Income Tax Compliances

Income Tax in India

Income Tax in India: Taxes in India can be categorized as direct and indirect taxes. Direct tax is a tax you pay on your income directly to the government. Indirect tax is a tax that somebody else collects on your behalf and pays to the government eg. restaurants, theaters and e-commerce websites recover taxes from you on goods you purchase or a service you avail. This tax is, in turn, passed down to the government. Direct Taxes are broadly classified as :

• Income Tax – This is taxes an individual or a Hindu Undivided Family or any taxpayer other than companies, pay on the income received. The law prescribes the rate at which such income should be taxed

• Corporate Tax – This is the tax that companies pay on the profits they make from their businesses. Here again, a specific rate of tax for corporate has been prescribed by the income tax laws of India

Basic Introduction of Income Tax

Everyone who earns or gets an income in India is subject to income tax. (Yes, be it a resident or a non-resident of India ). Also read our article on Income Tax for NRIs. Your income could be salary, pension or could be from a savings account that’s quietly accumulating a 4% interest. Even, winners of ‘Kaun Banega Crorepati’ have to pay tax on their prize money. For simpler classification, the Income Tax Department breaks down income into five heads:

Head of Income Nature of Income covered

Income from Salary Income from salary and pension are covered under here

Income from Other Sources Income from savings bank account interest, fixed deposits.

Income from House Property This is rental income mostly

Income from Capital Gains Income from sale of a capital asset such as shares, house.

Income from Business and Profession This is when you are self-employed or work as a freelancer.

Income Tax Slabs under Existing Regime:

FY 2019-20 i.e. AY 2020-21 and FY 2020-21 i.e. AY 2021-22

There are three categories of individual taxpayers:

• Individuals (below the age of 60 years), which includes residents as well as non-residents

• Resident senior citizens (60 years and above but below the age of 80 years)

• Resident super senior citizens (above 80 years of age)

Income Tax Slabs & Rates for Individual Tax Payers & HUF (Less Than 60 Years Old) for FY 2019-20 – Part I

Up to ₹2,50,000* Nil

₹2,50,001 to ₹5,00,000 5% of total income exceeding ₹2,50,000

₹5,00,001 to ₹10,00,000 ₹12,500 + 20% of total income exceeding ₹5,00,000

Above ₹10,00,000 ₹1,12,500 + 30% of total income exceeding ₹10,00,000

• No tax for individuals with income less than ₹ 2,50,000

• 0%-5% tax with income ₹ 2.5 lacs to 5 lacs for different age groups

• 20% tax with income ₹ 5 lacs to 10 lacs

• 30% tax with income above ₹ 10 lacs

• A tax rebate under section 87A is allowed to individual taxpayers a maximum amount of:
  – Rs 2,500 for total income up to Rs 3.5 lakh for FY 2018-19
  – Rs 12,500 for total income up to Rs 5 lakh for FY 2019-20

• Investments upto ₹ 1.5 lacs under Sec 80C can save ₹ 46,800 in taxes.

Note : An additional 4% Health & education cess will be applicable on the tax amount calculated as above.

Income Tax Slabs for Senior Citizens (60 Years Old Or More but Less than 80 Years Old) for FY 2019-20 – Part II

Income up to Rs 3,00,000* No tax

Income from Rs 3,00,000 – Rs 5,00,000 5%

Income from Rs 5,00,000 – 10,00,000 20%

Income more than Rs 10,00,000 30%

Note : An additional 4% Health & education cess will be applicable on the tax amount calculated as above.

Income Tax Slabs for Super Senior Citizens(80 Years Old Or More) for FY 2019-20 – Part III

Income up to Rs 5,00,000* No tax

Income from Rs 5,00,000 – 10,00,000 20%

Income more than Rs 10,00,000 30%

Note : An additional 4% Health & education cess will be applicable on the tax amount calculated as above.

Surcharge applicable to the individuals covered in Part I, II and III:

Net income exceeds Rs 50 lakh but doesn’t exceed Rs 1 crore 10%

Net income above Rs 1 crore but doesn’t exceed Rs 2 crore 15%

Net income exceeds Rs 2 crore but doesn’t exceed Rs 5 crore 25%

Net income exceeds Rs 5 crore 37%

Income Tax Slabs for Domestic Companies for FY 2019-20 – Part IV

Gross turnover upto 400 Cr. in the FY 2017-18 25%

Gross turnover exceeding 400 Cr. in the FY 2017-18 30%

Where the company opted for Section 115BA 25%

Where the company opted for Section 115BAA 22%

Where the company opted for Section 115BAB 15%

In addition cess and surcharge is levied as follows:

Cess: 4% of corporate tax

Surcharge applicable:

Net income exceeds Rs.1 Crore but doesn’t exceed Rs.10 Crore 7%

Net income exceeds Rs.10 Crore 12%

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.

