Paying income tax is the duty of every earning individual in the country whose income falls in the tax slab. FAQ on income tax can help you understand the rules and regulations regarding taxation.
However, all the rules and regulations regarding taxation can get confusing at times. These FAQs can help you understand it better.
What is Income Tax?
You first have to ask yourself ‘‘what is income tax’’ before you can learn about anything related to it. It is the tax imposed by the Government of India on the earning citizens of the country. The Income Tax Act of 1961 dictates the taxation system of India.
What is the Financial Year for Income Tax Purposes?
Financial Year
The financial year refers to a one-year period used by taxpayers for accounting and financial reporting purposes. It represents the year in which income is earned. As per the Income Tax Act, this period begins on April 1st of the calendar year and ends on March 31st of the following calendar year. It is abbreviated as “FY.” For instance, the financial year starting from April 1, 2023, and ending on March 31, 2024, is denoted as FY 2023-24.
Assessment Year
The assessment year is the one-year period immediately following the financial year, spanning from April 1st to March 31st. It is called the assessment year because taxpayers are required to evaluate their income earned during the financial year and pay taxes during this period. For example, incomes earned during FY 2023-24 will be assessed in the assessment year AY 2024-25.
What are the Various Forms of Collection of Income?
What are the Different Categories Under Which Income Tax is Imposed?
The Income Tax Act categorizes the taxable income tax deduction into different sections:
- Salaries
- Profits from business or profession
- Income from house property
- Income from other sources
- Capital gains
Does India Provide ‘Double Taxation Relief’?
The double taxation relief is offered to individuals who are charged taxes on the same source of income in India and a foreign country. This is allowed under Section 91 of the Income Tax Act 1961. The relief is also offered if the foreign country in question has a ‘Double Taxation Avoidance Agreement’ with India.
What are the Books of Account that Need to be Maintained Under the Income Tax Laws?
The Institute of Chartered Accountants of India has set many guidelines that Indian companies need to follow. Under the Companies Act, the books of accounts are arranged for the organizations. For individuals, the book of account and related documents are required so the Assessing Officer can determine the total income of every individual.
What is a PAN?
The Permanent Account Number (PAN) is a ten-digit number issued by the Income Tax Department. The number is unique to every taxpaying individual.
What are the Benefits of Taking PAN?
The PAN is mandatory to pay taxes and for other financial transactions like buying high-end products, availing of financial credit, opening a bank account, and trading in securities, among others. It is also accepted as a valid identity card.
Why are Income Taxpayers Limited in Number?
As a developing country, India has a very high number of citizens who earn less than the minimum income tax slab of ₹3 lakhs. Hence, they do not pay any income tax. Also, India is an agricultural country, and income from agricultural sources is tax exempted.
How can an Individual Save Taxes in India?
There are different ways to save taxes in India:
- Under Section 80C, an investment of ₹1.5 lakhs reduces taxable income
- Under Section 80D, the premium towards medical insurance is tax-deductible
- Under Section 80EE, home loan interests are tax-deductible
What is the Existing/Old Income Tax Regime?
The existing/old income tax regime refers to the traditional system of calculating and paying income tax as per the prevailing tax laws. Under this regime, taxpayers are required to calculate their taxable income based on the income tax slabs and rates specified by the government and claim deductions and exemptions as applicable.
