The Income Tax Department NEVER asks for your PIN numbers, passwords or similar access information for credit cards, banks or other financial accounts through e-mail. The Income Tax Department appeals to taxpayers NOT to respond to such e-mails and NOT to share information relating to their credit card, bank and other financial accounts.
Section 195 is a section of income tax act covers tax deductions for non-resident Indians (NRIs). Know more about TDS on NRIs, TDS rates and deductions under section 195 at Coverfox. Section115BBB - Tax on income from units of an open-ended equity oriented fund of the Unit Trust of India or of Mutual Funds Section115BBC - Anonymous donations to be taxed certain cases ChapterXIIA - SPECIAL PROVISIONS RELATING TO CERTAIN INCOMES OF NON-RESIDENDTS. Income chargeable to tax under section 115JC of the Income-tax Act, and such income exceeds one crore rupees, the total amount payable as income-tax on such income and surcharge thereon shall not exceed the total amount payable as income-tax on a total income of one crore rupees by more than the amount of income that exceeds one crore rupees. Charge of income-tax 1.30 5. Scope of total income 1.31 5A. Apportionment of income between spouses governed by Portuguese Civil Code 1.32 6. Residence in India 1.32 7. Income deemed to be received 1.34 8. Dividend income 1.34 9. Income deemed to accrue or arise in India 1.35 CHAPTER III INCOMES WHICH DO NOT FORM PART OF TOTAL INCOME 10. If any tax is still due on the basis of return of income, after adjusting advance tax and tax deducted at source, the assessee has to pay such tax (called self-assessment tax) at the time of filing of the return. 1.7 Return of Income. The Income-tax Act, 1961 contains provisions for filing of return of income.
What is Income Tax
Income Tax is a tax you pay directly to the government basis your income or profit. Income tax is collected by the Government of India. Taxes are of two types - direct tax and indirect tax.
Direct tax is the tax paid by you on your income directly to the government and is levied on profits and income. However, indirect tax is the tax levied on goods and services and is collected by someone else on your behalf and is paid to the government like theatres, restaurants, etc. For example, service tax is what you pay in a restaurant and is an indirect tax, whereas Income Tax that is deducted from your salary every month in the form of TDS, is an example of direct tax.
The money collected by the direct tax route is used by the Government for infrastructural developments and, also, to pay the employees of central and state government bodies.
Income Tax Act of India was passed in 1961. This Act governs the provisions for income tax as well as the various deductions that are applicable to it. However, since 1961, the law has been amended several times to take care of inflation and other socio-economic situations.
Income Tax Overview
Income Tax is undoubtedly the most important source of revenue for the Indian government. It is established as an inevitable imposition on the citizens in order to raise funds for fulfilling the development & defence needs of the country.
Taxes imposed on income, purchase, sale, and property help the government to run different government embodiment and machinery.
In India, the first Income Tax Act was introduced in 1860. It was implied by James Wilson to overcome heavy losses suffered by the British Government due to India’s freedom movement in 1857. The history of Income Tax in India is divided into 3 different periods:
- 1860-1885
- 1886-1914
- 1914 till date
Currently, the Income Tax Act 1961 is applicable in India. In 1956, the government referred the request to impose Income Tax Act. The Law Commission further submitted its report on the Income tax Act in 1958 and the same year, Chairman Shri Mahavir Tyagi, chaired the Direct Taxes Administration inquiry Commission.
The Income Tax Act, 1961 was introduced to the public. Since then, it has undergone amendments from time to time.
Types of Taxes in India
As per the Income Tax Act, there are 2 types of taxes in India:
- Direct Taxes
It is borne and paid directly by the individual on whom it is imposed such as, wealth tax, income tax, gift tax, etc. The taxpayer pays this tax directly to the government without any involvement of intermediary source.
- Indirect Taxes
If a tax is passed on by the taxpayer to the other person, it is an indirect tax e.g. sales tax, Value Added Tax (VAT) etc. This type of tax is paid indirectly to the Income tax department.
Who are the Tax Payers?
Any Indian citizen aged below 60 years is liable to pay income tax, if their income exceeds Rs 2.5 lakhs. If the individual is above 60 years of age and earns more than Rs 2.5 lakhs, he/she will have to pay taxes to the Government of India. Additionally, the following entities that generate income are liable to pay direct taxes:
- Hindu Undivided Family (HUF)
- Body Of Individuals (BOI)
- Association of Persons (AOP)
- Local Authorities
- Corporate firms
- Companies
- All Artificial Juridical Persons
What are the Different Income Tax Slab Rates?
