Understanding Income Tax in India
Income tax refers to the tax levied by the government for the purpose of financing its various operations. Taxes are of two types, direct and indirect. Whereas Income Tax is a direct tax, VAT, service tax, excise and the latest one to subsume all these taxes Goods and Services Tax (GST) are all indirect taxes.
Apart from funding the activities of the government, taxes also act as a fiscal stabiliser that aid in distributing wealth evenly among the population. Furthermore, taxes are instrumental in cushioning the effects of economic cycles. The payment of Income Tax in India is made according to the provisions made under the Income Tax Act.
According to the Indian Income Tax laws, income from the following sources is deemed taxable:
- Income from house property
- Profits and gains of business or profession
- Capital gains
- Income from other sources
The sum of income from all the sources above is calculated according to the provisions of Income Tax Act. The tax rates in India vary according to the earnings of an individual and are referred to as Income Tax slabs. These Income Tax rates are revised every year during the budget.
Income tax is calculated on an annual basis. It is levied on the income earned in the previous year which is also known as the Assessment Year. In the eyes of the law, the Financial Year begins on the 1st of April in a given year and ends on the 31st of March of the following year.
For the Financial Year 2016-17, the Income Tax deadlines are as follows:-
- 31st July – Last Date of Return filling for non-audit cases
- 30th September – Last Date of Return filling for audit cases
Income tax filing for salaried individuals
Salaried individuals can file their income tax returns basis their Form 16. Most of their income details are mentioned in their Form 16 issued by their employers. Our guide on Form 16 will help you understand all about the importance and filing with the help of Form 16.
Documents required for tax filing
There are different documents required for tax filing that need to be kept ready before you file your taxes. These include Form 16, Form 16A, investment receipts and proofs. Read our guide on document checklist that will help you be ready to file taxes.
Income tax slab rates
Indian Income tax laws, tax individuals per different slab rates of income. The basic exemption limit is Rs 2,50,000. Income tax department charges different tax slabs at the rates ranging from 10% up to 30%. Our guide on income tax slab rates will explain these in detail. You can easily estimate your tax liability by using our tax calculator and know how much taxes you owe to the government.
Income tax returns (ITR)
Tax returns are a statement of your earnings from various sources of income that include the tax liability, details of tax paid, and other refunds that are eligible to receive from the government. Our guide on ITR forms will help you choose the correct ITR form for tax filing.
Claiming refund of taxes paid
You are eligible for refunds to be claimed from the tax department in case you have paid excess taxes. These can be claimed on filing your tax returns. Once you have claimed a refund, you need to keep checking the status of your refund to make sure that your refunds are credited to your account in time. Our guide on tax refunds will help you understand different statuses of refund and know your refund status.
Late filing of income tax returns
It is necessary to file the income tax returns before the deadline to avoid a penalty for non-filing of tax returns. Our guide on penalties and late filing fees for will help you understand the different charges levied by the government.
Income tax filing procedure
With the introduction of e-Filing, Income Tax Returns have become simpler and convenient. You can e-File Income Tax Returns from the comfort of your home or office at any hour of the day. You can follow these simple steps to e-File Income Tax Returns online. You can read the entire procedure in our guide to ‘e-filing income tax returns on government website‘.
What are the various tax saving instruments?
There are many tax saving instruments that are used for tax exemptions under the various sections of the Income Tax Act. Investing in tax saving instruments is an apt way to boost your wealth and save taxes concurrently. Our guide on section 80C will help you understand the various ways in which you may save taxes. Apart from this, you can also save taxes by investing in health insurance, and our guide on section 80D explains this in detail.