Taxable income is the portion of an individual’s or company’s income on which tax owed by the government in a given tax year is calculated. Taxable income includes wages, salaries, bonuses, invested sums, and other types of declared unearned income.
Taxable Income Meaning
‘What is taxable income?’ is a frequently asked question. Taxable income meaning can be further elaborated as a proportion of an individual’s or company’s gross income that is subject to tax as per the Income Tax Act of the Government of India. It consists of both earned and unearned income like canceled debts, government benefits, lottery payments. Income generated from selling appreciated taxes in a given financial year is also included in taxable income.
In this glossary, we will further you about following topics related to taxable income:
As per the Income Tax Act, 1961, income tax is levied on:
- Income from salary
- Income from business or property
- Income from capital gain tax
- Income from house property
- Income from other sources
With the help of Form 16 and salary slips, you can calculate your taxable income on salary. For calculating taxable income on salary, you can apply the following formula:
Taxable income= Gross salary – tax-exempted (House Rent Allowance + Transport Allowance + Medical Reimbursements) + Reimbursements provided on actual bills)Taxable Income Calculator
Total taxable income depends on tax deductions, filing ITR status, and standard deductions. To calculate your taxable income, follow the steps below:
- Calculate adjusted gross income which is equal to gross annual income with subtracted adjustments
- From adjusted gross income, subtract any standardized or itemized deductions and entitled tax exemptions
- The final sum after subtracting form adjustments, deductions and exemptions from gross income is equal to taxable income
Taxable Income Slab 2022-23
An individual who was in India for 182 days or a minimum of 60 days during the preceding tax year or for at least 365 days during the previous 4 years will be taxed.
The new taxable income slab for 2022-23:
| Income Tax Slab | Tax Rate |
|---|
| Up to ₹2.5 lakh | Nil |
| From ₹2,50,001 to ₹5,00,000 | 5% of the total income that is more than Rs.2.5 lakh |
| From ₹5,00,001 to ₹7,50,000 | 10% of the total income that is more than Rs.5 lakh |
| From ₹7,50,001 to ₹10,00,000 | 15% of the total income that is more than Rs.7.5 lakh |
| From ₹10,00,001 to ₹12,50,000 | 20% of the total income that is more than Rs.10 lakh |
| From ₹12,50,001 to ₹15,00,000 | 25% of the total income that is more than Rs.12.5 lakh |
| Income above ₹15,00,001 | 30% of the total income that is more than Rs.15 lakh |
The above mentioned tax slab is optional for individuals. It’s upto individuals if they chose to use the new tax regime or the old one. If filing ITR (Income tax returns) as per slab 2022-23, i.e the new regime, the aforementioned tax slab should be used.
Apart from this, taxpayers can file updated returns in two years in the one-time window.
Taxable Income for Employees
For employees under the age of 60 years:
| Net Income | Income Tax Rate | Education Cess | Secondary and Higher Education Cess |
| Up to Rs.2.5 lakhs | Nil | Nil | Nil |
| Rs.2.5 lakhs to Rs.5 lakhs | 5% of (Total income – Rs.2.5 lakhs) | 2% of income tax | 1% of income tax |
| Rs.5 lakhs to Rs.10 lakhs | Rs.12,500 + 20% of (Total income – Rs.5 lakhs) | 2% of income tax | 1% of income tax |
| Above Rs.10 lakhs | Rs.1,12,500 + 30% of (Total income – Rs.10 lakhs) | 2% of income tax | 1% of income tax |
Taxable Income for Senior Citizens
For individuals between the age of 60 and 80 years:
| Net Income | Income Tax Rate | Education Cess | Secondary and Higher Education Cess |
| Up to Rs.3 lakhs | NIL | Nil | Nil |
| Rs.3 lakhs to Rs.5 lakhs | 5% of (Total Income – Rs.3 lakhs) | 2% of income tax | 1% of income tax |
| Rs.5 lakhs to Rs.10 lakhs | Rs. 10,000 + 20% of (Total income – Rs.5 lakhs) | 2% of income tax | 1% of income tax |
| Above Rs.10 lakhs | Rs.1,10,000 + 30% of (Total income – Rs.10 lakhs) | 2% of income tax | 1% of income tax |
For individuals above 80 years of age
| Net Income | Income Tax Rate | Education Cess | Secondary and Higher Education Cess |
| Up to Rs.5 lakhs | Nil | Nil | Nil |
| Rs.5 lakhs to Rs.10 lakhs | 20% of (Total Income – Rs.5 lakhs) | 2% of income tax | 1% of income tax |
| Above Rs.10 lakhs | Rs.1 lakh + 30% of (Total income – Rs.10 lakhs) | 2% of income tax | 1% of income tax |
Read more: Filing ITR (Income Tax Return) For The Very First Time?