accommodation and receive HRA as part of your salary.

• Other Deductions: Include donations under 80G, interest on education loans under 80E, and other applicable exemptions.
  

Deductions reduce the gross total income, helping to lower your tax liability.

4. Calculate Tax on Total Income After deductions, calculate tax based on the net taxable income using the applicable slab rates:

• For the old regime, use the standard slabs with basic exemption limits, considering the chosen deductions.

• For the new regime, apply the revised lower tax rates without claiming most exemptions.
  

This step gives you the base tax before any additional charges.

5. Add Surcharge and Cess Next, include:

• Surcharge: Applicable for higher income brackets. The rate depends on the taxable income (e.g., 10%, 15%, 25%, or 37% depending on income exceeding ₹50 lakh or ₹1 crore).

• Health and Education Cess: A flat 4% of the tax plus surcharge is levied to fund government health and education programs.
  

This step ensures the total tax liability reflects all statutory charges.

6. Subtract TDS / Advance Tax Paid Finally, deduct any tax already paid during the year:

• TDS (Tax Deducted at Source): Tax deducted by your employer or other parties. Check Form 26AS to verify.

• Advance Tax: Any advance tax paid in quarterly installments.
  

The remaining amount after these deductions is your net tax payable. If the taxes paid exceed liability, it will result in a refund; if less, you need to pay the balance tax.

TaxBuddy simplifies these steps and provides a detailed breakdown instantly.

Impact of Investments and Deductions on Tax

Investments under Section 80C (like PPF, ELSS, NSC), insurance premiums under 80D, and home loan interest can significantly reduce taxable income under the old regime. Choosing investments strategically can lower total tax liability and increase refunds. In the new regime, fewer deductions are allowed, so the focus shifts to comparing tax savings with lower slab rates. Using TaxBuddy, taxpayers can see the direct impact of each deduction on their total tax.

Practical Example: Total Tax Calculation

Consider a salaried professional with the following details:

Component	Amount (₹)	Tax Impact
Salary	12,00,000	Base Income
80C Investments	1,50,000	Deduction
80D Medical Insurance	25,000	Deduction
Interest Income	50,000	Added to Taxable
Capital Gains	1,00,000	Taxed Separately
TDS Already Paid	1,20,000	Subtracted

Using TaxBuddy, the total tax liability is calculated automatically under both regimes, showing which option is more tax-efficient.

Common Mistakes to Avoid While Calculating Tax

Accurate tax calculation is crucial for avoiding penalties, ensuring refunds, and maintaining compliance with the Income Tax Act. Despite this, taxpayers often make avoidable errors that can lead to unnecessary financial and administrative issues. Some of the most common mistakes include:

Ignoring Eligible Deductions or Exemptions: Many taxpayers fail to consider the full range of deductions and exemptions available under the Income Tax Act, such as Section 80C (investments in PF, PPF, ELSS), Section 80D (health insurance premiums), and House Rent Allowance (HRA). Missing these can result in overpayment of taxes, reducing the potential for refunds or savings.

Forgetting to Include TDS or Advance Tax Already Paid: Taxpayers sometimes neglect to factor in TDS (Tax Deducted at Source) from salary, bank interest, or other sources, as well as any advance tax payments made during the financial year. Overlooking these amounts can lead to incorrect tax calculations, causing either underpayment or overpayment.

Applying Wrong Tax Slab Rates: With the availability of both old and new tax regimes, it is critical to apply the correct slab rates. Using the wrong rates can significantly distort the tax liability, either resulting in additional payments or delays in refunds due to mismatches.

Not Accounting for Surcharge or Health and Education Cess: Taxes in India are not limited to the basic slab rates. Surcharge and the 4% health and education cess must also be included in total tax liability calculations. Ignoring these components can lead to non-compliance and penalties.

Delaying Tax Calculation: Procrastinating on tax calculations can increase the risk of errors, missed deadlines, and late fees. Delays can also complicate the reconciliation of TDS and other credits, increasing the chances of scrutiny.

