How to Calculate Tax Of Your Salary With Inbuilt Automated Software

An in-built software solution can make the tax calculation process more straightforward and more convenient.

Currently, the Government of India has imposed an income tax as a partial mandatory deduction to facilitate the country's economic development and defense needs. There is a reason why there is a partial tax, not every salaried individual is required to pay tax, but rather depending on the amount they receive and the tax slabs created under the new and old tax regimes, it will depend on their income level. Nevertheless, employees are allowed to recover the amount by filing income tax returns after calculating them specifically.

In addition to automating a number of tax-related tasks, organizations are also adopting payroll management systems like TrackOlap to make employees able to carry out many payroll-related tasks more easily by automating many of the activities related to human resources, accounting, and payroll. In this way, companies can save a considerable amount of time and effort while improving efficiency and productivity. In addition, this tool can increase the engagement and accountability of employees by empowering them to manage themselves.

With the help of a payroll management application, employers can be able to determine how much money they should set aside for future tax obligations based on income tax projections - a 'forward-looking' seamless process. It is important for them to make projections to avoid getting caught off guard by an unexpectedly high tax bill. They can also avoid fines due to underpayment of taxes.

Before we deep dive into the main topic, let’s have a look at the new tax regime 2023-2024 India!

Key Differences Between the New & Old Tax Regimes:

The new tax rates under the new tax regime were announced by Indian Finance Minister Nirmala Sitharaman during the Union Budget 2023. A new tax system was implemented in addition to the current one in FY 2020–2021. Taxpayers can choose to opt for one of these income tax regimes in FY 2022–23 (AY 2023–24) and pay tax in accordance with their choice. These two Indian income tax systems are different primarily in a few ways:

Firstly, compared to the previous tax system, the new one has more tax slabs with lower tax rates. Because of this, depending on whether you choose the new or the old tax regime, the income tax slabs for FY 2022–23 (AY 2023–24) are different.

Secondly, if you choose the new tax system, you are not eligible for any of the important deductions and exemptions, like Section 80C, Section 80D, and others, that were available under the previous system.

Eventually, the new tax system gives taxpayers the chance to enhance their take-home pay and does not need them to make an upfront investment, whereas the previous system reduced take-home pay since taxpayers had to make certain long-term investments to receive the advantages.

Because the majority of the exemptions and deductions are unavailable under the new tax regime, the taxpayer does not need to bother about the documentation and compliances. While claiming deductions and exemptions under the old system, taxpayers were required to have all the necessary documentation, and in many situations, the employee was required to provide this documentation to the employer.

What is Income Tax Slab?

Individual taxpayers are expected to pay their income taxes according to the income tax slab system. A person may fall under a different tax bracket depending on their income. As a result, people with higher incomes will have to pay more taxes. The introduction of the slab system aimed to keep the nation's taxation structure equitable. Every time a budget is announced, the slabs typically vary.

Things you must consider before opting for new tax Regime:

You can choose between the new and old tax regimes that are now available to individual taxpayers in India. However, before you decide, keep in mind the following key details:

Take into account tax-saving deductions and exemptions:

The new tax system, compared to the previous one, features more income tax slabs and lower income tax slab rates for the fiscal year 2022–2023 (FY 2022–2023). But there aren't many exemptions and deductions available under the new tax system. There are around 70 exemptions and deductions on this list, such as HRA, Section 80C deductions, and the benefit for house loan interest that are available under the old tax system but ineligible under the new system.

Age-based lower Tax Exemption Limit:

The old tax regime offered higher tax exemptions for senior citizens and super senior citizens of Rs. 3 lacks and Rs. 5 lacks, respectively, based on income tax slab rates in AY 2023–24. The new tax system only offers an exemption limit of Rs. 2.5 lakh, regardless of the taxpayer's age, hence the old tax regime's higher limit is not available under it.

Consider Other Advantages Besides Tax Savings:

Under the old tax regime, tax-saving investments and expenses such as a term life insurance policy, Public Provident Fund, and National Pension System provided a dual benefit. On the one hand, this lowers your tax burden, but on the other hand, they also offer advantages like long-term wealth creation or family financial security. In the case of the new tax regime, you do not get any tax savings at all.

