Income tax is a tax levied directly by the central government on the incomes earned by the individuals and other non-individual entities such as Hindu Undivided Family (HUF), partnership firm and so on during a financial year. These various sources of income include salary, pension, capital gains, sale of financial investments, interest income, other incomes and so on.
Unlike the Goods and Services Tax (GST) Council where the Union Finance Minister and State Finance Ministers decide the rates, the income tax rates are announced by the Finance Minister during the year’s Union Budget.
The rate at which your total income earned during the year will be taxed depends on the slab in which your income falls. Over and above the income tax, a cess and surcharge is levied. The cess is payable by all taxpayers. For those earning more than Rs 50 lakh a year, a surcharge is levied between 10 percent and 37 percent.
The total income earned by a taxpayer during a financial year has to be reported to the government in the assessment year by filing income tax return (ITR filing).
Financial year is the year in which income is earned by a taxpayer; a financial year is between April 1 and March 31. Assessment year is the year immediately following the financial year for which the return is to be filed.
Income earned from various sources such as salary, pension, interest from fixed deposits (FDs), savings account, capital gains from sale of house, equity mutual funds, debt mutual funds and so on have to be reported in ITR.
1. What is the basic exemption limit for individuals aged below 60 years? According to income tax laws, it is mandatory to file ITR if your income exceeds the basic exemption level. The basic exemption level depends on the age of the individual during the financial year.
Currently, for individuals below 60 years of age, the maximum income exempt from tax is Rs 2.5 lakh in a financial year. This can change depending on the announcements made in the Union Budget.
2. What are the tax rates at which income is charged? The income tax slab rates are 5 percent, 20 percent, and 30 percent.
Also Read:Latest income tax slabs
3. How to file income tax return An individual can file income tax return by registering himself on the incometaxindiaefiling.gov.in or via private e-filing websites.
4. What is the difference between gross total income and net total income? Gross total income refers to the total income earned by the taxpayer. Income tax laws allow an individual to claim certain tax-exemptions (such as house rent allowance) and deductions under various sections such as section 80C for investments made in Public Provident Fund, equity mutual funds etc. of up to Rs 1.5 lakh.
Gross total income minus tax-exemptions and deductions would result in net total income. The tax liability of the person will be calculated on the net total income.
5. What is the last date to file income tax return? The last date to file income tax return for individuals is July 31, unless extended by the government.