Income tax slab rates are defined on the basis of the earning of the taxpayers. Income tax slab rates are broadly categorized as follows:
For HUFs and Individuals (Male or Female) Below the Age of 60 Years Income Tax Slabs & Rates 2017-18
Income Tax Slabs | Income Tax Rates |
Income less than Rs 2.5 lakhs | Not applicable |
Income greater than Rs 2.5 lakhs but less than Rs 5 lakhs | 5% of the amount exceeding Rs 2.5 lakhs |
Income greater than Rs 5 lakhs but less than Rs 10 lakhs | 20% of the amount exceeding Rs 5 lakhs |
Income greater than Rs 10 lakhs | 30% of the amount exceeding Rs 10 lakhs |
For Individuals (Male or Female) Above the Age of 60 Years:
Income Tax Slabs | Income Tax Rates |
Taxable income less than Rs 3 lakhs | Not Applicable |
Taxable income greater than Rs 3 lakhs but less than Rs 5 lakhs | 5% of the amount exceeding Rs 3 lakhs |
Taxable income greater than Rs 5 lakhs but less than Rs 10 lakhs | 20% of the amount exceeding Rs 5 lakhs |
Taxable income greater than Rs 10 lakhs | 30% of the amount exceeding Rs 10 lakhs |
For Individuals (Male or Female) Above the Age of 80 Years:
Income Tax Slabs | Income Tax Rates |
Taxable income less than Rs 5 lakhs | Not Applicable |
Taxable income greater than Rs 5 lakhs but less than Rs 10 lakhs | 20% of the amount exceeding Rs 5 lakhs |
Taxable income greater than Rs 10 lakhs | 30% of the amount exceeding Rs 10 lakhs |
For Co-operative Societies:
Income Tax Slabs | Income Tax Rates |
Taxable income less than Rs. 10,000 | 10% of the income |
Taxable income greater than Rs. 10,000 but less than Rs. 20,000 | 20% of the amount exceeding Rs. 10,000. |
Taxable income greater than Rs. 20,000 | 30% of the amount exceeding Rs. 20,000. |
For Domestic Companies:
The income tax rate applicable for Domestic Companies will be @ 30%.
For Foreign Companies:
Nature of Income | Rate of Tax |
According to the agreement designed by Indian Government, if the foreign firms are paid by the Indian Government in the form of royalties (After March 31st ,1961 and before April 1st, 1976) | 50% |
According to the agreement made with an Indian concern, if the payment is done for the technical services (provided by foreign firms - After February 29th 1964, before April 1st 1976) | 50% |
For any other income | 40% |
For Local Authorities:
For local authorities, the tax rate is determined as at 30%.
**Income Tax Slab Rates for the assessment year 2018-19**
How is the Income Tax Collected?
There are primarily three ways in which the Income Taxes are collected by the Government:
- Taxes Deducted at Source (TDS)
- Taxes Collected at Source (TCS)
- Voluntary payment by tax payers into designated Banks
What are the different taxable Heads of Income?
Income taxes are levied depending on the source of Income. Following are the five main income heads from which taxes are deducted.
- Income From Salaries
Taxable income that all employees receive from their employers is categorized under this head. As per section 192 of the Income Tax Act, the employer will withhold taxes if the employees do not come within the taxable bracket. All about tax deductions and the net paid income are detailed in Form 16 that must be provided by the employer to the employee.
- Income From Capital Gains
Capital gains taxation applies to earnings from the sale of capital assets held by the tax assessee. Capital assets refer to the properties such as buildings, lands, bonds, equities, debentures, jewelleries, etc. Taxes are levied on the income of the assessee when such properties are sold.
- Income From House Property
Income Tax is levied on house property, if the house is given out on rent by the owner. However, under this head, the property cannot be used for business or professional purposes.
- Income (Profits) From Business
As per section 30 to 43D of the Income Tax Act, the profits earned from businesses or by providing professional services are considered taxable as per applicable rates. This income head is also known as “Profits and Gains of Business or Profession”.
- Income From Other Sources
Income from any sources other than the four listed above is categorized under this head. Some specific income coming under this head is listed below:
- Lottery/horse race winnings
- Income from dividends
- Pension received after the pensioner’s death.
- Rental income (other than house properties)
- Gifts received
- Interest on government securities, debentures, and bonds.
What are Income Tax Returns?
Every individual, who has a source of income, regular or irregular, is legally required to file their income tax returns. Even if your income is below the taxable bracket, you should file your income tax returns. There are prescribed forms through which the income earned by a person and the income tax paid thereon are informed to the Income Tax Authority. The following table shows different forms prescribed for different classes of taxpayers.
