What is Income Tax?
Income Tax is a tax imposed on individuals and companies for their income. In India, income tax is regulated by the Income Tax Act of 1961. Individuals are required to pay taxes on their income based on the tax slabs prescribed by the government. Companies are also required to pay taxes on their profits.
What are the type of taxes?
1. Income Tax: Income tax is a tax levied on individuals or entities (taxpayers) that varies with respective income or profits (taxable income).
2. Corporate Tax: Corporate tax is a tax imposed on limited companies, corporations and other legal entities.
3. Goods and Services Tax (GST): GST is an indirect tax imposed on the supply of goods and services. It is a single tax on the supply of goods and services, right from the manufacturer to the consumer.
4. Wealth Tax: Wealth tax is a tax imposed on the net wealth of a person. It is imposed on the accumulated wealth of individuals and corporate entities.
5. Customs Duty: Customs duty is a tax imposed on goods imported into a country or exported from a country.
6. Excise Duty: Excise duty is a tax imposed on the manufacture or sale of certain goods within a country.
7. Value Added Tax (VAT): VAT is a form of indirect tax imposed on the value added to a product or service at each stage of the supply chain.
8. Professional Tax: Professional tax is a tax imposed by the state government on individuals who are engaged in any profession, trade, or employment.
How to file ITR online
1. Visit the e-filing portal of the Income Tax Department (https://incometaxindiaefiling.gov.in/)
2. Log in to the portal using your valid user ID, password, and date of birth.
3. Click on the ‘e-File’ tab and then select ‘Income Tax Return’.
4. Select the appropriate ITR form from the given options.
5. Fill in all the required information in the form.
6. Upload the requisite documents, if any.
7. Make sure to enter all the details correctly and then click on ‘Validate’.
8. After validating your form, click on ‘Submit’.
9. You will receive an acknowledgement for your ITR filing.
10. Make the payment for filing your ITR if applicable.
11. Upon successful payment, you will receive a confirmation mail and an SMS on the registered email ID and mobile number.
Who should pay Income Tax?
Individuals, Hindu Undivided Families (HUFs), companies, association of persons, body of individuals, firms, local authorities, and artificial judicial persons are all required to pay Income Tax in India.
Types of Tax Payers in India
1. Individuals: This includes all citizens of India, who are liable to pay income tax based on their income levels.
2. Corporates: This includes companies and firms that are registered in India and are liable to pay corporate income tax.
3. Non-Resident Indians (NRIs): This includes all Indian citizens who are living or working abroad and are liable to pay taxes in India on their income earned in India.
4. Partnership Firms: This includes firms that are registered as partnership firms and are liable to pay tax on the profits earned.
5. Hindu Undivided Families (HUFs): This includes families that are registered as Hindu Undivided Families and are liable to pay taxes on the incomes earned by members of the family.
6. Trusts and Charities: This includes trusts and charities that are registered and are liable to pay taxes on the incomes earned by them.
Type of Individuals tax payers in india
Individual taxpayers in India can be classified into two broad categories: Resident and Non-Resident.
1. Resident: A resident is an individual who has stayed in India for a period of more than 182 days in the preceding financial year. Residents are liable to pay taxes on their global income in India.
2. Non-Resident: A Non-Resident is an individual who has stayed in India for a period of less than 182 days in the preceding financial year. Non-Residents are liable to pay taxes only on their income that is generated from India.
How are Resident Individuals tax payers in india classified as per age?
In India, resident individuals are classified into three broad categories based on their age:
1. Senior Citizens (aged 60 years and above): Senior citizens are eligible for certain tax benefits, such as higher exemption limit, lower tax rates, and additional deductions.
2. Super Senior Citizens (aged 80 years and above): Super senior citizens are eligible for even higher exemption limit, lower tax rates, and additional deductions.
3. Other Resident Individuals (below 60 years): Resident individuals below 60 years are subject to the same tax provisions as other taxpayers.
