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Basics of Income Tax
Basics of Income Tax
Income tax is a direct tax that individuals and businesses pay on their income to the government. In India, the Income Tax Act, 1961, governs the provisions related to income tax. The tax is collected by the Central Board of Direct Taxes (CBDT), which operates under the Department of Revenue in the Ministry of Finance.
Types of Income
Types of Income
Salary
Includes wages, bonuses, perks, and allowances.
House Property
Rental income from a property.
Business or Profession
Income generated from a business or professional activities.
Capital Gains
Profits earned from the sale of capital assets like property, stocks, or mutual funds.
Other Sources
his includes income from interest, dividends, lottery, and any other sources not covered under the above heads.
Income Tax Returns
Income Tax Returns
Every taxpayer is required to file an Income Tax Return (ITR) with the Income Tax Department. The ITR should be filed by individuals, Hindu Undivided Families (HUFs), companies, and other entities. The due date for filing varies, and non-compliance may result in penalties.
Advance Tax and TDS (Tax Deducted at Source)
Advance Tax and TDS (Tax Deducted at Source)
Advance Tax
Taxpayers, whose tax liability exceeds ₹10,000 in a financial year, are required to pay advance tax in installments.
TDS
Employers and other entities deduct TDS before making payments. This ensures a steady inflow of tax and reduces the burden on the taxpayer.
Tax Planning
Tax Planning
Tax planning involves making strategic financial decisions to minimize the tax liability. This can be achieved through investments in tax-saving instruments like Provident Fund (PF), Public Provident Fund (PPF), Equity-Linked Saving Schemes (ELSS), and National Pension System (NPS).
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