ITR Form 1 | Any person who receives regular salary or pension or has an income from residential property or other sources. |
ITR Form 2 | This form is for those who are come under the category of Hindu Undivided Families and have income from any sources other than Profits gained from business and profession. Webcam driver windows 7. |
ITR Form 3 | This form is for the Hindu Undivided Families whose income fall under the head of Profits and Gains of Business or Profession. |
ITR Form 4S | This form, also known as SUGAM, is applicable to HUFs(Hindu Undivided Families) and individuals opting for SUGAM taxation scheme as per section 44 AD/ AE |
ITR Form 4 | This form is applicable to Hindu Undivided Families and individuals who are professionals or proprietors |
ITR Form 5 | This form is applicable for LLPs, Firms, BOIs, AOPs, artificial judiciary persons and local authorities. |
ITR Form 6 | This form is applicable to companies that claim no exemptions as per section 11 of the Income tax Act. |
ITR Form 7 | This form is applicable to the persons who are required to file returns as per Sections 139(4A), 139 (4D), 139 (4C), 139(4B) |
ITR Form V | ITR V is provided to acknowledge that the Income Tax return has been filed. |
Uses & Benefits of Filing Income Tax Return
Mentioned below are the uses and benefits of Filing Income Tax Return
- Easy Loan Processing
Filing ITR (Income Tax Return) makes it easier for financial institutions to check the financial credibility of an individual (assesse). If a taxpayer applies for a loan, it helps in the easy processing of bank loans.
- Foreign Travel
The process of foreign trips’ visa procurement needs ITR proofs.
- Carry Forwarding of Losses
Some losses such as business loss, speculation loss, a capital loss can be carried forward only when ITR is filed before the due date.
- Tax Refund
In case you have paid any additional tax, it can only be claimed if you have filed your ITR.
- Passport Application
Applying for a passport becomes an easier process if you have filed your ITR as it serves as a Non-ECR proof (Non Emigration Check Required). You simply need to submit a photocopy of your ITR assessment along with actual payment receipt of latest income tax return. Or else, you can also submit the income tax statement attested by IT authorities.
- Insurance Claim
If there is an accidental death, the insurance company will need a proof of income to the process the claim. In case ITR is missing, it can significantly lower the amount of claim as ITR is the only document that court accepts for such cases.
- Government Tenders
Filing ITR also comes handy while applying for government tenders, panel registration, etc. You need to submit your ITRs of last 5 to 7 years which will be checked by the tender scrutiny committee. It is done to assess whether you (as an applicant/contractor) have worked on a tender at a particular scale or not.
- High Life Risk Cover
If you are planning to buy a high life cover of Rs. 50 lakhs or 1 crore, it can only be bought if you have filed your ITR. It helps the insurance providers to verify your annual income.
| You may like to Read: How to e filing income tax |
Income Tax Calculation
Tax calculation is done on the annual income of a person and the annual financial cycle under income tax law starts from 1st April to 31st of March of the next calendar year. The law classifies the years as “Previous Year” and “Assessment Year”.
“Previous year” is defined as the year in which income is earned, and “Assessment Year” is defined as the year in which it is charged.
Tax Deduction
The following are the various sections of Income Tax Act of 1961, which allows reduction on one’s Taxable Income.
Sections 80C
Under this section, deduction is available to individuals and HUF. On the payment made towards life insurance policies, provident Fund or superannuation, tax deduction is available up to the amount of Rs 1,50,000/-.
Section 80CCC
Tax exemptions under this section are on payment made on insurance companies and LIC that are under approved pension plans. The pension policy must be taken from the individual himself and must be up to Rs 1, 50,000 out of taxable income.
Section 80CCD
Tax exemption under this section is for contribution by the assessee and the employer to the new pension scheme. The tax exemption under this section is equal to the contribution, not exceeding 10% of an individual salary.
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Section 80D
The premiums paid on the health insurance comes under this section of income tax deduction. Health insurance policies generally provide coverage to the insured person, spouse, and dependent children. If you pay premiums for your health insurance, then you can save your taxes up to Rs 15, 000 to Rs 20, 000. In the case of Hindu Undivided Family, the general deduction is up to Rs 15, 000 and additional deduction is Rs 5, 000.
Section 80DDB
Under this section, the tax deduction is done on medical expenses that arise from the treatment of any disease or illness specified in the rule (11DD). The tax benefit is applicable for the taxpayer, for the family member or any member of HUF.
Section 80E
The interest paid on education loan in the country comes under this section of the tax deduction.
Section 80EE
The first time home owners come under this section of tax benefit. Those people whose first home purchase value is less than Rs 40 lakh and the loan takes for which is Rs 25 lakh or less are applicable for the tax deduction.
Section 80RRB
Under this section, the tax deduction is applicable on the income earned by way of royalties and patents. For the patent registered under the patent act, 1970 up to the amount of Rs 3, 00,000 income tax can be saved.
Section 80TTA
Tax deductions are applicable on interest earned in the post office and co-operatives society and saving bank accounts. Up to Rs 10,000 of interest income individuals and HUFs can claim the deduction.
Section 80U
This section of income tax deduction is applicable for disable people. To avail the tax benefit under this section, one needs to show their disability certificate. Depending on the severity of disability up to Rs 1,00,000 can be non-taxed.
