Income Tax

Q1: What is Income Tax? 

A: Income tax is a direct tax levied by the Indian government on the income earned by individuals, businesses, and other entities during a financial year.

Q2: What are the different sources of income taxed under Income Tax? 

A: Income from various sources such as salary, business or profession, capital gains, house property, and other sources like interest, dividends, etc., are taxed under Income Tax.

Q3: What is the Income Tax return filing deadline in India? 

A: The due date for filing Income Tax returns in India is typically July 31st of the assessment year for individual taxpayers.

Q4: Are there any penalties for late filing of Income Tax returns? 

A: Yes, if an individual fails to file their income tax return within the due date (usually July 31st of the assessment year), a penalty of ₹5,000 may be levied, subject to certain conditions. The penalty amount may increase further if the delay persists you may be liable to pay a penalty of up to Rs. 10,000, depending on the delay.

Q5: What are Advance Tax payments? 

A: Advance tax payments are periodic payments made by taxpayers on their estimated income throughout the financial year, avoiding a lump sum payment at year-end.

Q6: How can I e-file my Income Tax return in India? 

A: You can file your ITR online through the Income Tax Department's official website www.incometaxindiaefiling.gov.in. Alternatively, there are various e-filing portals and tax-filing software available that can assist you in filing your ITR electronically.

Please note that tax laws and regulations are subject to change, so it is essential to verify the latest rules with a tax professional or refer to the official government sources.

Q7. Is it mandatory to link Aadhaar with PAN for filing ITR?

Linking Aadhaar with PAN for filing ITR is mandatory unless you fall under one of the exemptions. The deadline to link PAN and Aadhaar is June 30, 2023. If you do not link your PAN and Aadhaar by this date, your PAN will become inoperative. This means that you will not be able to use your PAN for any financial transactions, including filing ITR.

There are a few exemptions to the PAN-Aadhaar linking requirement. These exemptions include the following:

Q8: What is the tax treatment for long-term capital gains (STCG) on equity investments? 

A: As of my last update in December 2024, If equity shares listed on a stock exchange are sold within 12 months of purchase, the seller may make a short-term capital gain (STCG)  or incur a short-term capital loss (STCL). The seller makes short-term capital gains when shares are sold at a price higher than the purchase price. Short-term capital gains are taxable at 15%. This has been increased to 20% with effect from 23rd July, 2024.

Calculation of short-term capital gain = Sale price minus Expenses on Sale minus the Purchase price 

Q9: What is the tax treatment for long-term capital gains (LTCG) on equity investments? 

A: As of my last update in December 2024, long-term capital gains on equity investments exceeding ₹1 lakh were subject to a flat 10% tax, without indexation benefit. However, it's essential to check for any changes in tax rules since then. 

It is to be noted that Budget 2024 has brought about a change in taxation of long-term Capital Gain with effect from 23rd July 2024.  For the benefit of the lower and middle-income classes, the limit on the exemption of Long-Term Capital Gains on the transfer of equity shares or equity-oriented units or units of Business Trust has increased from Rs.1 Lakh to Rs.1.25 lakh per year. However, the rate at which it is taxed has increased from 10% to 12.5%. The exemption limit to Rs.1.25 lakhs has been increased for the whole of the year, whereas the tax rate changed on 23rd July 2024. 

Q10: Can I claim tax benefits on home loans? 

A: Yes, under Section 24(b) of the Income Tax Act, you can claim deductions of up to ₹2 lakh on the interest paid on a home loan for a self-occupied property. Additionally, under Section 80C, you can claim deductions on the principal repayment, subject to the overall limit of ₹1.5 lakh. 

Q11: What are the tax benefits under Section 80C? 

A: Section 80C of the Income Tax Act provides various tax-saving investment options. Some popular options include Employee Provident Fund (EPF), Public Provident Fund (PPF), National Savings Certificate (NSC), Equity-Linked Saving Scheme (ELSS), and more. Taxpayers can claim deductions of up to ₹1.5 lakh by investing in these eligible instruments. 

Q12: What are the changes announced in the New Tax Regime in Budget 2024?

A: Changes announced in the New Tax Regime in Budget 2024


Q13. What is an Income Tax Return (ITR)?

Ans. An income tax return (ITR) is a form that taxpayers must file with the Income Tax Department to declare income from all sources. The Income Tax Department then uses this information to calculate tax and define the tax slab into which the taxpayer will fall. Taxpayers can also claim deductions and exemptions on ITR to lower the tax burden.

