TABLE OF CONTENT:

1. What is the Income Tax?
2. Income liable for Tax
3. Assessment Year
4. Slab Rates
5. Deductions
6. Conclusion

What is the Income Tax?

Paying Income Tax to the Government is an important milestone in everyone’s life. It falls under the category of ‘must-do’, making it a responsibility of every Indian Citizen. Now, what is an Income tax?

Income tax is a portion of our income that we pay to the government for the country’s welfare and development. The process is termed as Income Tax returns filing. This looks pretty simple but there are slabs and other regulations of paying Income Tax.

‘Income’ liable for Tax

Income, as per the Income Tax Act, 1961 classifies the income into five categories which are liable for Tax Returns:

• Salary Income – This includes salary, pension, allowances, leave encashment or any other cash you receive for your service.
• House Property – This includes income from renting an owned property.
• Capital Gain – This includes all the income that arises from transactions in capital assets like shares/mutual funds.
• Business or Profession – This includes income from an additional business other than your job.
• Other Sources – this includes interest income in a savings/fixed deposit account

Assessment Year

Assessment year is the year that comes after the ‘previous year’. In simple words, the year in which you earn the total income is the Financial Year and the income you have earned in the financial year can be taxed in the Assessment Year.

For example, if you start your job on 1 January 2020, your tax year closes on 31 March 2020. 2019-20 is your previous year and your AY is 2020-21.

Slab rates

Slab rates are different threshold levels of income on which your taxability is determined. As per the Income Tax Act, 1961, every taxpayer is categorized into different income groups to determine the rates at which their income will be taxed. These groups are called tax slabs. Tax liability depends on the tax slabs and they are divided into the following criteria’s: -

Tax Rates for Individuals as per budget 2019-2020

Tax Rates for Senior Tax Payers between the age of 60 years to 80 years’ old

Tax Rates for Super Senior Tax payers above the age of 80 years

Deductions

 Various deductions are available for a taxpayer from the end of the Income Tax Department. This results in a reduction of the gross income, which in turn reduces the tax liability.

Sum of all income = Gross income

Gross Income – Deductions = Taxable Income

Therefore, higher is your deduction; lower is your tax liability.

 How can we help you?

It is recommended for every Indian citizen to understand the tax terms clearly and pay the taxes with responsibility. Even if the payable tax amount is NIL, the Income Tax Returns should be filed annually on time.

Online Legal India ^TM helps you to file ITR in proper format and without any hassle, all online and at a nominal charge. The skilled tax experts even help you avail every kind of deductions in every possible means.