Section 24
The interest paid on a housing loan comes under this section of tax exemption. In addition to the deduction under section 80C, 80CCF, and 80D up to Rs 2,00,000 per year can be claimed as the deduction. For the rented properties, 30% of the received rent and municipal taxes paid are eligible for tax saving.
What is Income Tax Act?
The income tax laws in India are established under the provisions of Income Tax Act, 1961. According to these income tax laws, the taxable categories are mentioned below.
- Salaries
- Profits & gains earned from a business or profession
- Income from house/property
- Capital gains
- Income from other sources
The Basics of Income Tax Calculation in India
Income Tax in India is filed annually on the basis of ‘Previous Year’ and Assessment year’.
Previous Year
According to income tax rules, ‘Previous Year’, also known as the ‘Financial Year’ begins on 1st April of the current year and ends on 31st March of the next year. It doesn’t matter in which particular month you have started earning, the financial year will end on the 31st March and the new tax year will begin 1st April onwards. Hence, it becomes necessary to plan your taxes in advance for each financial year.
Assessment year
In simple words, it is the upcoming fiscal year which comes after the ‘Previous Year’ and one has to assess and file her/his income tax returns in the ‘Assessment Year’.
Income Tax Act, 1961
The Income Tax Act comes with a wide range of sections. Each of section caters to a different aspect of taxation rules in India. Let’s have a look into various chapters of the IT Act along with the related sections and sub-sections:
Chapter 1
The first section of the Income Tax Act offers a basic introduction to the IT Act.
Chapter 2
This chapter deals with the commencement & the extent of the IT Act.
Chapter 3
This particular chapter deals with income tax charges, dividend income, the scope of total income, income earned through working abroad, etc.
Chapter 4
The Chapter 4 of Income Tax laws deals with the other forms of income that are not a part of total income like income from property, institution, trusts, political parties’ incomes, etc.
Chapter 5
The chapter deals with sections about income earned from other sources such as income from capital gains, house property, businesses, etc.
Chapter 6
The chapter deals with the transfer of income wherein no actual transfer of assets is involved. It also includes revocable transfer.
Chapter 7
This chapter is basically about the deductions applicable on income generated from certain sources and certain payments.
Chapter 8
Chapter 8 of Income tax Act deals with the rebates and how much share a member would get in a body or an association.
Chapter 9
This chapter deals with the double taxation relief in detail which helps the taxpayers to get a rebate on the income tax paid.
Chapter 10
This chapter deals with the special scenarios where income tax payment is avoided. This type of scenarios normally includes agreements with foreign countries. The chapter deals with the information about the particular countries that follow these kinds of agreements.
Chapter 10A
This chapter deals with different types of general anti-avoidance income tax rules for the income taxpayers.
Chapter 12
This chapter deals with the tax calculation under special cases.
Chapter 12A
The chapter 12A of the Income Tax Act deals with the special provisions formulated for Non-Resident Indians. It includes short-term capital gains, capital gains, provident fund, etc. This chapter includes Section 110 to Section 115BBE of the income tax rules as per the Income Tax Act, 1961.
There are various cases that belong to this section that yield tax-liable incomes such as foreign currency units, dividends, royalty, dividends, etc.
Chapter 12BThis particular chapter deals with special tax provisions that are designed for particular companies. It includes the Section 115J to Section 115JF of the Income Tax Act.
Chapter 12BB
This chapter deals with the taxation process to convert a foreign organization into an Indian subsidiary.
Chapter 12DThis chapter deals with the taxation process for the profits earned by domestic companies. It also deals with the interest payable in case of non-payment of taxes by the companies or if the company is a defaulter.
Chapter 12DA
This chapter deals with the income tax rules on the distributed income of an organisation.
Chapter 12E
Chapter 12E of the Income Tax Act deals with the rules meant for distributed income of unit holders.
Chapter 12F
This chapter deals with the taxes on income received from venture capital funds and from venture capital companies.
Chapter 12G
This chapter deals with special provisions designed for the shipping companies and the involved taxation procedures.
Chapter 13
This chapter deals with the information related to different income tax authorities including their jurisdiction, appointment & control, their powers and also disclosure of information.
Chapter 14
Chapter 15 of the Income Tax Act deals with Section 139 to Section 152. Basically, this chapter deals with all the return filing formalities which include obtaining PAN, e-filing of ITR, accounting methods. It also includes other amendments, intimation of any loss and related cases and rectification of mistakes.
Chapter 14A
Chapter 14A deals with the special provisions that help to avoid repetitive appeals. It includes the cases that are already pending in the Supreme Court or High Court.
Chapter 15
This chapter deals with the liabilities for different cases which include general as well as special provisions. It also deals with the provisions meant for tax recovery from NRIs, private companies, etc.