The old and new tax slabs are as follows:
Old Regime FY 2022-23
Income tax slabs
|
Income tax rate
|
From 0 to ₹2,50,000
|
0%
|
From ₹2,50,001 to ₹5,00,000
|
5%
|
From ₹5,00,001 to ₹7,50,000
|
10%
|
From ₹7,50,001 to ₹10,00,000
|
15%
|
From ₹10,00,001 to ₹12,50,000
|
20%
|
From ₹12,50,001 to ₹15,00,000
|
25%
|
From ₹15,00,001 and above
|
30%
|
New Regime FY 2023-24
Income tax slabs
|
Income tax rate
|
Up to ₹2,50,000
|
Nil
|
₹2,50,001- ₹5,00,000
|
5% above ₹2,50,000
|
₹5,00,001- ₹7,50,000
|
₹12,500 + 10% above ₹5,00,000
|
₹7,50,001- ₹10,00,000
|
₹ 37,500 + 15% above ₹ 7,50,000
|
₹10,00,001- ₹12,50,000
|
₹ 75,000 + 20% above ₹ 10,00,000
|
₹12,50,001- ₹15,00,000
|
₹1,25,000 + 25% above ₹ 12,50,000
|
Above ₹15,00,000
|
₹1,87,500 + 30% above ₹ 15,00,000
|
What are the Exceptions to the Income Tax Slab?
Exceptions to the income tax slab typically refer to various deductions, exemptions, and allowances that can be claimed by taxpayers to reduce their taxable income. These exceptions can include deductions for investments in specified schemes, exemptions for certain types of income, allowances for specific expenses, and so on.
What Documents are Required for ITR Filing?
Some common documents often required for ITR filing include:
- Form 16 or salary certificates from employers
- Bank statements and interest certificates
- TDS certificates
- Proof of investments, such as receipts or statements for deductions claimed
- Proof of capital gains or losses, if applicable
- Proof of deductions and exemptions claimed
- Aadhaar card or other identification documents
- PAN card
- Previous year’s ITR copy
How Can I Calculate My Income Tax?
Income tax calculator is very easy to use to figure out the tax payable on your income. Here are the steps:
Step 1: Choose the Financial Year
In the first step, you need to select the financial year from the dropdown menu for which you want to calculate the income tax.
Step 2: Enter Basic Details
In the second step, enter your basic details such as your age, earnings, the type of house you are living in, the rent that you pay if you are living in a rented house, etc.
Step 3: Income Details
Now, add your income details, such as your basic and gross salary, and income from other sources, such as interest on deposits and rental income.
Step 4: Add Your Exemptions
Next, you need to add the exemptions such as HRA, special allowance, and EPF contribution.
Step 5: List Down Your Capital Gains
In this part, you can list down all the capital gains you have earned in the year through the sale of equity investments, unlisted shares, or debt investments.
Step 6: Add the Deductions
In this step, you need to provide details of your tax investments (such as ELSS, term insurance premiums, NPS, PPF, health insurance, and donations to charities) under sections 80C, 80D, 80G, 80E, and 80TTA, etc.
Step 7: Get the Results
After hitting “Continue,” you will see your total taxable income and the total tax that you need to pay under the tax regime you have chosen.
What is the Computation of Income?
Computation of income refers to the process of calculating an individual’s or entity’s total income for a specific period. It involves determining all the sources of income, accounting for deductions, exemptions, and allowances, and arriving at the final taxable income. Computation of income is a crucial step in calculating the amount of income tax that needs to be paid.
What is ITR-V?
ITR-V stands for Income Tax Return Verification. It is a document generated after successfully filing the income tax return online. Once you file your return electronically, the ITR-V is generated, which serves as an acknowledgment of your filed return. You are required to sign this document and send it to the Income Tax Department within the specified time for verification purposes.
What are Income Tax Saving Instruments?
Income tax saving instruments are financial products or investment options that provide tax benefits to individuals and help in reducing their taxable income. These instruments are designed to encourage savings and investment while offering tax advantages. Examples of income tax-saving instruments include Public Provident Funds (PPF), Employee Provident Funds (EPF), National Savings Certificates (NSC), tax-saving fixed deposits, and certain insurance policies.
How to Calculate Health Insurance and Medical Expense Deduction?
In addition to the deduction available under Section 80C, taxpayers can also avail themselves of a tax benefit by utilizing Section 80D for health insurance premiums and medical expenses incurred by themselves, their family, and their parents.
