Excel Formula for Computing Income Tax

While trying to calculate my tax liability, I happened to create a single cell formula in MS-Excel which computes the tax liability based on the total taxable amount as the input to it. This formula will be helpful to many others so I thought of sharing it with all those who are looking for an excel formula for tax computation.

Step 1: Copy the formula given below in cell I25 of an excel sheet

=IF(H25<=160000 , 0, IF(H25<=300000, (H25-160000)*10%, IF(H25<=500000, (H25-300000)*20% + (300000-160000)*10%, (H25-500000)*30% + (500000-300000)*20% + (300000-160000)*10%)))

Step 2: Enter the total taxable income for FY 2009-10 in cell H25 in the same excel sheet

Step 3: Computed value in cell I25 is the tax liability – it will be automatically computed by the above formula

Note that there are four tax slabs as of this year (FY 2009-10) as explained below:

Upto 160000 INR – No tax (0%)
More than 160000 INR and Upto 300000 INR – 10% tax
More than 300000 INR and Upto 500000 INR – 20% tax
More than 500000 INR – 30% tax

This formula can easily modified for use in the next FY and even beyond even if there are any changes in the tax slabs. The logic would remain the same, the value and the formula construct may need to be tweaked appropriately.