There are seven different ITR forms, each of which is designed for a different type of taxpayer. The most common ITR forms are:


Q14. What is the slab rate for ITR?

Ans. According to the Union Budget 2024-25, individual income tax slabs for the new tax regime have been revised. Below are the updated income ranges and tax rates: 


QI.1 What simplification has been carried out in section 2 pertaining to ‘definitions’ in the new Bill? 

Ans. Following simplifications have been carried out: i. The language has been simplified wherever possible, without disturbing the meaning; ii. iii. All definitions continue to be in alphabetical order; Terms which have been defined at a number of places in the Income-tax Act, 1961 in the same manner have now been placed in section 2 itself. For example, the definition of ‘senior citizen’, which was appearing at six places in the 1961 Act, has been now placed in section 2; 

QI.2  What is a ‘tax year’? What does it replace? What was the need for introducing it? Why was the term ‘financial year’ not used in place of the term ‘tax year’? 

Ans. A ‘tax year’ is a period of twelve months contained in a financial year. It replaces the term ‘previous year’ used in the Income-tax Act, 1961. Further, with the discontinuance of the use of the term ‘assessment year’ in the Income-tax Bill, now the term ‘tax year’ will now be used in relation to the rate or rates of income-tax also. In addition, any assessment of the income or total income will also be done for a ‘tax year’. Use of the terms ‘previous year’ and ‘assessment year’ were creating confusion in the minds of the taxpayers as they represented two different financial years. The rationale for the use of two terms is no longer valid in view of alignment of ‘previous year’ with the financial year or part of the financial year (in specific cases). The term ‘Tax year’ is commonly used in income tax legislation in comparable tax jurisdictions.  As a tax year can be a period which is less than the financial year in certain cases, the term ‘financial year’ has not been used while doing away with the terms ‘previous year’ and ‘assessment year’. However, many actions are carried out by tax authorities and other stakeholders while implementing the tax law, being procedural actions and compliances, such as time period for filing returns, rectifications etc, which require reference to a financial year. In such cases, the time period denoted by a financial year has more relevance. This means that the term ‘financial year’ is required separately.    

QI.3  Is ‘financial year’ also defined in the new Bill? Has the term ‘financial year’ also been used in the new Bill? Why is it still appearing in the Bill if it is the same as a ‘tax year? 

Ans: The term ‘financial year is not defined in the Income-tax Bill. It is not defined in the Income-tax Act, 1961 also. It is defined in section 3(21) of the General Clauses Act, 1897 as the year commencing on 1st April. The term ‘financial year’ has been used in the Income-tax Bill. For example, in the proposed section 21(5) of the Bill, reference has been made to a financial year in relation to the completion certificate issued by a competent authority in case of a building held as stock-intrade. In such cases, the term financial year has relevance instead of the term ‘tax year’.  

QI.4 Can a ‘tax year’ be a period which is less than a ‘financial year’? 

Ans: Yes. This will happen when a business is newly set up during any financial year, or a source of income comes into existence during a financial year. In such cases, the tax year will begin from the date of setting up of the business or the source of income coming into existence, and end on the last day of that financial year. 

QI.5  Will the concept of ‘tax year’ conflict with the concept of an ‘assessment year’ at any particular time? For example, if the new Act comes into effect from 1st April, 2026, will the tax year 2026-27 of the new Act conflict with the Assessment Year 2026-27 of the Income-tax Act, 1961? 

Ans. No. The Assessment Year 2026-27 of the Income-tax Act, 1961 will pertain to the income of a taxpayer for the previous year 2025-26 and not to the income of the financial year 2026-27; The tax year 2026-27 of the new Act will pertain to the income of a taxpayer for the financial year 2026-27; The assessment for income of the previous year (financial year) 2025-26 of a taxpayer shall be done as per the provisions of the Income-tax Act, 1961 for the assessment year 2026-27; The assessment for income of tax year (financial year) 2026-27 of a taxpayer shall be done as per the provisions of the Bill for tax year 2026-27. 

QI.6 Is there any change in the content of the charging section?  

