Sunday, August 21, 2016

Income Tax in India

Overview:

Income tax is that percentage of your income that you pay to the government to fund infrastructural development, pay the salaries of those employed by the state or central governments, etc. All taxes are levied based on the passing of a law, and the law that governs the provisions for our income tax is the Income Tax Act, 1961.

Income tax is only of the direct means of taxation like capital gains tax, securities transaction tax, etc., and there are many other indirect taxes that we pay like sales tax, VAT, Octroi, service tax, etc.

The income tax you pay every month or upon every contractual earning is what forms a large part of the revenue for the Government of India. These revenue functions are managed by the Ministry of Finance, which has delegated the responsibility to managing direct taxes (like income tax, wealth tax, etc.) to the Central Board of Direct Taxes (CBDT).
Income Tax - In Detail:

Income tax has to be paid by every individual person, Hindu Undivided Family (HUF), Association of Persons (AOP), Body of Individuals (BOI), corporate firms, companies, local authorities and all other artificial juridical persons that generate income.

Taxes are calculated on the annual income of a person, and an annual cycle (year) in the eyes of the Income Tax law starts on the 1st of April and ends on the 31st of March of the next calendar year. The law recognizes and classifies the year as “Previous Year” and “Assessment Year”.

The year in which income is earned is called the previous year and the year in which it is charged to tax is called the assessment year.

For example: Income earned between April 1st 2014 and March 31st 2015 is called the income of the previous year and will be charged to tax in the next year, or the assessment year that starts on April 1st 2015.

Taxes are collected by the government in three primary ways:
Voluntary payment by taxpayers into designated banks, like advance tax and self-assessment tax.
Taxes Deducted at Source (TDS) which is deducted from your monthly salary, before you receive it.
Taxes Collected (TCS).
Income Tax Slab Rates:

Income tax slab rates are for different categories of taxpayers, who are taxed progressively higher based on their earning. The income tax slab rates can be broadly classified into the following categories:


Individuals and Hindu Undivided Families (HUF):
These are the slab rates as of financial year 2014-2015, i.e. assessment year 2015-2016 and FY 2015-2016 and assessment year 2016-2017.

On all the tables listed below, Education Cess of 2% and SHEC of 1% will be levied on the tax computed using the rates given below.

Under Section 87(A), an Income Tax Rebate of Rs.2,000 is provided for all individuals earning an income that’s less than Rs.5,00,000 per annum.

No comments:

Post a Comment