ABOUT INCOME TAX
- Income Tax – This is taxes an individual or a Hindu Undivided Family or any taxpayer other than companies, pay on the income received. The law prescribes the rate at which such income should be taxed
- Corporate Tax – This is the tax that companies pay on the profits they make from their businesses. Here again, a specific rate of tax for corporates has been prescribed by the income tax laws of India.
| 31 January | 31 March | 31 July | Oct – Nov |
|---|---|---|---|
| Deadline to submit your investment proofs | Deadline to make investments under Section 80C | Last date to file your tax return | Time to verify your tax return |
Income Tax Basics
Everyone who earns or gets an income in India is subject to income tax. (Yes, be it a resident or a non-resident of India ). Also read our article on Income Tax for NRIs. Your income could be salary, pension or could be from a savings account that’s quietly accumulating a 4% interest. Even, winners of ‘Kaun Banega Crorepati’ have to pay tax on their prize money. For simpler classification, the Income Tax Department breaks down income into five heads:
| Head of Income | Nature of Income covered |
|---|---|
| Income from Salary | Income from salary and pension are covered under here |
| Income from Other Sources | Income from savings bank account interest, fixed deposits, winning KBC |
| Income from House Property | This is rental income mostly |
| Income from Capital Gains | Income from sale of a capital asset such as mutual funds, shares, house property |
| Income from Business and Profession | This is when you are self-employed, work as a freelancer or contractor, or you run a business. Life insurance agents, chartered accountants, doctors and lawyers who have their own practice, tuition teachers |
Taxpayers and Income Tax Slabs
Taxpayers in India, for the purpose of income tax includes:
- Individuals, Hindu Undivided Family (HUF), Association of Persons(AOP) and Body of Individuals (BOI)
- Firms
- Companies
Each of these taxpayers is taxed differently under the Indian income tax laws. While firms and Indian companies have a fixed rate of tax of 30% of profits, the individual,HUF, AOP and BOI taxpayers are taxed based on the income slab they fall under. People’s incomes are grouped into blocks called tax brackets or tax slabs. And each tax slab has a different tax rate. In India, we have four tax brackets each with an increasing tax rate.
- Income earners of up to 2.5 lakhs
- Income earners of between 2.5 lakhs and 5 lakhs
- Income earners of between 5 lakhs and 10 lakhs
- Those earning more than Rs 10 lakhs
| Income Range | Tax rate | Tax to be paid |
|---|---|---|
| Up to Rs.2,50,000 | 0 | No tax |
| Between Rs 2.5 lakhs and Rs 5 lakhs | 5% | 5% of your taxable income |
| Between Rs 5 lakhs and Rs 10 lakhs | 20% | Rs 12,500+ 20% of income above Rs 5 lakhs |
| Above 10 lakhs | 30% | Rs 1,12,500+ 30% of income above Rs 10 lakhs |
Advance Tax
Self-employed people must do the calculation themselves and pay the tax to the Government periodically every quarter.The deadlines are:
| Due Date | Advance Tax Payable |
|---|---|
| On or before 15th June | 15% of advance tax |
| On or before 15th September | 45% of advance tax |
| On or before 15th December | 75% of advance tax |
| On or before 15th March | 100% of advance tax |
Tax-saving mutual funds or ELSS
One of the only mutual fund scheme allowed under 80C, ELSS (Equity Linked Savings Scheme) is gaining popularity among people for its historically higher performance in the recent years. Another perk of ELSS is that it has the lowest lock-in period of 3 years.
No comments: