What is Income Tax?
Income tax is a levy imposed on the yearly earnings of an individual. The tax amount paid is contingent on the individual’s total income during a fiscal year.
Individuals can conveniently execute their income tax payments, TDS/TCS payments, and Non-TDS/TCS payments through online channels. To facilitate these payments, taxpayers need to provide the requisite information, making the entire process efficient and expedient.
Who is Obligated to Pay Income Tax?
Filing an Income Tax Return (ITR) is compulsory for individuals when their total Gross Income, including the standard deduction, surpasses Rs. 3,00,000 within a financial year. This threshold increases to Rs. 3,00,000 for senior citizens and Rs. 5,00,000 for super senior citizens. The following entities are required to both pay taxes and submit their income tax returns:
- Artificial Judicial Persons
- Corporate firms
- Associations of Persons (AOPs)
- Hindu Undivided Families (HUFs)
- Companies
- Local Authorities
- Bodies of Individuals (BOIs)
Who are Taxpayers?
Taxpayers are individuals or entities who are legally responsible for paying taxes to the government. They are required to contribute a portion of their income or profits to the government, which is then used to fund public services, infrastructure, and various government programs. Taxpayers can include:
- Individuals: This category includes people who earn income through various sources, such as employment, self-employment, investments, or rental income.
- Businesses: Companies, partnerships, sole proprietorships, and other types of business entities are also taxpayers. They pay various taxes, including income tax, corporate tax, and other taxes related to their operations.
- Property Owners: Property owners pay property taxes on real estate they own, which are used to fund local government services and infrastructure.
- Investors: Individuals and entities that earn income from investments, such as capital gains, dividends, and interest, are considered taxpayers.
- Consumers: People who make purchases are subject to sales tax, value-added tax (VAT), or goods and services tax (GST), depending on the country's tax system.
- Importers and Exporters: Businesses involved in international trade are often required to pay customs duties and other taxes related to importing and exporting goods.
- Other Entities: Various organizations, trusts, and associations may also be taxpayers, depending on their financial activities and legal structure.
The specific tax obligations and the types of taxes paid can vary significantly from one jurisdiction to another, and they depend on the individual or entity’s financial situation and the local tax laws and regulations in place.
Taxpayers and Income Tax Slab Rates
In the Union Budget 2023, the Finance Minister of India announced a new income tax slab. However, the new income tax regime is optional, and individuals can opt for it or file their taxes as per the old regime.
Income Tax slab under New Regime for FY 2023-24
| Income Tax Slab | Tax Rate |
|---|---|
|
Up to Rs.3 lakh |
Nil |
|
Above Rs.3 lakh - Rs.6 lakh |
0.05 |
|
Above Rs.6 lakh - Rs.9 lakh |
0.1 |
|
Above Rs.9 lakh - Rs.12 lakh |
0.15 |
|
Above Rs.12 lakh - Rs.15 lakh |
0.2 |
|
Above Rs.15 lakh |
0.3 |
Income Tax Slab (Old Regime) for individuals who are less than 60 years old
| Income Tax Slab | Tax Rate |
|---|---|
|
Up to Rs.2,50,000 |
Nil |
|
From Rs.2,50,001 to Rs.5,00,000 |
5% |
|
Above Rs.6 lakh - Rs.9 lakh |
20% of the amount exceeding Rs.5 lakh |
|
More than Rs.10,00,000 |
30% of the amount exceeding Rs.10 lakh |
Income Tax Forms List:
When an individual seeks to receive an income tax refund, the initial step is to complete the income tax return filing process. The specific ITR form to be submitted by the individual depends on their income assessment group and can be chosen from the following options:
| ITR Form Name | Description |
|---|---|
|
ITR-1 |
Individuals with Income from Salaries, One house property, other sources (Interest etc.) |
|
ITR-2 |
For Individuals and HUFs not having Income from Business or Profession |
|
ITR-2A |
For Individuals and HUFs not having Income from Business or Profession and Capital Gains and who do not hold foreign assets |
|
ITR-3 |
For Individuals/HUFs being partners in firms and not carrying out business or profession under any proprietorship |
|
ITR-4 |
ITR-For individuals and HUFs having income from a proprietary business or profession |
|
ITR-4S |
Presumptive business income tax return |
|
ITR-5 |
For persons other than, - (i) individual, (ii) HUF, (iii) company and (iv) person filing Form ITR-7 |
|
ITR-6 |
For Companies other than companies claiming exemption under Section 11 |
|
ITR-7 |
For persons including companies required to furnish return under sections 139(4A) or 139(4B) or 139(4C) or 139(4D) or 139(4E) or 139(4F) |
|
ITR-V |
The acknowledgment form of filing a return of income |
Income Tax Refund FY 2023-24
If you have paid more in taxes than your actual tax obligation, you are eligible to request a refund for the excess amount you’ve paid. For instance, if your TDS liability for the fiscal year 2023-2024 amounted to Rs. 35,000, but your employer deducted Rs. 40,000, you can seek a refund for the extra Rs. 5,000 that was withheld.
Furthermore, you could initiate an income tax refund claim if you inadvertently omitted to declare your tax-saving investments, resulting in the imposition of tax without factoring in your eligible deductions. Individuals can verify the status of their income tax refund on the official website of the Income Tax Department.
Income Tax Saving Investments
Optimizing Tax Savings through Investment Declarations – By ensuring that you’ve duly disclosed your investments, including HRA, Life Insurance Premiums, National Savings Certificate, Leave Travel Allowance, Fixed Deposits (with a minimum tenure of 5 years), ELSS Tax Saving Mutual Funds, and more, you can access increased tax deductions. The following investment options can be explored for minimizing your tax liability:
Investment Options:
- Mutual Funds: Equity Linked Savings Schemes (ELSS) qualify for tax deductions under Section 80C. ELSS offers advantages such as a shorter lock-in period and enhanced returns compared to fixed deposits and PPFs.
- Unit Linked Insurance Plans (ULIP): These insurance plans linked to the market enable deductions for the investments made.
- Insurance: Life Insurance and Health Insurance: Premiums paid for life and health insurance policies are eligible for tax deductions under Section 80C.
- Home Loans: Taking a home loan for purchasing a house or renovation purposes can lead to tax deductions of up to Rs. 1.5 lakh in a financial year. However, personal loans do not offer tax exemptions.
In addition to the above, you can also consider the following options to reduce your taxable income:
Fixed Deposits (FD): Fixed deposits with a lock-in period of five years can facilitate tax savings while earning interest on the deposited amount.
National Savings Certificate (NSC): NSC presents a secure and dependable investment option, with the flexibility to deposit as low as Rs.100 for a lock-in period of 5-10 years. Investments made in NSC are eligible for tax deductions.
Provident Fund (PF): Increasing contributions to your PF account can effectively reduce your taxable income.
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Taxable income or gross income includes salaries, wages, bonuses, etc.
Under the new tax regime, no tax must be paid if your income is less than Rs.3 lakh in a year.
The tax amount deducted by the employer and deposited to the IT Department is TDS. The TDS that will be deducted will depend on the individual's salary.
Any individual, artificial body, or group of individuals earning more than the basic exemption limit are expected to pay income tax.
The government collects income tax for various reasons, including paying off the salaries of the state and central government employees and meeting infrastructural expenses. The income tax collected by the government acts as a source of income based on which the nation's development is taken care of.
Income tax is a direct tax. That is, income tax is paid by the liable entity directly to the entity which imposes the tax. In the case of income tax, the imposing party is the government, while the responsible party is the one who is drawing an income against which the tax liability arises.
f income based on which the nation's development is taken care of.
There are various instruments in which you can invest to save tax. The most common options include PPF, National Savings Certificate, National Pension System, ELSS schemes, etc.
Yes, the income earned by tuition teachers is taxable under the professional income type.
Yes, income tax is charged even on income earned in cash. However, if the cash credit is unexplained, the tax is charged at a flat rate of 60%, and no other tax benefits in terms of exemption are applicable. On top of that, there is a surcharge of 25%, with a penalty of 6%
Two different tax regimes are currently used in India to file income tax returns. However, the tax-free income differs for both the new and old regimes. The annual income of up to Rs.2.5 lakh is tax-free if you have chosen the old tax regime, while for the new tax regime, the annual income of up to Rs.3 lakh is tax-free.
All individuals and assesses who do not require their accounts to be audited must file their income tax returns by July 31. However, companies, individuals and working partners of firms whose accounts must be audited must file their income tax returns by September 30. Assesses who are required to submit a report under Section 92E of the Income Tax Act must file their returns by November 30.
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