Types of Income Tax
1. Resident Income Tax: Tax on income earned by residents of a country.
2. Non-Resident Income Tax: Tax on income earned by non-residents of a country.
3. Corporate Income Tax: Tax on profits earned by companies.
Income Tax Slabs
Income tax slabs, also known as tax brackets, are the ranges of income that are subject to different tax rates.
How is Income Tax Calculated?
Income tax is calculated based on the taxpayer's taxable income, which is the total income earned minus any deductions and exemptions. The tax is then calculated using the tax slabs and rates.
Income Tax Returns
Taxpayers are required to file income tax returns (ITRs) with the tax authorities, usually on an annual basis. The ITR contains information about the taxpayer's income, deductions, and tax liability.
Benefits of Income Tax
1. Revenue Generation: Income tax is a significant source of revenue for governments.
2. Redistribution of Wealth: Income tax helps to redistribute wealth from the rich to the poor.
3. Economic Growth: Income tax can influence economic growth by encouraging investment and entrepreneurship.
Income Tax Exemptions and Deductions
Taxpayers can claim exemptions and deductions to reduce their taxable income. Common exemptions and deductions include:
1. Basic Exemption: A certain amount of income is exempt from tax.
2. Standard Deduction: A fixed amount of income is deductible from taxable income.
3. Charitable Donations: Donations to charitable organizations are deductible from taxable income.
4. Home Loan Interest: Interest paid on home loans is deductible from taxable income.
FORMS THAT NEED TO BE FILED FOR INCOME TAX PURPOSES:
1. ITR-1 (Sahaj): For individuals being a resident (other than not ordinarily resident) having total income upto Rs.50 lakh, having Income from Salaries, one house property, other sources (Interest etc.), and agricultural income upto Rs.5 thousand.
2. ITR-2: For Individuals and HUFs not having income from profits and gains of business or profession.
3. ITR-3: For individuals and HUFs having income from profits and gains of business or profession.
4. ITR-4: For Individuals, HUFs and Firms (other than LLP) being a resident having total income upto Rs.50 lakh and having income from business and profession which is computed under sections 44AD, 44ADA or 44AE and agricultural income upto Rs.5 thousand.
5. ITR-5: For persons other than- (i) individual, (ii) HUF, (iii) company and (iv) person filing Form ITR-7
6. ITR-6: For Companies other than companies claiming exemption under section 11
7. ITR-7: For Charitable purposes, trusts, political parties, or colleges/universities.
Eligibility:
Individuals
1. Resident Individuals: Individuals who are residents of the country and have a gross total income exceeding the basic exemption limit.
2. Non-Resident Individuals: Individuals who are non-residents of the country and have income earned in the country.
3. Senior Citizens: Senior citizens who have a gross total income exceeding the basic exemption limit.
Entities
1. Companies: All companies, whether private or public, are required to file income tax returns.
2. Firms: Partnership firms, limited liability partnerships (LLPs), and other types of firms are required to file income tax returns.
3. Trusts: Trusts, including charitable trusts and religious trusts, are required to file income tax returns.
4. Societies: Societies, including cooperative societies and housing societies, are required to file income tax returns.
Other Entities
1. Hindu Undivided Families (HUFs): HUFs are required to file income tax returns.
2. Association of Persons (AOPs): AOPs are required to file income tax returns.
3. Body of Individuals (BOIs): BOIs are required to file income tax returns.
4. Local Authorities: Local authorities, including municipalities and panchayats, are required to file income tax returns.