What is it like to file your taxes?

During the process of filing tax returns, employees are expected to provide a wide range of information about themselves and the truthfulness of this information. Because true and truthful information is of utmost importance, an employee may experience several difficulties, as mentioned below.

Employee queries

The financial year is about to come to an end, which means that employees have to submit their return amount as well as the corresponding proofs. Employees may find it hard to understand and ask HR to resolve any queries they have about their exempt sections and where to submit the proofs, as they have a variety of categories/sections that are available to them, including HRA, hostel-going children, bank interest, fringe benefits, allowances, etc., because of the number of categories/sections they have access to.

Share your attachments with others

A company may require employees to submit proofs in softcopy or hardcopy formats. This can typically be done via mail or physical forms. If the employee is a recruit, he may already be aware of the process and may ask HR for guidance. If you are a manager, you could also ask HR for assistance.

There are limits to the exemptions

Employees are not all compensated the same way or receive the same benefits, payment, and salary structures. As a result, employees may have different exemption criteria based on their salaries, payments, and benefits. A common human tendency is to forget or be completely unaware of the exemptions on taxable income that are available to them, for which no one but human resources must be consulted.

Calculation of taxable income

There are a variety of income types that may or may not be considered taxable under the final income head, depending on which employees are eligible for the exemption amount under the final income head. It can be extremely challenging for an employee to calculate his or her taxability based on the variety of sources of income they earn.

There are different types of regimes

As the TDS slabs have been updated, only a few companies have been following the new scheme, and there is nothing wrong with that, as long as employees are aware of the new regime their company uses. If employees are not aware of the new regime, their IT returns might be delayed.

How TarckOlap’s Solution Fix the Income Tax Declaration Problems?

Here is the best HR app that is offered for the challenges highlighted above in TrackOlap’s tax declaration feature within its web and mobile solutions. The IT declaration support in TrackOlap’s web and mobile solutions has every aspect that can assist employees and HR with the process of income tax computation.

Solution options that have been proposed

There is an online portal, as well as a mobile application, which works as an Android app as well as an iOS app to provide the IT declaration solution to employees.

Uploading proofs online is very easy and convenient

The TrackOalp feature allows employees to upload all proofs regarding the declarations they have made, and they do so in softcopy format. It is so easy to create proof as it can be captured and uploaded by employees even through their mobile phones. There is no need to print it and submit it in physical form.

Regime selection

In this payroll management solution , the employees have the option to select between post-budget and pre-budget calculations, i.e., the old regime and the new regime based on the slabs that they would like to take into consideration in the calculation.

All income categories are available for use

Employees have the option to enter their exempted amount in the feature where they can attach proof for the required field to be covered under the tax exemption, and all types of income can be exempted under the tax exemption.

The generation of IT forms in an organization

There is an advantage of using the digital signature option of the software when compared to the manual process of asking HR for forms 16 and 24Q. Employees can easily download the form from their mobile app or web portal directly from their mobile devices.

Calculating your tax liability with an innovative inbuilt tax calculator

It is important to know how much income tax will be deducted and projected for the upcoming month. There must be a separate option called “tax calculator” in the solution that gives you information about how much income tax has been deducted and how much will be deducted in the coming month. As a result of this, employees can verify and file their tax returns more efficiently and effectively.

With TrackOlap’s cloud-based computing platform, you can easily manage your finances and stay on top of all your tax-related activities with a cloud-based accounting system that is error-free and accurate in no time and with much less effort than ever before. Their tax calculator is error-free and completely secure to make your work easier. Manage the tax declaration, calculate the deductions, availing Form 16, and TDS details are now easily available with TrackOlap.

Let's wrap up with a few words

Almost every sector where humans work is deeply rooted in technological advancements, including business activities. TrackOlap has developed a solution that focuses on the employee and helps organizations boost their productivity by offering employee-centered solutions. A tax declaration solution that we offer becomes extremely useful for HR managers near the end of the financial year when many tasks have to be completed and many are due to be completed within a short period of time.