Chapter 16
Chapter 16 of the Income Tax Act deals with the firms and their taxation and assessment process. It also deals with constitution changes, succession, and their dissolution processes.
Chapter 17
This chapter deals with the clauses related to tax collection & recovery. It also gives an insight of the interest charged on late tax payments or recovery cases.
Chapter 18
This chapter deals with the income tax relief given to the companies for the dividends they pay to their shareholders. Chapter 18 also deals with the tax relief provided to the companies in lieu of their charitable work that they support through their foundation wings.
Chapter 19
Chapter 19 deals with the tax refunds in case any extra tax is paid to the Income Tax department. It involves the cases where a taxpayer is eligible to get a refund, interest on her/his refund if there is no claim made, correctness of assessment. It includes Section 237 to Section 245.
Chapter 19A
Chapter 19A deals with the settlement of cases and includes sections 245A to 245L. Different aspects of settlements such as application, abatement of proceeding, procedure, and recovery are covered under it.
Chapter 19B
This chapter deals with all advance rulings. It also deals with sections from 245N to 245V. The chapter 19B includes application for power of authority, advance ruling and procedure.
Chapter 20
The chapter deals with the appeals forwarded to the commissioner and deputy commissioner. Other than this, it also deals with appeals made to the Supreme Court, High Court and other general revision aspects by commissioner.
Chapter 20A
The chapter 20A of the Income Tax Act includes section 269A to section 269S. This chapter basically deals with the acquisition of immovable property in certain cases to counteract tax evasion. All acquisition aspects from jurisdiction to every other related aspect are covered under this chapter.
Chapter 20B
The Chapter 20B deals with different payment modes, tax evasion correction are required. It also deals with loan accepting and deposits and its corresponding modes.
Chapter 20C
This chapter deals with buying of immovable property. However, the properties that are made by the central government for transfer cases. Few aspects covered under the chapter are appropriate authority, restrictions on the property, vesting of property and rectification of mistakes.
Chapter 21
It includes sections 271 to 275 of the Income Tax Act. It deals with different penalties applicable to taxpayers in different cases. In short, it deals with penalties such as non-payment of taxes, non-disclosure, and failure to comply with different provisions of the income tax sections and so on.
Chapter 22
This chapter includes section 275A to section 280D. These sections deal with prosecution & offenses with respect to compliance failure and other related details.
Chapter 23
This chapter includes sections 281 to 298. It further deals with almost all miscellaneous topics that can’t be categorised under any other tax chapters mentioned above. It includes generic as well as special scenarios that may arise with respect to the taxation process for different taxpaying entities.
Schedules Made to the Income Tax Act
Schedules to the Income Tax Act 1961 basically consist of various annexures that were amended and added to include the scenarios that were not initially mentioned or covered. These schedules are introduced to make the Income Tax Act more comprehensive and inclusive.
Income Tax E-Filing
Over the past few years, the income tax department of India has digitized the entire process of Income Tax Collection and return filing. It has become very convenient for individuals as well as businesses to pay their taxes online, file returns and finally track the history of their payments through the various portals of the Income Tax Department.
Income Tax paid by you is directly used in nation-building activities. The tax helps the Government to improve the infrastructure of our country, provide better governance and run the various public services smoothly. All the taxpaying Indians are, therefore, in whatsoever little way contributing towards a better future for our motherland.
FAQs on Income Tax
Q 1: What is the income tax?
Ans: Income tax is the tax levied by the Indian government on the income of every earning individual. The income tax is basically a form of direct tax and its governing laws are given in the Income Tax Act, 1961.
Q 2: Define the administrative framework of the Income Tax?
Ans: The government of India’s all the revenue functions are managed by the Finance Ministry. The ministry of finance confides tasks such as wealth tax, income tax, etc. to the CBDT or Central Board of Direct Taxes. Basically, the CBDT is a wing of the Ministry of Finance's Department of Revenue. The CBDT gives essential inputs for policy's planning and framing of the direct taxes and as well as administers the laws of direct taxes through the IT department. In this way, the laws of the Income Tax are administrated by the IT department only under the supervision and control of the CBDT.
Q 3: What is the meaning of Financial Year in the context of the Income Tax?
Ans: As per the laws of the Income Tax, the Financial Year is the time period that starts from the 1st of April and ends on the March 31st of the next year (calendar).
Q 4: What is the time period during which the income of a person is taken into account to calculate his/her income tax?
Ans: The income that a person earns during the period of 12 months starting from the 1st of April to March 31st (in one financial year) is considered to calculate the Income Tax.
Q 5: What are the different income collection forms?
Ans: The Government of India collects taxes through different means, which are:
- Self-assessment tax
- Advance tax
- Tax on the regular assessment
- Taxes that are collected at the source (TCS)
- Taxes that are deducted at the source (TDS)
- Attachments, etc.