Income Tax Slabs under New Regime:

Budget 2020 has announced a new tax regime giving taxpayers an option to pay taxes as per the new tax slabs from FY 2020-21 on wards.

Income tax slabs under the new tax regime for all individuals for FY 2020-21 (AY 2021-22)

Up to Rs 2.5 lakh NIL

Rs 2.5 lakh to Rs 5 lakh 5% (Tax rebate of Rs 12,500 available under section 87A)

Rs 5 lakh to Rs 7.5 lakh 10%

Rs 7.5 lakh to Rs 10 lakh 15%

Rs 10 lakh to Rs 12.5 lakh 20%

Rs 12.5 lakh to Rs 15 lakh 25%

Rs 15 lakh and above 30%

Note: The tax calculated on the basis of such rates will be subject to health and education cess of 4%.

• Any individual opting to be taxed under the new tax regime from FY 2020-21 onwards will have to give up certain exemptions and deductions.

• Here is the list of exemptions and deductions that a taxpayer will have to give up while choosing the new tax regime.

  1. Leave Travel Allowance (LTA)

  2. House Rent Allowance (HRA)

  3. Conveyance

  4. Daily expenses in the course of employment

  5. Relocation allowance

  6. Helper allowance

  7. Children education allowance

  8. Other special allowances [Section 10(14)]

  9. Standard deduction

  10. Professional tax

  11. Interest on housing loan (Section 24)

  12. Chapter VI-A deduction (80C,80D, 80E and so on) (Except Section 80CCD(2) and 80JJA)

• Points to remember while opting for the new tax regime:

  1. Option to be exercised on or before the due date of filing return of income for AY 2021-22

  2. In case a taxpayer has a business income and exercised the option, he/she can withdraw from the option only once. A business taxpayer withdrawing from the optional tax regime has to follow the regular income tax slabs.

Comparison Between Existing Tax Regime & New Tax Regime:

Select Which Tax Regime is Beneficial for You Click Here to Compare Tax Regimes for You

What is ITR ?

Income Tax Return (ITR) is a form in which the taxpayers file information about his income earned and tax applicable to the income tax department. The department has notified 7 various forms i.e. ITR 1, ITR 2, ITR 3, ITR 4, ITR 5, ITR 6 & ITR 7 till date. Every taxpayer should file his ITR on or before the specified due date. The applicability of ITR forms varies depending on the sources of income of the taxpayer, the amount of the income earned and the category the taxpayer belongs to like individuals, HUF, company, etc.

Why you should File ITR ?

It is mandatory to file income tax returns (ITR) in India if any of the conditions mentioned below are applicable to you:

1. If your gross annual income is more than-

Particulars Amount

For individuals below 60 years Rs 2.5 Lakh

For individuals above 60 years but below 80 years Rs 3.0 Lakh

For individuals above 80 years Rs 5.0 Lakh

2. If you have more than one source of income like house property, capital gains etc.

3. If you want to claim an income tax refund from the department.

4. If you have earned from or have invested in foreign assets during the FY.

5. If you wish to apply for visa or a loan

6. If the taxpayer is a company or a firm, irrespective of profit or loss.

What is TDS?

TDS or Tax Deducted at Source is income tax reduced from the money paid at the time of making specified payments such as rent, commission, professional fees, salary, interest etc. by the persons making such payments.

Usually, the person receiving income is liable to pay income tax. But the government with the help of Tax Deducted at Source provisions makes sure that income tax is deducted in advance from the payments being made by you.

The recipient of income receives the net amount (after reducing TDS). The recipient will add the gross amount to his income and the amount of TDS is adjusted against his final tax liability. The recipient takes credit of the amount already deducted and paid on his behalf.

What is the due date for depositing the TDS to the government?

The Tax Deducted at Source must be deposited to the government by 7th of the subsequent month. However, the TDS deducted in the month of March can be deposited till 30th April.

How and When to file TDS returns?

Filing Tax Deducted at Source returns is mandatory for all the persons who have deducted TDS. TDS return is to be submitted quarterly and various details need to be furnished like TAN, amount of TDS deducted, type of payment, PAN of deductee, etc. Also, different forms are prescribed for filing returns depending upon the purpose of the deduction of TDS. Various types of return forms are as follows:

Form 24Q (TDS on Salary) and Form 26Q (TDS except salary)

TDS on all payments except Sale of Property and Payment of Rent.

Q1 – 31st July

Q2 – 31st October

Q3 – 31st January

Q4 – 31st May

Form 26QB (TDS on Sale of Property) & Form 26QC (TDS on Payment of Rent)

30 days from the end of the month in which TDS is deducted.