Using an automated and reliable tool like TaxBuddy can minimize these mistakes. The platform ensures accurate tax computation by considering eligible deductions, TDS, tax slabs, surcharge, and cess automatically. It also provides a structured filing process, reducing errors, improving compliance, and helping taxpayers avoid penalties while saving valuable time.

Conclusion

Calculating total tax accurately is vital for effective financial planning and compliance. Using platforms like TaxBuddy ensures precision, compares old and new tax regimes, and shows the impact of deductions and investments. For anyone looking to simplify their tax calculation process and avoid errors, it is highly recommended todownload the TaxBuddy mobile appfor a seamless and hassle-free experience.

FAQs

Q1. Can TaxBuddy calculate total tax under both old and new regimes? Yes, TaxBuddy automatically computes your total tax liability under both the old and new tax regimes. It provides a clear comparison, showing which regime results in lower tax based on your income, deductions, and exemptions. This feature helps taxpayers make an informed decision and choose the most tax-efficient option without manually calculating each scenario.

Q2. Are deductions like 80C, 80D included in calculations? Absolutely. TaxBuddy factors in all eligible deductions under the old tax regime, including common provisions like Section 80C (investments in PPF, ELSS, life insurance) and 80D (health insurance premiums). This ensures your taxable income is accurately reduced, giving you a precise estimate of your tax liability and helping you maximize eligible savings.

Q3. How does TaxBuddy handle TDS and advance tax? TaxBuddy considers all TDS (Tax Deducted at Source) and advance tax payments you have made during the financial year. It subtracts these amounts from your total tax liability automatically. This ensures your final payable tax or refund is accurate, avoiding any discrepancies or errors in calculation.

Q4. Can I calculate tax for multiple income sources? Yes, TaxBuddy supports comprehensive tax calculations for various income types. This includes salary, interest income, rental income, capital gains, professional fees, and other sources. By consolidating all income streams, the tool ensures an accurate total tax liability without missing any source.

Q5. Does the tool account for surcharge and cess? Yes, TaxBuddy automatically includes all applicable surcharges and the standard 4% health and education cess in your tax calculation. This provides a complete and realistic estimate of your total tax liability, so you are aware of the exact amount payable.

Q6. Is it safe to enter personal income details on TaxBuddy? Yes, the platform is fully secure. TaxBuddy uses encryption and secure protocols to protect your personal and financial data. You can safely enter sensitive information like PAN, salary, bank details, and investments without worrying about data breaches or unauthorized access.

Q7. Can TaxBuddy help with filing the return after calculation? Yes, once your tax is calculated, TaxBuddy guides you through the e-filing process. The platform supports online submission of ITR, helps with uploading necessary documents, and assists in verification via Aadhaar OTP, net banking, or other options. This ensures a seamless end-to-end tax filing experience.

Q8. Is it suitable for freelancers and professionals? Yes, TaxBuddy is designed to cater to individuals with multiple income types, including freelancers and professionals. It can handle professional fees, consultancy income, and other self-employment earnings while factoring in TDS, eligible expenses, and deductions for accurate tax computation.

Q9. Can I revise calculations if my income or deductions change? Yes, you can update your income details, deductions, or investments at any point, and TaxBuddy will instantly recalculate your tax liability. This flexibility helps you stay prepared for changes during the financial year and ensures accurate filing without manual rework.

Q10. Does it help in tax planning for the next year? Yes, TaxBuddy provides tax projections for future financial years based on your current income and proposed investments. You can explore how additional contributions to Section 80C, 80D, NPS, or other deductions will impact your tax liability, helping you plan smarter and save more.

Q11. Are capital gains calculations included? Yes, both short-term and long-term capital gains from equity, mutual funds, and property are included in TaxBuddy’s calculation. The platform automatically applies relevant exemptions, indexation benefits, and TDS adjustments to ensure accurate capital gains reporting.

Q12. Can I track refunds using TaxBuddy? Yes, TaxBuddy allows you to monitor the status of your income tax refund. Once your ITR is filed, the platform updates you on processing stages and estimated timelines. You will also receive notifications for any actions required, ensuring transparency and peace of mind.