Q 6: Who should pay the income tax?
Ans: Any individual, group of person or some artificial body who has earned the income during the previous financial year(s) is needed to pay the Income Tax on his/her earnings. As per Section 2 (3) of the Income Tax Act, the Income Tax Department recognizes the earners of the income in the below mentioned seven categories, which are called Status:
- Hindu Undivided Family (HUF)
- Individual
- Association of Persons (AOP)
- Companies
- Body of Individuals (BOI)
- Firms
- Local Authority and Artificial Judicial Person
When the companies pay income tax as per Income Tax Act, then it is known as the Corporate Tax.
Q 7: What are the means of Income Tax collection? Or how does the Indian government collect the Income Tax?
Ans: The government of India collects the taxes in three ways –
- Voluntary payment is done by the taxpayers of India in different designated banks for example self-assessment tax and advance tax paid by the Indian taxpayers.
- Taxes that are collected at the source (TCS)
- Taxes deducted at the source (TDS) from the receiver's income.
It is mandated by the Income Tax Department of India for every earning person to compute his/her income and do the tax payment correctly.
Q 8: Mention different heads under which the Income Tax is levied in India?
Ans: As per the Income Tax Act, the income of any taxpayer is classified under 5 various heads of the income, which are:
- Salaries
- Capital gains
- Income from the house property
- Gains and profits of profession or business
- Income through other sources
Q 9: Provide the basic tax exemption limit levied on the Income Tax in India?
Ans: The basic tax exemption limit for the financial year 2017 – 18 is as follows:
- For HUF, individual, BOI, and AOP – Rs.2, 50, 000
- For individuals falling in the age range of 60 to 80 years – Rs.3, 00, 000
- For individuals who are 80 years of age or more – Rs.5, 00, 000
However, for other categories, like co-operative societies, companies, firms, and other local authorities, there is no basic limit of tax exemption and therefore, they should pay taxes on their complete income that is chargeable on tax.
Q 10: Is there any provision of Double Taxation Relief in India?
Ans: Yes, a taxpayer can claim relief with respect to the income that is charged to tax both abroad as well as India. The taxation relief is either granted according to the provision of the double taxation avoidance agreement mentioned into along with the country (if there is any) by the Indian Government or by allowing the relief according to section 91 of the Income Tax Act with respect to the tax that is paid in the foreign country.
Q 11: What are the account's books prescribed under the law of the Income Tax that is to be maintained?
Ans: For the companies, the account books are prescribed as per the Companies Act. However, other people are expected to maintain and keep such account's books and various other documents that may enable the officer accessing to compute the total income as per the provision of the Income Tax Act.
In addition to this, the Institute of Charted Accountants of India has mentioned different standards of accounting and guidelines that must be followed by the business entities.
Q 12: What is PAN?
Ans: The full form of PAN is Permanent Account Number. It is a ten-digit alphanumeric code issued by the Department of Income Tax. It is a unique code.
Q 13: Define the benefits of having PAN?
Ans: Permanent Account Number or PAN is required for each and every transaction with the Department of Income Tax. The PAN is made mandatory for various other financial transactions like when one goes to open a bank account, for the purchase of high-end consumer goods, availing financial credits of institutions, foreign travel, dealing with securities, making a transaction of some immovable property, etc. In addition to this, a PAN card is considered as one of the most valuable ways of photo identification that is accepted all of the non-Government and Government institutions of India.
Q 14: How does one get to know the amount of Income Tax that he/she has to pay?
Ans: The rates of the corporate tax and income tax are provided in the Finance Act that is passed by the Parliament each year. One can as well check his/her tax liability by using the free tax calculator online available at www dot incometaxindia dot gov dot in
Indian Income Tax Act 1961 Pdf
Q 15: If I want to discuss some tax-related matters from where should I ask for the help of an Income-tax expert?
Ans: If you want to discuss some tax-related matter, then you can discuss it with the tax professionals or can take the help of any Public Relations Officer (PRO) sits in every local Income Tax office. You can also discuss your issue with Tax Return Preparers (TRPs). To locate the nearest TRP, you can visit – www dot trpscheme dot com
Indian Income Tax Act 1961 Pdf Free Download
Q 16: What do the terms like Income-tax other than companies and Income-tax on companies that are mentioned in Challan mean?
Ans: The tax that companies pay on their income is known as corporate tax and to pay the same in the Challan, it is specified as Income-tax on companies – 0020. However, the tax that is paid on the non-corporate assessees it is known as income-tax and to pay this in the challan, this tax is mentioned as Income-tax other than companies – 0021.
Q 17: What is the process to calculate advance tax and to pay it?
