TaxCare

INCOME TAX: ​​It is a direct tax levied by the Government of India on the income of every person. The provisions governing the Income-tax are covered in the Income-tax Act, 1961.​ 

PERSON: The term 'person' includes Individual, Hindu Undivided Families [HUFs], Association of Persons [AOPs], Body of individuals [BOIs], Firms, LLPs, Companies, Local authority and any artificial juridical person not covered under any of the above.

INCOME: Under the Income-tax Law, the word 'income' has a comprehensive and inclusive meaning. In the case of a salaried person, all that is received from an employer in cash, kind or as a facility is considered as an income. For businessmen, his net profit will constitute his income. Income may also flow from investments in the form of Interest, Dividend, Commission, etc. Further, income may be earned on the sale of capital assets like building, gold, etc.

Income shall be computed as per relevant provision of Income-tax Act, 1961, which lays down detailed condition for computation of income chargeable to tax under various heads of income mentined in income tax return forms. 

Income tax returns are filed annually with payment of due tax following a FINANCIAL YEAR (FY) and ASSESSMENT YEAR (AY) cycle, which begins from 1st April to 31st March of the succeeding year of an English calendar. 

FINANCIAL YEAR (FY): It refers to the year during which the income is earned. It begins from 1st April of the current year to 31st March of the succeeding year of an English calendar, e.g., FY 2020-2021, from 01/04/2020 to 31/03/2021. 

ASSESSMENT YEAR (AY): It refers to the year in which the earned income is assessed, and the due income tax return is filed with payment of applicable tax. It is also beginning from 1st April of seceding year to 31st March of the next succeeding year of an English calendar, e.g., for FY 2020-2021, the AY will be 01/04/2021 to 31/03/2022.  

​​​​​​ADVANCE TAX: It is to be calculated based on the expected tax liability of the year. Advance tax is to be paid in instalments as given below:​​

• 1st Instalment 15 per cent – On or before 15th June
• 2nd instalment 45 per cent – On or before 15th September
• 3rd instalment 75 per cent – On or before 15th December​
• 4th instalment 100 per cent –On or before 15th March 

Note: Any tax paid on or before the 31st day of March shall also be treated as advance tax paid during the same financial year.

The advance tax deposit will be adjusted with final INCOME TAX RETURNS. 

TAX DEDUCTED AT SOURCE (TDS):  Deduction of tax at source applied to several payments such as salary, interest, commission, brokerage, professional fees, royalty, contract payments, etc. The amount deducted by the employer/payer should be deposited to the department in the account of the employee/recipient. 

TDS payment is also considered advance tax payment and can be adjusted with final INCOME TAX RETURNS. 

FINAL PAYMENTS: An taxpayers reach to final payment of income tax after preparing a complete set of returns with the last background that considers various financial statements and deductions of section allowed under Income tax law. It also includes interest on unpaid advance as per schedule. 

The term 'person' of income tax includes various categories of the assessee, e.g. INDIVIDUAL, SENIOR CITIZEN, HUF, NRI, COMPANY, TRUST, etc. Therefore, an income earned by different categories of the assessee from the same or different types of business may be treated differently by the Income-tax laws. 

TAX SLABS: 

Income earned by an assessee from different types of business activity attracts identical tax treatment for TAX SLABE, and the RATE OF TAX vary at a different level of income of the taxpayer.

EXEMPTIONS: Income tax law allows some exemptions to the taxpayers in the account of various business activities and types of residents statute that are excluded from taxable income. 

Here are looks for some. 

• EXEMPTED INCOME: Income earned from agricultural activities are fully exempted from the income tax. 
• SPECIAL EXEMPTIONS: Income tax section 10 (26) allows total exemption of Income earned by a tribal resident of 6th schedule state (North-East including SIKKIM, LEH and Ladakh) in an individual capacity.

 DEDUCTIONS:  Income tax law also allows some deductions to the taxpayers in the account of various allowances and expenditures that are excluded from taxable income. 

Here are looks for some. 

• ALLOWANCES: Specific allowances such as HRA, ENTERTAINMENT, CHILD EDUCATION, UNFORM, RATION  etc., are exempted spatially or wholly from income tax. 
• SAVINGS/INVESTMENT/INSURANCE: Income tax section 80c/80d/80ccd etc., are the popular Income tax savings schemes that allow taxpayers to save a certain amount levying from income tax. 
• BUSINESS EXPENSES: Various business expenses such as Insurance premium, ESI, EPF, Marketing expenses etc., are allowed for deduction to arrive at taxable income.