Income-Tax Act, 1961 as amended by Finance Act. Income deemed to accrue or arise in India. Section - 9A. Certain activities not to constitute business connection in India. Section - 10. Incomes not included in total income. Section - 10A. Special provision in respect of newly established undertakings in free trade zone, etc.
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:
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:
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.
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:
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
For Individuals (Male or Female) Above the Age of 60 Years:
Indian Income Tax Act 2017 Pdf
For Individuals (Male or Female) Above the Age of 80 Years:
For Co-operative Societies:
For Domestic Companies:
The income tax rate applicable for Domestic Companies will be @ 30%.
For Foreign Companies:
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:
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.
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.
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 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.
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 any sources other than the four listed above is categorized under this head. Some specific income coming under this head is listed below:
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.
Uses & Benefits of Filing Income Tax Return
Mentioned below are the uses and benefits of Filing Income Tax Return
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.
The process of foreign trips’ visa procurement needs ITR proofs.
Some losses such as business loss, speculation loss, a capital loss can be carried forward only when ITR is filed before the due date.
In case you have paid any additional tax, it can only be claimed if you have filed your ITR.
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.
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.
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.
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.
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.
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.
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:
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 TaxQ 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:
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:
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 –
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:
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:
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
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
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:
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:
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?Indian Income Tax Act 1961 Pdf Download
Ans: There are the following reasons due to which the particulars of a person are not displayed in his/her Form 26AS:
For the rectification of these errors, a taxpayer may request the deductor to:
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.
Income Tax Act India Pdf Free DownloadQ 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:
Income Tax Act India Pdf Download
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.
What is Section 195 of Income Tax Act?
Section 195 of the Income Tax Act, 1961 lays down provisions for tax deductions for Non-Resident Indians (NRIs). This section focuses on tax rates and deductions on daily business transactions with a non-resident. Any amount generated through these business transactions is chargeable under Income Tax Act, 1961. This amount may or may not be income or profits. The certificate for remittance is compulsory.
Section 195 further mentions guidelines on avoiding a revenue loss arising out of a tax liability from a non-resident by the way of deducting the same amount from their payments at source. The payer, that is, the person remitting payments to a NRI, can any individual, Indians and international companies, Hindu Undivided Family (HUF), person with exempt income in India and juristic person with or without an income that is chargeable to tax in India. The payee, under Section 195, is any non-resident with a residential status that comes under the purview of Section 6 of the Income Tax Act, 1961.
Comments are closed.
|
Details
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |