Free Excel Tax Application – Calculating income tax can be difficult due to many rules and regulations. There are calculators and other tools you can use. You can also get CA support. But the best way is to use Excel to simplify this process. In this article, we will look at the tax system and explain how to calculate income tax in Excel. We also provide useful examples of using different tax slabs.
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Plus, to help you out, we’ve included ready-to-use Excel templates with instructions on how to use them. This template will help you determine the amount of tax you will have to pay in 2023-2024 based on the old and new tax rates.
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There may be additions and deletions to related tax regulations from time to time. This happens when the government is always changing. Therefore, it is important to stay aware of changes in tax rates.
The table below shows the tax rates under the old and new tax regimes. Information taken from government tax website and Indian Budget press release.
Note: The table above shows the tax rates for people under 60 years of age. As Government of India has different tax brackets for people of different ages, please refer to the official website for details.
To help you calculate income tax in Excel, we have included a ready-to-use Excel template that you can download here. Go ahead and download the template.
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3. We have included tax rates (old and new) and additional rates on the same sheet.
(We have already written this formula in the Excel sheet, so Excel will only use the price and this formula and calculate the taxable income and taxes.)
Note: If the amount is less than 50 lacs, the additional column will give the result ‘0’.
Step 1: You need to know in advance about the old or new regime taxes and rates.
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We do this to determine how many tax brackets and rates we should use. If your income falls into the second bracket, you must use the first and second brackets. If it is in the third bracket, then use the first, second, and third brackets.
Example: Suppose you find 9 hours. According to the tax table shown in section 1, your income falls in the third group (5 lacs to 10 lacs). So we have to look at three tax brackets: up to 2.5 lac, 2.5 to 5 lac, and 5 lac to 10 lac.
We divide income into each tax bracket because each tax bracket has a different tax rate. And to get the taxes right, we need the correct taxable income for each bracket.
Since your income is 9 lacs, the first 2.5 lacs fall into this group. We subtract the lower tax rate from the higher rate (2.5 – 0 = 2.5).
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Now that we have broken down income by bracket, we just need to apply the tax rates.
Let’s understand how to calculate income tax in Excel with some examples. We have included all the examples below in the ready-to-use templates provided in the previous section.
Suppose an employee named Happy Hogan has an annual salary of 5 lacs, gross profit of 75,000 and deductions of 20,000. As before, income above 2.5 lacs and below 5 lacs is taxed at 5%. tax policy. Let’s calculate his taxable income and the total tax he has to pay in the fiscal year.
Note: We’ve included Excel slides for all the steps, so it’s easy to follow the calculations.
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Step 2: Create two lines to calculate “Income Tax” and “5% Income Tax” as shown below.
Step 3: First, we get taxable income, which is the income on which we pay taxes. To do this, we subtract discounts and payments from the total amount
To do the same calculation in Excel, you need to enter this formula in cell B5: “=B2 –B3 –B4”.
Step 4: Press Enter to get the added formula results. In Excel, pressing Enter tells the program to calculate.
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Income tax is 5% on income above 2.5 lacs and below 5 lacs as per the old tax system.
Result: Happy’s income is 1.55 lac (including tax deductions) and he has to pay Rs. 7,750 as income tax.
Let’s say Alex’s income is 28 lacs. Total profit is 5.5 lac and deduction is 2.3 lac. Alex wants to use a tax system under the old tax system. Let’s calculate Alex’s taxable income and the taxes he must pay in the fiscal year.
Step 2: Add additional tax fields as shown below.
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Therefore, we write down the formula “= B2 -B3 -B4” and subtract the amount of profits and discounts from the total income.
Step 5: To calculate all taxes, we first calculate each council’s taxes and add them up.
Therefore, Alex’s taxable income is Rs.20.20 lacs and he has to pay Rs.4,185 lacs as income tax.
In the example above, we calculated taxes using the manual calculation method. However, there is a very different way of using the IF function to calculate taxes. Let’s calculate the tax using the IF function.
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When using the IF function (logical_test, value_if_true, value_if_false), we must provide a value (what to check) and then an action (what Excel should do).
The IF function we use here is very complex. To understand how it works, read our detailed guide on “Excel IF Function”.
In the case of IF, we check whether the income is less than or equal to the higher tax bracket. We do this to determine how much tax we have to pay on income.
The top brackets and IF system for each plate are listed in the table below. Because we are using Excel cell numbers in the IF condition, we have also determined the contents of each cell.
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Note: For the last bracket (above 10) we do not have an upper bracket. So here we see if the amount is more than the bottom button (10 lacs).
2. Value_if_false: We don’t need this for tax calculations. So we don’t want to add it.
In this step, we create the final IF formula that we will use. To do this, keep all fields included in comma-separated boxes, for example:
As we have explained the formula, type the formula above and paste it in cell B6.
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Result: Alex’s taxable income is Rs.20.20 lacs and he has to pay Rs.4,185 lacs as income tax.
Based on the example above, users can calculate taxes based on the new tax system introduced in Budget 2023. Alex can estimate the tax amount based on both taxes.
Step 3: Similar to step 5 of example 2, calculate the tax amount on each board until you reach the last one.
Here the taxable income is 20.20 lacs, so the tax that falls below is 15 lacs and above.
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Result: The tax amount will be 3.06 lacs on income of 20.20 lacs under the new tax system in cell B7. So, Alex had to pay 4.185 lacs under the old regime and 3.06 lacs under the new regime.
Note: To calculate income tax and expenses incurred in the previous year 2021-22, citizens must follow the old system.
Let’s say the user’s salary is 90 lacs. The total benefit is 15 lacs and the total discount is 9.8 lacs. Tax payments and additional details are also available based on the old tax schedule. Now the user wants to calculate his income and the taxes he has to pay in the financial year.
Let us see how a user can calculate his income and tax his income as income tax to the Government.
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Step 2: To calculate additionally, create 5 more rows to calculate taxable income, tax liability, expenses, health and education costs, and the tax amount.
Step 3: Select cell B5 to calculate taxable income. Subtract the amount of wages and deductions from the total amount.
Step 5: Enter tax rate and value added information to calculate tax on 65.20 Lacs.
Step 6: Calculate the tax using the IF function as above, using the formula in cell B6.
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Step 8: Since the amount is more than 50 lacs, additional 10% is charged on tax in cell B6.
Step 9: Now, after adding additional income to income, calculate the 4% tax for Health and Education in cells B6 + B7.
Step 10: Now after adding up, calculate the total tax in cell B9
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