What are the steps required for computation of tax payable under income tax ?

The steps required for computation of tax payable are :

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1. Compute income under different heads and applying the rules of set off and carry forward and set off of losses.

2. Apply the provisions of clubbing of income, and find out total income.

3. From the total income thus arrived at, reduce long term capital gains and lottery winnings.

4. Compute income-tax at prescribed rates in respect of long term capital gains and winnings from lottery.

5. Compute income-tax on the balance of income according to the rate schedule given.

6. From the tax computed under (5) above, deduct rebate of tax allowed under sec­tion 88 and 88B.

7. Add up income-tax on long term capital gains, winnings from lottery and tax after rebate computed under (6) above.

8. To this will be added surcharge at 12 per cent, if warranted.