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What is Income tax?
Taxes levied by the Government are of two types, i.e. Direct Taxes and Indirect Taxes. Direct taxes are levied on profit or income of tax payers and Indirect Taxes are those taxes which are levied on Goods and Services. Income tax is type of direct taxes which refers to the tax you pay directly to the Government depending on your income or profit derived from your business or profession or any other sources of income.
Uses and benefits of filing Income Tax Return
- Quick loan approval
- For claiming a refund of TDS deducted
- Credit card processing
- For applying government tenders
- Hassle free visa processing, when traveling to foreign countries
- Proof of income for self-employed businessman/professionals
- To buy an insurance policy with higher cover
- To avoid penalty/scrutiny if you are required to file your tax return
- Help to carry forward losses
Who are the Tax Payers?
Any Indian citizen aged below 60 years is liable to pay income tax if their income exceeds Rs 2.5 lakhs. If the individual is above 60 years of age and earns more than Rs 2.5 lakhs, he/she will have to pay taxes to the Government of India. Additionally, the following entities that generate income are liable to pay direct taxes:
- Hindu Undivided Family (HUF)
- Body of Individuals (BOI)
- Association of Persons (AOP)
- Local Authorities
- Corporate firms
- Companies
- All Artificial Juridical Persons
What are the different taxable Heads of Income?
Taxable income that all employees receive from their employers is categorized under this head. As per section 192 of the Income Tax Act, the employer will withhold taxes if the employees do not come within the taxable bracket. All about tax deductions and the net paid income are detailed in Form 16 that must be provided by the employer to the employee.
Capital gains tax applies to earnings from the sale of capital assets held by the tax assessee. Capital assets refer to properties such as buildings, lands, bonds, equities, debentures, jewellery, etc. Taxes are levied on the income of the assessee when such properties are sold.
Income Tax is levied on house property if the house is given out on rent by the owner. However, under this head, the property cannot be used for business or professional purposes.
As per section 30 to 43D of the Income Tax Act, the profits earned from businesses or by providing professional services are considered taxable as per applicable rates. This income head is also known as “Profits and Gains of Business or Profession”.
Income from any sources other than the four listed above is categorized under this head. Some specific income coming under this head is listed below:
- Lottery/horse race winnings
- Income from dividends
- Pension received after the pensioner’s death.
- Rental income (other than house properties)
- Gifts received
- Interest on government securities, debentures, and bonds.
What is Income Tax Returns?
Every individual, who has a source of income, regular or irregular, is legally required to file their income tax returns. Even if your income is below the taxable bracket, you should file your income tax returns. There are prescribed forms through which the income earned by a person and the income tax paid thereon are informed to the Income Tax Authority. The following table shows different forms prescribed for different classes of taxpayers.
INCOME SLAB AND TAX RATES FOR F.Y. 2021-22/A.Y 2022-23
1. For resident Senior Citizens. (Age above 60 Years)
| Old Tax Slab | Rate | New Tax Slab ( Sec 115BAC) | Rate |
|---|---|---|---|
| Upto Rs 3,00,000 | Nil | Upto Rs 2,50,000 | Nil |
| Rs 3,00,001 – Rs 5,00,000 | 5% | Rs 2,50,001 – Rs 5,00,000 | 5% |
| Rs 5,00,001 – Rs 10,00,000 | 20% | Rs 5,00,001 – Rs 7,50,000 | 10% |
| | | Rs 7,50,001 – Rs 10,00,000 | 15% |
| Above Rs 10,00,000 | 30% | Rs 10,00,001 – Rs 12,50,000 | 20% |
| | | Rs 12,50,001 – Rs 15,00,000 | 25% |
| | | Above Rs 15,00,000 | 30% |
2. For resident Super Senior Citizens. (Age above 80 Years)
| Old Tax Slab | Rate | New Tax Slab ( Sec 115BAC) | Rate |
|---|---|---|---|
| Upto Rs 5,00,000 | Nil | Upto Rs 2,50,000 | Nil |
| | | Rs 2,50,001 – Rs 5,00,000 | 5% |
| Rs 5,00,001 – Rs 10,00,000 | 20% | Rs 5,00,001 – Rs 7,50,000 | 10% |
| | | Rs 7,50,001 – Rs 10,00,000 | 15% |
| Above Rs 10,00,000 | 30% | Rs 10,00,001 – Rs 12,50,000 | 20% |
| | | Rs 12,50,001 – Rs 15,00,000 | 25% |
| | | Above Rs 15,00,000 | 30% |
3. Individuals, [other than those mentioned above, HUF, AOP/BOI (other than co-operative societies).
| Old Tax Slab | Rate | New Tax Slab ( Sec 115BAC) | Rate |
|---|---|---|---|
| Upto Rs 2,50,000 | Nil | Upto Rs 2,50,000 | Nil |
| Rs 2,50,001 – Rs 5,00,000 | 5% | Rs 2,50,001 – Rs 5,00,000 | 5% |
| Rs 5,00,001 – Rs 10,00,000 | 20% | Rs 5,00,001 – Rs 7,50,000 | 10% |
| | | Rs 7,50,001 – Rs 10,00,000 | 15% |
| Above Rs 10,00,000 | 30% | Rs 10,00,001 – Rs 12,50,000 | 20% |
| | | Rs 12,50,001 – Rs 15,00,000 | 25% |
| | | Above Rs 15,00,000 | 30% |
Note: Rebate u/s 87A, in which resident individuals are allowed rebate (if their taxable income does not exceed Rs. 5 lakh) equal to 100% of income tax or Rs. 12,500 whichever less.
