Income Tax Basics for B.Com Students: Complete Guide

Income Tax Basics for B.Com Students — Complete Guide with Examples

Why B.Com students must learn Income Tax

Income tax is one of the core topics in B.Com accounting and finance papers. Beyond exams, basic tax knowledge helps students understand payroll, salary structure, deductions, and personal finance decisions. This guide explains concepts simply, shows worked calculations, compares the old and new tax regimes, and gives practical filing tips.

Key terms — quick reference

Assessment Year (AY): The year in which income is taxed (e.g., AY 2025-26).
Previous Year / Financial Year (FY): The year in which income was earned (e.g., FY 2024-25).
Gross Total Income: Total income before deductions and exemptions.
Taxable Income: Gross total income minus allowable deductions.
Deductions: Amounts allowed under sections like 80C, 80D, etc., which reduce taxable income.

Current tax regimes — old vs new (high level)

Indian taxpayers can choose between the old (legacy) regime (which allows many deductions/exemptions) and the new regime (simplified slabs with fewer exemptions). Which is better depends on your deductions and income. See official tax rates for the exact slab numbers — source: Income Tax Department. :contentReference[oaicite:1]{index=1}

Illustrative slab summary (for student understanding)

For clarity, here are the commonly used slab breakpoints referenced in official sources (verify for the exact Assessment Year you teach or study):

Old regime (example): Up to ₹2,50,000 — Nil; ₹2.5L–5L — 5%; ₹5L–10L — 20%; >10L — 30%. :contentReference[oaicite:2]{index=2}
New regime (example): Up to ₹3,00,000 — Nil; ₹3L–7L — 5%; ₹7L–10L — 10%; 10L–12L — 15%; 12L–15L — 20%; >15L — 30%. :contentReference[oaicite:3]{index=3}

Worked example — step by step

Practical example helps most students. We'll compute tax for a student (or fresher) with salary and standard deductions.

Scenario A — Salary ₹7,50,000 in FY (using sample slabs)

Gross Salary: ₹7,50,000
Standard deduction (if salaried): ₹50,000 → Net = ₹7,00,000
Assume no other deductions (for simplicity)

1) Tax under Old Regime (sample old slabs)

Using old regime slabs (0–2.5L nil; 2.5–5L @5%; 5–10L @20%):

Tax on ₹2.5L–5L = 5% of ₹2,50,000 = ₹12,500
Tax on ₹5L–7L = 20% of ₹2,00,000 = ₹40,000
Total tax = ₹52,500
Add Health & Education Cess (4%) = ₹2,100 → Tax payable ≈ ₹54,600

2) Tax under New Regime (sample new slabs)

Using new regime slabs (0–3L nil; 3–7L @5%; 7–10L @10%):

Tax on ₹3L–7L = 5% of ₹4,00,000 = ₹20,000
Tax on remaining ₹0 (since net income after standard deduction = ₹7,00,000)
Total tax = ₹20,000
Add Cess 4% = ₹800 → Tax payable ≈ ₹20,800

Conclusion: In this simplified example, the new regime is cheaper (₹20,800 vs ₹54,600) because there were few eligible deductions. If you have large 80C/80D deductions, the old regime may become beneficial. Always run both calculations with your real deductions to choose correctly. (Slabs cited from the Income Tax Dept and tax guides.) :contentReference[oaicite:4]{index=4}

How to decide: new regime vs old regime — comparison checklist

Use this checklist to decide quickly:

If you claim large 80C (PF, PPF, ELSS) or education loan interest, the old regime may be better.
If you have few deductions and prefer lower base rates, the new regime may be simpler and cheaper.
Compare both by calculating tax payable — a small spreadsheet helps (we provide a sample below).

Quick spreadsheet method (recommended for B.Com students)

Column A: Income heads (Salary, Interest, Other)
Column B: Gross amounts
Column C: Deductions claimed (80C/80D etc.)
Compute taxable income & apply both slab tables — choose the smaller tax payable.

Exam-style short notes (memorize these)

Assessment Year vs Previous Year: AY = year of filing; PY = year income earned.
Basic exemption limit: Old regime commonly uses ₹2.5L; new regime commonly uses ₹3L (check latest AY rules). :contentReference[oaicite:5]{index=5}
Cess: Health & Education Cess = 4% on tax (commonly applied).

Practical filing & exam tips

Always keep proofs for 80C, 80D, HRA (rent receipts), and others — examiners and employers often ask for verification.
Use the official e-filing portal for practice; it shows step-by-step forms and is the source of truth. :contentReference[oaicite:6]{index=6}
Teach your classmates one worked calculation — explaining improves retention.

Common mistakes students make

Mixing up AY and FY when solving numerical questions — always write both in answer scripts.
Forgetting to apply cess and surcharge where applicable.
Using gross salary without subtracting standard deduction / professional tax.

Sample questions (for practice)

Compute tax for a salary of ₹12,00,000 with ₹1,50,000 investments under 80C — compare old and new regimes.
Explain advantages and disadvantages of the new tax regime for a fresh graduate.

Summary — what to remember

Learn the slab structure, practice 5–10 calculations, and always compare both regimes before filing. For exams, state which AY/FY you're using and show each step clearly. For real-life filing, cross-check rates on the official Income Tax Department site. :contentReference[oaicite:7]{index=7}