Tax is filed by everyone because it is mandatory regardless of where we are born and where we live. Our income tax is a fund for our government. Yes, it is the primary source of income for our respective governments from which it spends on various developmental and maintenance projects that we see all around us.
Calculating tax has always been a common practice. Earlier it was filed manually, with a pen and paper. However, gradually with the rising trend of the digital platform, things switched over to the digital method and it is presently the method that we follow to calculate our taxes and file it duly.
We are surrounded by a world of digital tax calculators that are changing the way we used to calculate our taxes and making it far easier and efficient.
Check out how tax is calculated
Our taxes are a certain amount of money that is a percentage deducted from our income. Now, it can vary widely from person to person and will entirely depend on the amount of money one earns. In most countries, a standard procedure is followed where the first part of your income, which is up to a certain amount, is charged at a flat rate of 20%. This fixed charge is termed as the standard rate of tax. Also, you must know that the amount that it applies to is known as the standard rate tax band.
The calculation of taxes in the present scenario
We all have to calculate our taxes but for most of us living in the present age, calculation of taxes by the primitive manual method is not only difficult but also excessively time-consuming. And we don’t really want to lose out on our precious seconds right? That’s why we have these new-age tax calculator all around us, to make our work easier, cutting off all of our confusions.
Now, avoiding the consultation of our tax consultant or financial advisor, we can simply download or work out the whole procedure of filing taxes online. Also, at the end of the calculation, it is now also possible to know about whether we are eligible for tax refunds. In fact, we can know three things at the end of our calculation, they are:
- It will help us know whether we owe any money to the IRS.
- It will also let us know if the IRS owes us money.
- Or, it will help us understand that we are leveled with our taxes and no one owes the other.
Now, though nothing noteworthy happens in the last case and it is always BAU then, but if we owe money to the IRS, then we should pay the bill that comes at the end because we have not paid our taxes or a certain amount of it. Also, if the IRS owes us money then we would be getting our money back in the form of tax refunds. Yes, tax refunds are after all our own money that we have overpaid earlier.
A Step-by-step guide of calculating your income tax with the help of a calculator for a particular year
In case you are wondering how you can effortlessly calculate your tax using one of the tax calculators that you can avail today, then don’t worry because we will demonstrate it here though an easy step-by-step method.
So, here we go without wasting much of your time:
1. In the first step, you usually have to select the financial year for which you wish to file your income tax.
2. Then, it is time to select your age correctly. You should know that the tax liabilities vary according to the age of a person in most countries while filing taxes.
3. Next, you need to click on the tab that says ‘Go to Next Step’
4. Now, you need to enter your taxable salary. The salary you enter here should be the salary you receive after deducting a set of exemptions like HRA, LTA, standard deduction, and so on. (That is if you want to know your tax liability under the old tax slabs)
And if not, you can simply enter your salary. This will then be the amount that you get without implementing any other exemptions like HRA, LTA, standard deduction, professional tax, and so on. (That is if you want to know your tax liability under the new tax slabs) In the following steps you need to enter all the other details pertaining to your income and interest and finally, you need to calculate everything to know the result. So, happy calculating! Good Luck!