Surcharge:
10% for Individual having taxable Income exceeding 50 Lacs upto 1 Crore
15% for Individual having taxable Income exceeding 1 Crore but doesn’t exceed two crore rupees
25% for Individual having taxable Income exceeding 2 Crore but doesn’t exceed five crore rupees
37% for Individual having taxable Income exceeding 5 Crore
Health and Education Cess: 4% on the amount of Tax plus surcharge.
| Firms : |
|---|
| Income tax : 30% |
| Surcharge : 12% of the Income Tax, where total taxable income is more than Rs. 1 crore. |
| Health and Education Cess: 4% on the amount of Tax plus surcharge. |
| Companies : |
|---|
| (A) Domestic Companies Income tax : If opted for Section 115BA (in case turnover or gross receipt does not exceed Rs 400 crore in the FY 2018-19) – 25% If opted for Section 115BAA (in case assessee is not claming Profit linked deductions, unabsorbed depreciation & Losses) – 22% If opted for Section 115BAB (for new manufacturing companies) -15% Any other domestic company -30% MAT- 15% Surcharge: 7% if the taxable income exceeds Rs. 1 crore & 12% if the taxable income exceeds 10 crores However, the rate of surcharge in case of a company opting for taxability under Section 115BAA or Section 115BAB shall be 10% irrespective of amount of total income. Health and Education Cess: 4% on the amount of Tax plus surcharge |
| (B) Foreign Companies | |
|---|---|
| Income tax : | 40% (in general ) 50% (Royalty received from Government or an Indian concern in pursuance of an agreement made with the Indian concern after March 31, 1961, but before April 1, 1976, or fees for rendering technical services in pursuance of an agreement made after February 29, 1964 but before April 1, 1976 and where such agreement has, in either case, been approved by the Central Government) |
| Surcharge : | 2% if the taxable income exceeds Rs. 1 crore & 5% if the taxable income exceeds 10 crores |
| Health and Education Cess: | 4% on the amount of Tax plus surcharge |
| Cooperative Socities (Under Old Regime) | |
|---|---|
| Upto Rs. 10,000 | 10% |
| Rs. 10,001 to Rs. 20,000 | 20% |
| Rs. 20,001 to Above | 30% |
Surcharge : 12% of the Income Tax, where total taxable income is more than Rs. 1 crore.
Health and Education Cess: 4% on the amount of Tax plus surcharge
| Cooperative Socities (Under New Regime) - Section 115BAC |
|---|
| Income tax : Flat rate of 22% Surcharge : 10% of the Income Tax Health and Education Cess: 4% on the amount of Tax plus surcharge |
| Local Authorities |
| Income tax : 30%. Surcharge : 12% of the Income Tax, where total taxable income is more than Rs. 1 crore Health and Education Cess: 4% on the amount of Tax plus surcharge |
