What income am I taxed for?

Income is not only salary, but it includes all the income that you earn from all other sources. The other sources include house property, profit/loss from selling stocks, interest earned on a savings account/fixed deposits. All the income generated from these sources are your gross income and thus is taxable.

So, how much tax I have to pay?

Tax is levied on the total income generated from all the sources. You can avail deductions on your taxable income under Section 80. Taxes for the Financial year 2016-17 are levied as per the defined tax slabs mentioned in this table below.

Tax Slab in Rupees FY 2016-17 Up to Rs.2,50,000 No Tax 2,50,000 - 5,00,000 10% 5,00,000 - Rs.10,00,000 20% Rs.10,00,000 and beyond 30% Surcharge: 10% of the Income Tax, where the total income exceeds INR 1 Cr. Education Cess: 3% on the sum of total income tax and surcharge.

For senior citizens of 60 years or older, the 0 tax limit is prescribed for income up to INR 3,00,000.

When an employer deducts tax from employee salary and pays it to the I-T Department on their behalf

The TAX employer deducts is called TDS or Tax Deducted at Source which they pay to IT department. The amount they cut off from the salary, is calculated on the base of your total income and investments you did.

The employers also provide a TDS certificate called Form 16 around June or July which shows all the calculations of monthly deductions. Banks also deduct TDS on interest earned from Fixed Deposits at a rate of 10% when they have your PAN information. If they do not have your PAN information then they cut TDS at a rate of 20%.

Description of Form 16:

Typically it’s a TDS certificate which shows the calculation of TDS deducted by your employer during the whole financial year. It also contains details of your salary and deductions applied on it.

It has two parts

Part A

details about employer and employee name, address, PAN and TAN details and TDS deductions.

Part B

details of salary paid, other incomes, deductions allowed, tax payable.

Description of Form 26AS:

It shows the summary of taxes deducted on your behalf and taxes paid by you. The Income Tax Department provides this and it can be accessed from the I-T Department's official website.

Minimize your taxable income by availing deductions:

While e-filing income tax return, remember to claim all the tax deductions and benefits that apply to you.Section 80C of the Income Tax Act offers a deduction of Rs.1, 50,000/- in many ways of investments. Also, there are a bunch of other deductions one can avail under the Section 80C to 80U.