Do you Know these Five Important Things about Income Tax in India?

The Income Tax Act was passed in the year 1961 in India. While several amendments have been made to the act since then, it is this act that still governs the income tax provisions and deductions applicable. The term ‘income tax’ is usually very confusing for a lot of people who’ve recently started their professional lives. The complicated terminologies, income slabs, filing dates, and exemptions appear just too much to understand at first.

If you too are confused about income tax, we have a list of some of the most important things that you should know about it.

1. Income Heads

Every individual who gets or earns an income from India has to payIncome Tax in India. This applies to resident Indians as well as NRIs. This income can be in the form of salary, rental income, pension, fixed deposits, or from your investment in mutual funds. The IT department has divided the income types into 5 heads. They are as follows-

• Salary
• Income from other sources like FDs, interest earned on savings bank account, etc.
• House property income
• Capital gains income from investments like mutual funds, equity market, etc.
• Business or profession income for self-employed professionals and business owners

2. Income Slabs

The amount of tax one has to pay depends on the amount they earn. There are four different income slabs and your slab would determine the tax you are required to pay. The four slabs are-

• Income not exceeding Rs. 2,50,000 - Zero tax
• Income from Rs. 2,50,000 up to Rs. 5,00,000 – tax rate is 5% on the income that falls in this range
• Income from Rs. 5,00,000 and up to Rs. 10,0000 – tax rate is 20% on the income that is above Rs. 5 lakhs and an additional amount of Rs. 12,500 is payable
• Income above Rs. 10,00,000- tax rate is 30% on the income that is above Rs. 10 lakhs and an additional amount of Rs. 1,12,500 is payable

This is the tax slab for the taxpayers who are below 60 years. The IT department has different slabs for people between 60-80 years and 80 years and above.

3. Tax Deductions

There are several sections in the IT Act, with the help of which salaries of employees, income from house property, income from profession or business, and income from other sources is eligible for tax deductions. The IT department encourages the taxpayers to make use of these deductions to legally reduce their tax liabilities.

Some of the most popular deductions as per the IT Act are:

• Section 80C- Allows investment in instruments like PPF account, ELSS funds, National Savings Certificate, etc.
• Section 80CC and 80CCD- 80CC allows deductions for the amount that is paid towards initiating or continuing an insurance policy and 80CCD allows deductions to individuals who contribute to the National Pension Scheme.
• Section 80TTA- Deductions of up to Rs. 10,000 for the interest that one earns from a savings bank account.
• Section 24- For taxpayers who have taken a home loan, this section enables deduction of the interest levied on the loan.

Similarly, there are many other sections for all the 5 different income heads.

4. Filing Returns

No matter if you have a regular or an irregular source of income, you need to file returns every year. Individuals whose income is below the lowest tax bracket also need to file returns. There are a number of ITR (Income Tax Returns) forms available with the help of which an individual lets the IT department know their total income and the tax paid on the same.

In the last few years, the returns filing process has been digitised to make the tax payments simpler for individuals and businesses.

5. Important Dates to Remember

The whole process of Income Tax in India follows a particular schedule and there are a few important dates that every taxpayer should remember. They are-

• 31st January-Last date for submitting proofs of investments
• 31st March- Last date to make investment as per Section 80C
• 31st July- Deadline for filing returns
• October-November- Verifying tax returns

The income tax is one of the most important aspects of your professional life, and it is very important to understand the whole process as soon as possible. This would enable you to enjoy most benefits from the deductions available and file the returns on time.

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