“The Income Tax Burden of an IT Professional in India: A Detailed Breakdown”
As an IT employee in India, the taxes you pay can be broadly categorized into the following types:
- Income Tax:
- Income tax is levied on your earnings based on the income tax slabs set by the Government of India.
- The tax slabs and rates for the financial year 2023-24 (Assessment Year 2024-25) under the old and new tax regimes are as follows:
Old Tax Regime (with exemptions and deductions):
- Up to ₹2.5 lakh: Nil
- ₹2,50,001 to ₹5 lakh: 5%
- ₹5,00,001 to ₹10 lakh: 20%
- Above ₹10 lakh: 30%
New Tax Regime (without exemptions and deductions):
Salaried Person with Income tax - Up to ₹2.5 lakh: Nil
- ₹2,50,001 to ₹5 lakh: 5%
- ₹5,00,001 to ₹7.5 lakh: 10%
- ₹7,50,001 to ₹10 lakh: 15%
- ₹10,00,001 to ₹12.5 lakh: 20%
- ₹12,50,001 to ₹15 lakh: 25%
- Above ₹15 lakh: 30%
- Professional Tax:
- This is a state-level tax and varies from state to state.
- The maximum amount charged as professional tax is ₹2,500 per annum.
- Goods and Services Tax (GST):
- As an IT employee, you typically do not pay GST directly. However, you do pay GST on goods and services you purchase, such as food, clothing, electronics, etc.
- The standard GST rates are 5%, 12%, 18%, and 28% depending on the type of goods and services.
- Cess and Surcharges:
- A Health and Education Cess of 4% on the income tax payable.
- Surcharges on income tax for individuals with income exceeding ₹50 lakh (10%), ₹1 crore (15%), ₹2 crore (25%), and ₹5 crore (37%).
Example Calculation:
Let’s assume an annual salary of ₹12,00,000 for an IT employee under the old tax regime:
- Income Tax Calculation:
- Up to ₹2.5 lakh: Nil
- ₹2,50,001 to ₹5 lakh: 5% of ₹2.5 lakh = ₹12,500
- ₹5,00,001 to ₹10 lakh: 20% of ₹5 lakh = ₹1,00,000
- ₹10,00,001 to ₹12 lakh: 30% of ₹2 lakh = ₹60,000
Total Income Tax = ₹12,500 + ₹1,00,000 + ₹60,000 = ₹1,72,500
- Health and Education Cess:
- 4% of ₹1,72,500 = ₹6,900
Total Tax Payable = ₹1,72,500 + ₹6,900 = ₹1,79,400
- Professional Tax (assuming maximum rate):
- ₹2,500 per annum
Total Taxes Paid:
- Income Tax: ₹1,79,400
- Professional Tax: ₹2,500
Grand Total = ₹1,81,900
This is a simplified calculation. Actual taxes may vary based on deductions, exemptions, and additional income sources. Additionally, taxes on purchases (GST) will vary depending on your spending habits
NOTE:
Cess :- A cess is a form of tax levied by the government on tax with specific purposes till the time the government gets enough money for that purpose. Different from the usual taxes and duties like excise and personal income tax, a cess is imposed as an additional tax besides the existing tax (tax on tax).
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