Person insured
|
Maximum deduction Below 60 years
|
Maximum deduction 60 years or older
|
You, your spouse, your children
|
₹25,000
|
₹50,000
|
Your parents
|
₹25,000
|
₹50,000
|
Preventative health checkup
|
₹5,000
|
₹5,000
|
Maximum deduction (includes preventive health checkup)
|
₹50,000
|
₹1,00,000
|
How to Claim Home Loan Deduction?
To qualify for the deduction, you must provide the necessary paperwork to either your employer or the income tax department, depending on the situation. These documents might comprise the loan agreement, interest certificate, and other pertinent records. Therefore, it is advisable to consider this opportunity if you have obtained a home loan for your property.
Important Income Tax Dates 2023-24
The important income tax dates for the years 2023-24 include:
- The first installment of advance tax for the financial year 2023-24 is due on 15th June 2023.
- Individuals and entities not liable for tax audits and who have not engaged in any international or specified domestic transactions should file their income tax returns for the fiscal year 2022-23 by 31st July 2023.
- The second installment of advance tax for the financial year 2023-24 is due on 15th September 2023.
- Taxpayers liable for audit under the Income Tax Act must submit their audit report (Section 44AB) for the assessment year 2023-24 by 30th September 2023.
- Taxpayers requiring audit (without international or specified domestic transactions) should file their income tax returns by 31st October 2023.
- Taxpayers having transfer pricing and specified domestic transactions must submit their audit report for the assessment year 2023-24 by 31st October 2023.
- Taxpayers requiring audit (without international or specified domestic transactions) have until 30th November 2023 to file their income tax returns.
- The third installment of advance tax for the financial year 2023-24 is due on 15th December 2023.
- The last date for filing a belated return or revised return for the fiscal year 2022-23 is 31st December 2023.
What Documents are to be Enclosed Along with the Return of Income?
Common documents that may be required to be enclosed include:
- TDS certificates
- Proof of investments, deductions, and exemptions claimed
- Bank statements and interest certificates
- Details of foreign income, if applicable
- Any supporting documents related to capital gains, if applicable
- Proof of tax payments, if any
- Form 16 or salary certificates from employers
- Aadhaar card or other identification documents
- PAN card
Should I Disclose All My Income in the Return, Even if it is Exempt?
In general, it is advisable to disclose all your income in return, even if it is exempt from tax. This helps in maintaining transparency and compliance with tax laws. Additionally, certain exemptions or deductions may have specific reporting requirements or impact the calculation of other taxes or benefits. It is recommended to report all your income, including exempt income, accurately.
Should I E-Verify to Get the IT Refund?
The process of e-verification is often required to complete the filing and processing of income tax returns. E-verification can be done through various methods, such as using Aadhaar OTP, net banking, or Electronic Verification Code (EVC). Verifying your return is important to ensure that it is considered valid and to facilitate the processing of any refunds due to you.
Can I Take Section 87A Rebate from Tax on Long-term and Short-term Capital Gains if There is No Other Income?
Section 87A offers a rebate for tax on both long-term and short-term capital gains. Nevertheless, if you have long-term capital gains from the sale of equity shares or equity-oriented funds (covered under Section 112A), you are not eligible to apply the rebate provided by Section 87A to offset the tax on those gains.
Can I File a Return After the Completion of the Assessment Year?
The assessment year refers to the year immediately following the financial year for which the income is being assessed. Generally, income tax returns are required to be filed within the specified due date, which is usually before the end of the assessment year. However, in some cases, the tax laws may allow for filing a belated return or filing a return after the completion of the assessment year, subject to certain conditions and penalties.
Key takeaways
- The double taxation relief is offered to individuals who are charged taxes on the same source of income in India and a foreign country.
- The period from April 1 to March 31 of the year is considered the ‘financial year’.
- The PAN is mandatory to pay taxes and for other financial transactions like buying high-end products, availing of financial credit.
