Income Tax Forms

Income tax is a direct tax that is levied on the income earned by an individual or a business entity in India. The tax is levied by the Central Government of India under the Income Tax Act, 1961. In this article, we will discuss the various aspects of income tax in India.

1. Who is liable to pay income tax in India?

• Any person who earns income in India is liable to pay income tax.

• Resident individuals, Hindu Undivided Families (HUFs), firms, companies, LLPs, and any other person are liable to pay income tax.

• Non-resident individuals and foreign companies are liable to pay income tax on income earned in India.

Tax slabs in India:

2. The tax slabs for different categories of taxpayers are as follows:

For individuals below the age of 60:

• Income up to Rs. 2.5 lakhs - No tax

• Income between Rs. 2.5 lakhs and Rs. 5 lakhs - 5% tax

• Income between Rs. 5 lakhs and Rs. 7.5 lakhs - 10% tax

• Income between Rs. 7.5 lakhs and Rs. 10 lakhs - 15% tax

• Income between Rs. 10 lakhs and Rs. 12.5 lakhs - 20% tax

• Income between Rs. 12.5 lakhs and Rs. 15 lakhs - 25% tax

• Income above Rs. 15 lakhs - 30% tax

For individuals between the age of 60 and 80:

• Income up to Rs. 3 lakhs - No tax

• Income between Rs. 3 lakhs and Rs. 5 lakhs - 5% tax

• Income between Rs. 5 lakhs and Rs. 10 lakhs - 20% tax

• Income above Rs. 10 lakhs - 30% tax

For individuals above the age of 80:

• Income up to Rs. 5 lakhs - No tax

• Income between Rs. 5 lakhs and Rs. 10 lakhs - 20% tax

• Income above Rs. 10 lakhs - 30% tax

3. Deductions:

• There are several deductions available under the Income Tax Act, which can be claimed to reduce the taxable income.

• Some of the popular deductions are Section 80C (for investments in PF, PPF, LIC, NSC, etc.), Section 80D (for medical insurance premiums), Section 80E (for education loan interest), Section 80G (for donations to certain charities), etc.

• The maximum deduction under Section 80C is Rs. 1.5 lakhs per year.

4. Taxation of capital gains:

• Capital gains refer to the profit earned from the sale of a capital asset, such as a property, shares, or mutual funds.

• Capital gains can be either long-term (if the asset is held for more than 3 years) or short-term (if the asset is held for less than 3 years).

• Long-term capital gains are taxed at a lower rate of 20% (with indexation benefits) or 10% (without indexation benefits), depending on the type of asset.

• Short-term capital gains are taxed at the regular income tax rates.

5. Taxation of business income:

• Business income is taxed separately from the personal income of an individual.

• The tax rate for business income is 30% for domestic companies and 40% for foreign companies.

• However, certain deductions are available for businesses, such as depreciation, expenses incurred in the course of business, etc.

6. Tax deducted at source (TDS):

• TDS is a mechanism where the person making the payment deducts tax at the source and remits the same to the government. 

• TDS is applicable on various types of payments, such as salary, rent, interest, commission, professional fees, etc.

• The rate of TDS varies depending on the nature of the payment and the status of the recipient.

• The person making the payment is required to deduct TDS at the prescribed rate and remit the same to the government within the specified time limit.

• The recipient can claim credit for the TDS deducted while filing their income tax return.

• Failure to deduct TDS or remit the same to the government can attract penalties and interest.