INCOME SLAB AND TAX RATES FOR F.Y. 2020-21/A.Y 2021-22
1. For resident Senior Citizens. (Age above 60 Years)
| Old Tax Slab | Rate | New Tax Slab ( Sec 115BAC) | Rate |
|---|---|---|---|
| Upto Rs 3,00,000 | Nil | Upto Rs 2,50,000 | Nil |
| Rs 3,00,001 – Rs 5,00,000 | 5% | Rs 2,50,001 – Rs 5,00,000 | 5% |
| Rs 5,00,001 – Rs 10,00,000 | 20% | Rs 5,00,001 – Rs 7,50,000 | 10% |
| | | Rs 7,50,001 – Rs 10,00,000 | 15% |
| Above Rs 10,00,000 | 30% | Rs 10,00,001 – Rs 12,50,000 | 20% |
| | | Rs 12,50,001 – Rs 15,00,000 | 25% |
| | | Above Rs 15,00,000 | 30% |
2. For resident Super Senior Citizens. (Age above 80 Years)
| Old Tax Slab | Rate | New Tax Slab ( Sec 115BAC) | Rate |
|---|---|---|---|
| Upto Rs 5,00,000 | Nil | Upto Rs 2,50,000 | Nil |
| | | Rs 2,50,001 – Rs 5,00,000 | 5% |
| Rs 5,00,001 – Rs 10,00,000 | 20% | Rs 5,00,001 – Rs 7,50,000 | 10% |
| | | Rs 7,50,001 – Rs 10,00,000 | 15% |
| Above Rs 10,00,000 | 30% | Rs 10,00,001 – Rs 12,50,000 | 20% |
| | | Rs 12,50,001 – Rs 15,00,000 | 25% |
| | | Above Rs 15,00,000 | 30% |
3. Individuals, [other than those mentioned above, HUF, AOP/BOI (other than co-operative societies).
| Old Tax Slab | Rate | New Tax Slab ( Sec 115BAC) | Rate |
|---|---|---|---|
| Upto Rs 2,50,000 | Nil | Upto Rs 2,50,000 | Nil |
| Rs 2,50,001 – Rs 5,00,000 | 5% | Rs 2,50,001 – Rs 5,00,000 | 5% |
| Rs 5,00,001 – Rs 10,00,000 | 20% | Rs 5,00,001 – Rs 7,50,000 | 10% |
| | | Rs 7,50,001 – Rs 10,00,000 | 15% |
| Above Rs 10,00,000 | 30% | Rs 10,00,001 – Rs 12,50,000 | 20% |
| | | Rs 12,50,001 – Rs 15,00,000 | 25% |
| | | Above Rs 15,00,000 | 30% |
Note: Rebate u/s 87A, in which resident individuals are allowed rebate (if their taxable income does not exceed Rs. 5 lakh) equal to 100% of income tax or Rs. 12,500 whichever less.
Surcharge on Income Tax computed on Other Incomes :
10% for Individual having taxable Income (Including Dividend & Income u/s 111A & 112A) exceeding 50 Lacs upto 1 Crore
15% for Individual having taxable Income (Including Dividend & Income u/s 111A & 112A) exceeding 1 Crore but upto two 2 Crore
25% for Individual having taxable Income (Excluding Dividend & Income u/s 111A & 112A) exceeding 2 Crore but upto 5 Crore
37% for Individual having taxable Income (Excluding Dividend & Income u/s 111A & 112A) exceeding 5 Crore
Surcharge on Income Tax computed on Dividend Income & Income taxable u/s 111A & 112A :
10% for Individual having taxable Income (Including Dividend & Income u/s 111A & 112A) exceeding 50 Lacs upto 1 Crore
15% for Individual having taxable Income (Including Dividend & Income u/s 111A & 112A) exceeding 1 Crore but upto two 2 Crore
15% for Individual having taxable Income (Excluding Dividend & Income u/s 111A & 112A) exceeding 2 Crore but upto 5 Crore
15% for Individual having taxable Income (Excluding Dividend & Income u/s 111A & 112A) exceeding 5 Crore
Health and Education Cess: 4% on the amount of Tax plus surcharge
| Firms : |
|---|
| Income tax : 30% |
| Surcharge : 12% of the Income Tax, where total taxable income is more than Rs. 1 crore. |
| Health and Education Cess: 4% on the amount of Tax plus surcharge. |
| Companies : |
|---|
| (A) Domestic Companies Income tax : If opted for Section 115BA (in case turnover or gross receipt does not exceed Rs 400 crore in the FY 2019-20) – 25% If opted for Section 115BAA (in case assessee is not claming Profit linked deductions, unabsorbed depreciation & Losses) – 22% If opted for Section 115BAB (for new manufacturing companies) -15% Any other domestic company -30% MAT- 15% Surcharge: 7% if the taxable income exceeds Rs. 1 crore & 12% if the taxable income exceeds 10 crores However, the rate of surcharge in case of a company opting for taxability under Section 115BAA or Section 115BAB shall be 10% irrespective of amount of total income. Health and Education Cess: 4% on the amount of Tax plus surcharge |
| (B) Foreign Companies | |
|---|---|
| Income tax : | 40% (in general ) 50% (Royalty received from Government or an Indian concern in pursuance of an agreement made with the Indian concern after March 31, 1961, but before April 1, 1976, or fees for rendering technical services in pursuance of an agreement made after February 29, 1964 but before April 1, 1976 and where such agreement has, in either case, been approved by the Central Government) |
| Surcharge : | 2% if the taxable income exceeds Rs. 1 crore & 5% if the taxable income exceeds 10 crores |
| Health and Education Cess: | 4% on the amount of Tax plus surcharge |
| Cooperative Socities (Under Old Regime) | |
|---|---|
| Upto Rs. 10,000 | 10% |
| Rs. 10,001 to Rs. 20,000 | 20% |
| Rs. 20,001 to Above | 30% |
Surcharge : 12% of the Income Tax, where total taxable income is more than Rs. 1 crore.
Health and Education Cess: 4% on the amount of Tax plus surcharge
| Cooperative Socities (Under New Regime) - Section 115BAC |
|---|
| Income tax : Flat rate of 22% Surcharge : 10% of the Income Tax Health and Education Cess: 4% on the amount of Tax plus surcharge |
| Local Authorities |
| Income tax : 30%. Surcharge : 12% of the Income Tax, where total taxable income is more than Rs. 1 crore Health and Education Cess: 4% on the amount of Tax plus surcharge |
