INCOME TAX

An income tax is a government tax imposed on individuals or entities (taxpayers) that varies with the income or profits (taxable income) of the taxpayer.

What is income tax

Income tax is a direct tax

It is levied & collected by Central Government

In case of direct tax , burden and incidence are on same person who pays the tax, but in case of indirect tax, the burden is on one and incidence is on another.

Tax on “Income”  Income tax  is imposed on taxable income

of all persons including individuals, Hindu Undivided Families (HUFs), companies, firms, local authority and any other artificial judicial person.

Levy of tax is separate on each of the persons and is governed by the Indian Income Tax Act, 1961.

Income tax is a key source of funds that the government uses to fund its activities and serve the public.

Scope of taxable income & ChargeNet income

range (Individual resident (Age

below 60 Yrs.) or any NRI / HUF / AOP / BOI / AJP)

Net income range (For

resident senior citizen1)

Net income range (For super senior citizen2)

Net income range (For any other person

excluding companies and

co-operative societies)

Income Tax rates3

Up to 200,000 Up to 250,000 Up to  500,000 Up to  200,000 NIL

200,001–500,000  250,001–500,000 - 200,001–500,000 10%

 500,001–1,000,000  500,001–1,000,000

 500,001–1,000,000

 500,001–1,000,000 20%

Above  1,000,000 Above  1,000,000 Above  1,000,000 Above  1,000,000 30%

A surcharge of 10% on income tax payable is applicable for every non-corporate assessee, whose total income exceeds  10 million

What comes under Income

Income broadly includes :Profits & gains from business and professionSalary incomeWinnings from lotteries, crossword puzzles,

races, games, gambling or bettingAllowances given to assessee by his

employeeCapital gains,

Previous Yr. & Assessment Yr.

     The year in which income is earned is known as previous year (P.Y.) and it is taxed in the next year called Assessment year(A.Y.)

Heads of Income Income from Salary

Income from House Property

Income from Business or Profession

Income from Capital Gains

Income from Other Sources

    1.

2.

3.

4.

5.

Components of salary

  Basic salary, Dearness Allowance(DA), House Rent Allowance(HRA), Conveyance allowance, Children education allowance, Children Hostel expenditure

allowance, Travel concession

Income from Salary

Income can be charged under this head only if there is an employer employee relationship between the payer and payee. 

Salary includes basic salary or wages, pension, gratuity, commission, retirement benefits. The aggregate of the above incomes, after exemptions available, is known as Gross Salary

Basic salary along with commissions and bonuses is fully taxable.

Income from House Property

Rental incomes arising from residential or commercial property are taxable under the IT act. Rental agreement would form the basis to determine income under this head

Income from Business or profession

Income earned through your profession or business is charged under the head “profits and gains of business or profession”.

The income chargeable to tax is the difference between the credits received on running the business and expenses incurred.

The deductions allowed are depreciation of assets used for business; rent for premises; insurance and repairs for machinery and furniture; advertisements; traveling and many more.

Income from Capital Gains

Any profit or gain arising from transfer of capital asset held as investments are chargeable to tax under the head “capital gains”.

Income from Other sources

This head comprises miscellaneous incomes, such as interest from bank deposits, winnings from game shows and lotteries.