Types of Income in India
1. Salary Income: This type of income is earned by individuals who are employed either in the public or private sector. Salaried income is usually received in the form of wages, salaries, bonuses, commissions, and other forms of payment.
2. Business Income: Business income is earned by individuals who own and operate businesses. It includes income from sales, services, and other forms of business activity.
3. Investment Income: Investment income is earned by individuals who invest in various financial instruments such as stocks, bonds, mutual funds, and other securities.
4. Rental Income: Rental income is earned by individuals who rent out their property, such as their house or apartment, to tenants.
5. Capital Gains: Capital gains are profits made from the sale of investments, such as stocks, bonds, and other securities.
6. Interest Income: Interest income is earned by individuals who deposit money in a bank or other financial institution and earn interest on their deposits.
7. Pension Income: Pension income is received by retired individuals who have pension plans with their employers or the government.
8. Royalty Income: Royalty income is earned by individuals who own intellectual property such as patents, cop.
Explain in details Old Income Tax Regime?
The old income tax regime was the tax system in India that was in effect from the financial year 2019-20 and earlier. Under this regime, individuals could choose between the old tax structure or the new tax regime.
In this system, income tax rates were divided into different tax slabs. For the financial year 2019-20, the income tax slabs were as follows:
• Up to Rs. 2.5 lakhs: No tax
• Rs. 2.5 lakhs to Rs. 5 lakhs: 5%
• Rs. 5 lakhs to Rs. 10 lakhs: 20%
• Above Rs. 10 lakhs: 30%
In addition to this, individuals had to pay surcharge on income above Rs. 50 lakhs and Rs. 1 crore. The surcharge rates were 15% and 37%, respectively.
The old tax regime also allowed individuals to claim deductions and exemptions from their taxable income, such as deductions under Section 80C, 80D, and 80E.
Overall, the old tax regime was slightly more beneficial for taxpayers as compared to the new regime. It allowed tax payers to save more money by claiming deductions and exemptions. However, the new regime provides some additional
Explain in details New Income Tax Regime?
The new income tax regime was announced in the Union Budget 2020-21 by Finance Minister Nirmala Sitharaman. Under this regime, taxpayers have the option to choose between the existing income tax system and the new tax regime.
The new tax regime proposes to reduce the existing tax slabs and provides tax deductions and tax exemptions to reduce the tax outgo of individuals.
The new tax regime removes several exemptions and deductions like standard deduction, leave travel allowance, house rent allowance, investment in 80C, etc along with rebate on tax paid under section 87A.
Income Tax Slab for Financial Year 2022-2023 in India
Income up to Rs. 2.5 lakh – No tax
Income between Rs. 2.5 lakh to Rs. 5 lakh – 5% tax
Income between Rs. 5 lakh to Rs. 7.5 lakh – 10% tax
Income between Rs. 7.5 lakh to Rs. 10 lakh – 15% tax
Income between Rs. 10 lakh to Rs. 12.5 lakh – 20% tax
Income between Rs. 12.5 lakh to Rs. 15 lakh – 25% tax
Income above Rs. 15 lakh – 30
What is PAN?
PAN, or Permanent Account Number, is a unique 10-digit alphanumeric identifier issued by the Indian Income Tax Department to all tax-paying entities in India. PAN is used for various financial transactions such as opening a bank account, receiving taxable salary or professional fees, sale or purchase of assets, and making investments in mutual funds or shares. It is a mandatory requirement for filing income tax returns.
What is TAN?
TAN (Tax Deduction and Collection Account Number) is a 10-digit number issued by the Indian Income Tax Department to those who are responsible for deducting or collecting tax. It is used for the e-payment of taxes. TAN is mandatory for all entities that are required to deduct or collect tax.
Types of Income Tax Forms in India
- ITR-1 (SAHAJ): This form is for individuals who are salaried employees or have income from one house property (excluding cases where loss is brought forward from previous years). It should be used by individuals who have total income up to Rs. 50 Lakhs and who do not have any capital gains, income from business/profession or other sources of income.
- ITR-2: This form should be used by individuals and Hindu Undivided Families (HUFs) who have income from sources other than profits and gains from business or profession. This includes income from salary, one house property, other sources, capital gains, and foreign income.
- ITR-3: This form should be used by individuals and HUFs who have income from profits and gains from business or profession.
- ITR-4 (SUGAM): This form should be used by individuals, HUFs and firms (other than LLP) who have opted for the presumptive taxation scheme as provided in Sections 44AD, 44ADA and 44AE of the Income-tax Act.
- ITR-5: This form should be used by firms, Limited Liability Partnerships (LLP), Association of Persons (AOP), Body of Individuals (BOI), Artificial Judicial Persons and Co-operative Societies.
- ITR-6: This form should be used by companies (other than those claiming exemption under section 11 of the Income Tax Act).
- ITR-7: This form should be used by persons including companies required to furnish return under sections 139(4A), 139(4B), 139(4C) and 139(4D).
What are the Documents Required for ITR Filing?
The following documents are required for filing Income Tax Return (ITR) in India:
- PAN Card: Permanent Account Number (PAN) is a 10-digit alphanumeric number issued by the Income Tax Department of India. It is a mandatory requirement for filing income tax returns.
- Aadhar Card: Aadhar Card is a 12-digit unique identity number issued by the Unique Identification Authority of India (UIDAI) to every individual resident in India. It is also mandatory for filing income tax returns in India.
- Bank Account Details: Details of all bank accounts held by the taxpayer during the previous financial year are required for filing ITR. This includes the account number, IFSC code, bank name, branch name, and type of account (savings/current).
- Form 16: Form 16 is a certificate of TDS (Tax Deducted at Source) issued by the employer to the employee. It is also required for filing ITR.
- Investment Details: Details of all investments made by the taxpayer during the previous financial year are required for filing ITR. This includes investments made in mutual funds, stocks, PPF, NSC, FD, etc.
- Tax Payment Receipts: If the taxpayer has made any tax payments during the previous financial year, he/she needs to provide the receipt of the same for filing ITR. This includes TDS, advance tax, self-assessment tax payments, etc.
- Interest Certificates: If the taxpayer has earned any interest income during the previous financial year, he/she needs to provide the interest certificate issued by the bank/institution for filing ITR.
- Other Income Documents: If the taxpayer has earned any other income such as rent, profits and gains of business/profession, he/she needs to provide the relevant documents like rent agreement, trading account, profit and loss account, etc. for filing ITR.
How can I calculate my income tax?
In India, income tax is calculated based on the total income of an individual during a financial year (April 1 – March 31). It is calculated based on the tax slabs set by the government for different levels of earned income.
The tax is calculated as follows:
- Calculate the total income: The total income is calculated based on the income earned from salary, house property, capital gains, business and profession, etc.
- Deduct the deductions and exemptions: The deductions and exemptions available under Section 80C and other sections of the Income Tax Act are deducted from the total income.
- Calculate the taxable income: The taxable income is calculated by subtracting the deductions and exemptions from the total income.
- Calculate the tax payable: Tax is calculated based on the tax slab applicable to the taxable income. The tax slab applicable to an individual is determined by the age and residential status of the individual.
- Calculate the education cess: Education cess is calculated at 3% of the total tax payable.
- Calculate the total tax payable: The total tax payable is calculated by adding the tax payable and the education cess.
- Calculate the surcharge: Surcharge is applicable on the total tax payable for certain individuals. The applicable rate of surcharge is determined based on the total income of the individual.
- Calculate the total tax payable with surcharge: The total tax payable with surcharge is calculated by adding the surcharge to the total tax payable.
- Calculate the tax deducted at source (TDS): TDS is deducted from the salary of the individual by the employer as per the applicable rate of TDS.
- Calculate the net tax payable: The net tax payable is calculated by subtracting the TDS from the total tax payable with surcharge.
These are the steps involved in calculating the income tax in India. The process of calculating the income tax may be different for different individuals based on their income, age and residential status. Therefore, it is important to consult a tax professional for accurate calculation of income tax.