Ans: The advance tax is calculated as per the expected liabilities of tax of the year. This tax is paid in installments as mentioned below:
- For all the assessees (except the assessees mentioned in the Section 44AD and 44ADA):
- Up to 15% - By 15th June
- Up to 14% - By 15th September
- Up to 75% - By 15th December
- Up to 100% - By 15th March
- For the eligible assessees who are referred in the Section 44AD and 44ADA:
- Up to 100% - By 15th March
Note: Any advance tax that is paid by 31st March is also treated as the tax that is paid during the same FY. One can make the deposits of the advance tax through challan ITNS 280 by selecting the relevant column for advance tax.
Q 18: What is the meaning of tax on regular assessment and what is the process to pay it?
Ans: As per the Income-tax Act, it is the responsibility of every person to calculate and pay his/her due taxes. When the Income Tax Department finds underestimation of the income and the consecutive due tax, it takes special measures to calculate the actual amount of tax that should be paid. This kind of demand raised on the person is known as Tax on Regular Assessment. This tax on regular assessment – 400 must be paid within 30 days of the receipt of the demand notice.
Q 19: What precautions should one take while filling the challan of the tax payment?
Ans: At the time of tax payment, with other things, a person should clearly mention the below things:
- Head of the payment, which can be Income-tax or Corporation tax (other than the organizations).
- Mode of payment and amount of the tax.
- Type of the payment, for example, Self Assessment Tax, Advance Tax, Tax on Dividend, Tax on Regular Assessment, Surtax or Tax on the Distributed Income to the Unit Holders.
- Assessment year
- PAN issued by the Income Tax Department
Q 20: Do I need to get some payment proof from the Banker to whom I have given (or submitted) the challan?
Ans: The bank should return the stamped counter-foil of the IT challan filled by the taxpayers. Therefore, you should get this counter-foil with the stamp. It is recommended to make sure that the stamp of the bank contains Banker’s Serial Number Code (BSR), the date of payment, and the Challan Identification Number (CIN).
Q 21: How does a taxpayer know that the amount deposited by him/her as tax in the bank is received by the Government of India?
Ans: The website – www dot tin-nsdl dot com gives online services known as Challan Status Enquiry. One can as well check his/her tax credit by seeing his/her Form 26AS from the e-filing account from www dot incometaxindiaefiling dot gov dot in. The Form 26AS also discloses the information related to TCS/TDS of one’s account.
Q 22: What should one do if his/her particulars related to tax payment are not found against his/her name on the website?
Ans: There are the following reasons due to which the particulars of a person are not displayed in his/her Form 26AS:
- The collector or deductor has not filed the TCS/TDS statement.
- The PAN number provided to collector or deductor by the taxpayer is not correct.
- The taxpayer has forgotten to provide the PAN number to the collector/ deductor.
- The deductor or collector has made some error while quoting the PAN of the taxpayer in the TCS/ TDS return.
- The deductor or collector has not provided the PAN of the taxpayer.
- The challan’s details for which one’s TCS/ TDS was deposited was quoted wrongly in the statement through the deductor or wrong challan details are uploaded by the bank.
For the rectification of these errors, a taxpayer may request the deductor to:
- File the TCS/TDS statement, if it is not been filed.
- Furnish the statement to correct, if the deductor has filed the TCS/ TDS statement and has missed providing the details or the taxpayer him/herself has forgotten to provide the PAN details before he/she has filed the TCS/ TDS return.
- Rectify the PAN through PAN correction statement mentioned in the TCS/ TDS statement that is already uploaded, if there is some error in the quoted PAN.
- If the TCS/ TDS filed by the deductor has mistaken in the challan details then to furnish the correction statement.
- Take to the bank to rectify the issue in the challan details that are uploaded through the bank.
Q 23: Are the responsibilities of a taxpayer over once he/she pays his/her taxes?
Ans: No, the responsibilities do not get over after paying the taxes. This is because, the taxpayer thereafter has to ensure that the tax credits are available in his/her tax credit statement and the certificates of TDS/ TCS received by him/her and the complete particulars of the income and the tax payment are given to the Department of the Income Tax as Return of Income that has to be filled before the mentioned due date for the same.
Q 24: Define Assessing Officer in brief.
Ans: Assessing officer is an officer appointed by the Income Tax Department. This officer has given a particular jurisdiction in a specific geographical area in the town or city or on the class of people. One can find out his/her area’s Assessing Officer from the website of the department – www dot incometaxindia dot gov dot in or through the PRO.
Q 25: Since income tax is levied on the income of each person. So, according to the law of the Income-Tax what is considered as income?
Ans: As per the laws of the Income-Tax, the word income has a very inclusive and broad meaning. If we talk about a salaried person, all the money that one gets from his/her employer comes under the category of income. If we talk about a businessman, his/her net profit is considered as his/her income. Income can also come from the investments as commission, dividend, interest, etc. In addition to this, the income can also be earned on the sale of some capital assets such as gold, building, etc.