Ans. In the Income-tax Act, 1961, the charge of income-tax was on ‘total income’ of the ‘previous year’ of a person. Further, income-tax is charged for an ‘assessment year’ at the rate or rates provided by a Central Act. In the Income-tax Bill, in place of the term ‘previous year’, the term ‘tax year’ has been used. Further, the use of term ‘assessment year’ has been discontinued. Now, the total income also pertains to a ‘tax year’ and the rate or rates of incometax also pertain to that ‘tax year’. 

QI.7  In what way has the charging section been simplified? 

Ans. In the Income-tax Act, 1961, section 4 has two sub-sections and one proviso. Long sentences have been used in the section. In the Income-tax Bill, there are five sub-sections, explaining the charge of income-tax in smaller and simpler sentences.   

QI.8 Whether the Bill has introduced references to ‘Finance Companies’ and ‘Finance Units’ in the context of dividends, which could have implications for financial institutions and investors? 

Ans: The Income Tax Bill 2025 also contains all amendments proposed in Finance Bill 2025. Therefore, the users are advised to compare the provisions of the Income Tax Act, 1961, as updated with proposed amendments in Finance bill 2025, while reading the Income Tax Bill, 2025. Therefore, no such additional term has been introduced in the Bill. Finance Bill 2025 has proposed exclusion of advance or loans between two group entities where one of the entities is “Finance Company” or a “Finance Unit”, from the definition of the term ‘dividend’. The Bill only incorporates the proposal made in the Finance Bill, 2025. 



Goods and Services Tax (GST):

1. What is GST? 

Goods and Services Tax (GST) is a comprehensive indirect tax levied on the supply of goods and services throughout India. It replaced multiple indirect taxes like excise duty, service tax, VAT, and others, with the aim of creating a unified tax system.

2. When did GST come into effect? 

GST was implemented in India on July 1, 2017.

3. How does GST work? 

GST is a value-added tax levied at each stage of the supply chain. It is applicable to the supply of goods and services from the manufacturer or service provider to the end consumer. Businesses and service providers collect GST from their customers and remit it to the government after claiming input tax credit on the GST paid at the previous stages of the supply chain.

4. What are the different components of GST? 

GST in India has two main components: Central Goods and Services Tax (CGST) and State Goods and Services Tax (SGST). For inter-state transactions, Integrated Goods and Services Tax (IGST) is levied, which combines both CGST and SGST.

5. What is the GST rate structure? 

As of my last update in December 2024, The primary GST slabs for any regular taxpayers are presently pegged at 0% (nil-rated), 5%, 12%, 18% & 28%. There are a few lesser-used GST rates such as 3% and 0.25%.

Also, the composition taxable persons must pay GST at lower or nominal rates such as 1.5% or 5% or 6% on their turnover. There is a concept of TDS and TCS under GST as well, whose rates are 2% and 0.5% respectively (prior to 9th July 2024, it was 1%).

Further, the GST law levies cess in addition to the above GST rates on the sale of some items such as cigarettes, tobacco, aerated water, petrol, and motor vehicles, rates widely varying from 1% to 204%.

6. Are there any special rates for specific goods or services? 

Yes, certain goods and services are subject to specific rates. For example, luxury items and sin goods like tobacco and alcohol may attract a higher GST rate, while essential items like food grains and medicines might have a lower rate.

7. Who is liable to register for GST? 

Any business or person engaged in the supply of goods and services with an annual turnover exceeding the prescribed threshold is required to register for GST. The threshold for regular businesses is ₹20 lakhs (₹10 lakhs for special category states).

8. Can small businesses opt for the Composition Scheme under GST?

 Yes, small businesses with an annual turnover up to ₹1.5 crore (₹75 lakhs for special category states) have the option to opt for the Composition Scheme. Businesses under this scheme pay a fixed percentage of their turnover as GST and are relieved of maintaining detailed records.

9. Is GST applicable on exports and imports? 

No, exports are treated as zero-rated supplies, meaning no GST is charged on exported goods or services. For imports, IGST is levied at the time of importation, which can be claimed as input tax credit.

10. How is GST filed and paid? 

GST returns are filed electronically through the GST portal. Registered businesses need to file regular returns (GSTR-1 for outward supplies and GSTR-3B for summary returns) and an annual return (GSTR-9). Payments can be made online through various modes like net banking, credit/debit cards, etc.

Note: Tax laws are subject to amendments and updates. It's essential to consult a qualified tax professional or refer to the official websites for the latest information and clarifications.

For personalized tax advice and assistance, please contact our expert tax consultants at Fintax.