How Income Tax is Deducted

Can you tell me about the process to deduct Income Tax in India as I am unaware about it and want to know all about it, please help me with this?

[Pathak]

Any income received by an employee is taxed under the head Income from Salaries in India.

It is only taxable when an employer-employee relationship exists.

The first thing one need to know is the salary slab they fall under.

Slab Income Slab (Rs.) Income Tax Rate

0 0 to 2,50,000 NIL

I 2,50,001-5,00,000 10%

II 5,00,001-10,00,000 20%

III 10,00,001 and above 30%


If one fall in Slab I, tax is deducted on the amount that exceeds Rs. 2,50,001/- .
Similarly, tax for Slab II and Slab III is calculated for the amount that exceeds Rs. 5,00,001/- and Rs. 10,00,001/- respectively.
The same principle also applies to the tax slabs for senior citizens (Aged 60 years but less than 80 years):-

Slab Income Slab (Rs.) Income Tax Rate

0 0 to 3,00,000 NIL

I 3,00,001 to 5,00,000 10%

II 5,00,001 to 10,00,000 20%

III 10,00,000 and above 30%

India Income tax slabs 2014-2015 for very senior citizens (Aged 80 and above):-

Slab Income Slab (Rs.) Income Tax Rate

0 0 to 5,00,000 NIL

I 5,00,001 to 10,00,000 20%

II 10,00,000 and above 30%

Deductions on Income from Salary
The deductions on Income from Salary fall under the Section 16 of the Income Tax Act. The deductions are:

Entertainment Allowance under Section 16(ii):
Deduction is allowed by way of entertainment allowance given by an employer.
This deduction is available only for the Government employees.
The deduction is either the 1/5th of salary without including the benefits or perquisites or other allowances or Rs.5,000, whichever is lesser.
The non-government employees can avail this deduction.

Tax on Employment under Section 16(iii):
The Professional Tax is allowed as a deduction while computing income from salaries.

How to Calculate Income Tax