Q 26: Define taxable income and exempt income?
Ans: The income that is chargeable to tax is known as taxable income whereas the income that does not fall in the category of tax is considered as exempted income. The law of the Income-Tax exclusively grants tax exemptions to some income.
Q 27: What is the meaning of capital receipt and revenue receipt?
Ans: The receipts can be classified into two categories – (1) Capital Receipt, (2) Revenue Receipt.
The capital receipts have an isolated nature such as receipts of sale of personal jewelry, receipt of sale of some residential property, etc.
On the other hand, the revenue receipt has recurring nature such as salary receipts, interest income, etc.
Q 28: Are these receipts, which are revenue and capital, charged to tax?
Ans: According to the law of the Income-Tax all the receipts (revenue) are taxable unless they have some special permission or grant exemption from tax and all the capital receipts are exempted from tax unless there is some special provision to charge tax on them.
Q 29: Do the income of agriculturist taxable?
Ans: The income from agriculture is not taxable. However, if one has some non-agriculture income also, then at the time of tax calculation while calculating the tax on the income through non-agriculture mode, one’s agricultural income is also taken into account for the purpose of rate. To understand more about agricultural income, read the Income Tax Act’s Section 2(IA).
Q 30: According to the law of the Income Tax, is the income earned from animal husbandry taken as agricultural income?
Ans: No
Q 31: Does one need to maintain some record or proof of his/her earnings?
Ans: One should maintain the proofs of income from every source as well as make the records according to the Income Tax Act. However, failing to maintain any such records, one should maintain other reasonable records through which one can provide as a support of the claim of income.
Q 32: As an agriculturist should one maintain his/her proof of expenditures and earnings incurred?
Ans: Even if one's source of income is agriculture only, then also he/she is suggested to maintain all the proofs of his/her expenditure and earnings.
Q 33: If one wins price money or lottery in some competition, does he/she needed to pay the income tax on it?
Ans: Yes, these winnings also attract a flat rate of 30% tax without any limit on the basic exemptions. In such situations, the price money payer deducts the tax at the source (TDS) itself from the contestant’s winnings and pays the balance amount only.
Q 34: If a person’s income is taxed in abroad and in India as well, then can he/she claim any kind of relief on the double taxation?
Ans: Yes, in such a case, one is eligible to claim relief with respect to the income that is charged in abroad and in India as well. This relief is either granted according to the double taxation avoidance agreement provided with that country by the Indian Government or by allowing relief under Section 91 of the Income Tax Act in respect of the tax payment in foreign currency.
Q 35: What is the meaning of Profession?
Ans: The basic meaning of the profession is the exploitation of one’s knowledge and skills independently. The profession also involves vocation. Some of the examples of the profession are engineering, medical, legal, accountancy, agriculture, artist, technical consultancy, writing, interior decoration, etc.
Q 36: Which books of accounts are prescribed to be maintained by the people having a profession or business that come under the Income Tax Act?
Ans: According to the Income Tax Act, there are no books prescribed for the account of a person involved in some business or some non-specified profession. However, it is suggested to such persons to maintain and keep account’s books and other documents that can help the accessing officer to calculate that person’s total income as per the Income Tax Act, if:
Particular Details | HUF or Individual | Any Other Assessee |
If some existing profession or business, the income or the gross turnover in any of the three preceding years exceeds the below:
| Rs. 2, 50, 000 Rs. 2, 50, 000 | Rs. 1, 20, 000 Rs. 10, 00, 000 |
In the situation of some newly setup profession or business, the gross turnover or income of the 1st previous year is most likely to exceed the below:
| Rs. 2, 50, 000 Rs. 2, 50, 000 | Rs.1, 20, 000 Rs. 10, 00, 000 |
For the organizations, the account books are prescribed according to the Companies Act. There are different accounting guidelines and standards that are needed to be taken care of by the business entities. According to the maintenance of the account books by an individual professional who is engaged in some specific profession, he/she has to maintain some prescribed account’s books, if the annual receipt through his/her profession exceeds Rs.1, 50, 000 in all 3 years soon after the previous year (in the situation of new business set up, his/her annual receipts provided in the business for that specific year are most likely to exceed Rs.1, 50, 000).
The specified professions cater to professions such as medical, engineering, legal, accountancy, architecture, technical consultancy, company secretary, authorized representative, interior decoration, information technology, or film artist.
Q 37: Where should the account books related to business be kept and for how long?
Ans: All the account books and related documents must be kept at the business’s principal place. It is recommended to keep these documents for at least six years calculating from the end of a relevant year of Assessment, which in total is for seven financial years from the end of a relevant year. However, when the assessment is reopened, all the account books and other relevant documents which were being maintained and kept at the time of assessment reopening must be maintained and kept until the assessment occurs.