Income tax
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19-Oct-2014 -
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Economy & Finance
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Transcript of Income tax
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.