Tax is one of the central ways for a government to generate revenue for operations related to the welfare of the society. Among the different taxes present in the system, income tax in India is the one that is dealt by everyone, including individuals, firm or even an organization.
Therefore, here are few basics you need to understand to make your financial lives easy and making income tax in India simpler.
When the Income Tax is being computed?
Income Tax is being computed on annual basis. However, you first need to understand the difference between Financial Year vs Assessment Year.
Financial Year or the Tax Year starts from the 1st of April to the 31st of March of the next year. No matter when you started your job, the tax year closes on 31st March and a new tax year begins on the 1st of April.
Assessment year is the year followed by the Financial Year. It is the year in which you file a return for the income tax paid. Therefore, the tax paid for the tax year starting from 1st April 2020- 31st March 2021 is assessed in the year 2021-22 which is why the assessment year would be same.
Documents required for filing Income Tax in India
- PAN Card details
- Aadhar Card details
- Bank account information
- Details of cash deposits during demonetization
- TDS Certificates
- Tax payment challans
What is Income Tax in India?
Income Tax refers to the tax levied by a government to finance its various operations for the welfare of people. Taxes are divided into two types,
- Indirect Tax, such as Service Tax, VAT which is now subsumed into Goods And Service Tax.
What are the income categories that come under Income Tax in India?
The income tax laws in India are made under the provisions of Income Tax Act. According to the laws, following are the different income categories that are deemed to be taxable:
- Salaries
- Income from House Property
- Profits and Gains from Business or Profession
- Capital Gains
- Income from other sources
The income from all the above heads is clubbed to determine the taxable income.
What is Income Tax Return?
Income tax return is the tax form or forms used to file income tax with the Income Tax Department. In other words, it is a document stating your income and the taxes you have paid and acts as a proof of the taxes you have paid.
What is the need to file Income Tax Return?
Filing ITR is a mandate set by the Government of India as it helps you in getting a refund in case you have paid excess taxes. Moreover, not filing ITR leads to penalties or legal consequences.
How to calculate Income Tax
In order to calculate tax, different tax slabs or rates are applied and the final tax payable is calculated. Generally, the income is taxable if it exceeds more than ₹2,50,000 in case of Individual, Rs 3 lakh in case of senior citizen and up to Rs 5 lakh in case of super senior citizen.
Budget 2020 has given an option to choose between the existing income tax regime and a new regime for the coming financial year 2020-21.
The new tax regime offers lower tax rates and new tax slabs and simultaneously removes tax exemptions and will result in lower tax outgo for the taxpayer, according to the finance minister.
How do know about my Tax Payment details?
Once the tax is deposited by you or any other individual has deducted tax and deposited with the government on your behalf, then total amount of tax deposited against your PAN will be reflected in Form 26AS. You can download the statement from your account on the income tax e-filing website.
How to know which Tax regimes would be beneficial?
To know about which tax regime would be beneficial, i.e., result in lower tax payable for an individual is based on his/her income composition and investments made for the financial year 2020-21.
Here is the Income Tax slab for the Financial Year 2020-21 (Both New and Old Regime)
| New Tax Slab |
Income Slab |
Old Tax Slab |
| NIL |
Up to Rs 2.5 Lakh |
NIL |
| 5% |
From 250,001- Rs 500,000 |
5% |
| 20% |
From 500,001-Rs 750,00,000 |
10% |
| 20% |
From Rs 750,001- Rs 10,00,000 |
15% |
| 30% |
Rs 10,00,001- 12,50,000 |
20% |
| 30% |
Rs 12,50,000-1500,000 |
25% |
| 30% |
Above 1500,000 |
30% |
