Understanding Income Tax in India
Income tax refers to the tax levied by the government for the purpose of financing its various operations. Apart from funding the activities of the government, Income Tax also acts as a fiscal stabilizer that aids in distributing wealth evenly among the population. Furthermore, taxes are instrumental in cushioning the effects of economic cycles. The payment of Income Tax in India is done according to the provisions made under the Income Tax Act. According to the Indian Income Tax laws, income from the following sources is deemed taxable:
- Salaries
- Income from house property
- Profits and gains of business or profession
- Capital gains
- Income from other sources
The sum of income from all the aforementioned sources is calculated according to the provisions of Income Tax Act. The tax rates in India vary according to the earnings of an individual and are referred to as Income Tax slabs. Generally, these Income Tax rates are revised every year during the budget.
Income tax is calculated on an annual basis. It is levied on the income earned in the previous year which is also known as the Assessment Year. In the eyes of the law, the Financial Year begins on the 1st of April in a given year and ends on the 31st of March of the following year. For the Financial Year 2016-17, the Income Tax deadlines are as follows:-
- 31st July – Last Date of Return filling for non-audit cases
- 30th September – Last Date of Return filling for audit cases
Income Tax Slab Rates
Tax Slab for Men Below 60 Years of Age
| Income Tax Slab | Income Tax Rate |
|---|---|
| Income upto Rs. 2,50,000 | Nil |
| Income between Rs. 2,50,001 – Rs. 500,000 | 10% of Income exceeding Rs. 2,50,000 |
| Income between Rs. 500,001 – Rs. 10,00,000 | 20% of Income exceeding Rs. 5,00,000 |
| Income above Rs. 10,00,000 | 30% of Income exceeding Rs. 10,00,000 |
Tax Slab for Women Below 60 Years of Age
| Income Tax Slab | Income Tax Rate |
|---|---|
| Income upto Rs. 2,50,000 | Nil |
| Income between Rs. 2,50,001 – Rs. 500,000 | 10% of Income exceeding Rs. 2,50,000 |
| Income between Rs. 500,001 – Rs. 10,00,000 | 20% of Income exceeding Rs. 5,00,000 |
| Income above Rs. 10,00,000 | 30% of Income exceeding Rs. 10,00,000 |
Tax Slab for Senior Citizens Above Age 60 Years But Less Than 80 Years
| Income Tax Slab | Income Tax Rate |
|---|---|
| Income upto Rs. 3,00,000 | Nil |
| Income between Rs. 3,00,001 – Rs. 500,000 | 10% of Income exceeding Rs. 3,00,000 |
| Income between Rs. 500,001 – Rs. 10,00,000 | 20% of Income exceeding Rs. 5,00,000 |
| Income above Rs. 10,00,000 | 30% of Income exceeding Rs. 10,00,000 |
Tax Slab for Senior Citizens Above 80 Years of Age
| Income Tax Slab | Income Tax Rate |
|---|---|
| Income upto Rs. 5,00,000 | Nil |
| Income between Rs. 500,001 – Rs. 10,00,000 | 20% of Income exceeding Rs. 5,00,000 |
| Income above Rs. 10,00,000 | 30% of Income exceeding Rs. 10,00,000 |
Income Tax Returns (ITR)
Tax returns are a statement of your earnings from various sources of income that include the tax liability, details of tax paid, and other refunds that are eligible to receive from the government. It is necessary to furnish these details to the government before the aforementioned deadline in order to avoid penalty for Non Filing of tax.
How to choose the correct ITR form?
The Income Tax Return forms are classified under different categories. You can determine the applicable ITR form from the table below:
| ITR 1 (SAHAJ) | Individuals with income from salary and interest |
| ITR 2 | Individuals and Hindu Undivided Families (HUF) not having income from business or profession |
| ITR 3 | Individuals/HUFs being partners in firms and not carrying out business or profession under any proprietorship |
| ITR 4 | Individuals and HUFs having income from a proprietary business or profession |
| ITR 4S (SUGAM) | Individuals/HUF having income from presumptive business |
| ITR 5 | Firms, AOPs,BOIs and LLP |
| ITR 6 | Companies other than companies claiming exemption under section 11 |
| ITR 7 | Persons including companies required to furnish return under section 139(4A) or section 139(4B) or section 139(4C) or section 139(4D) |
Income Tax Filing Procedure
With the introduction of e-Filling , Income Tax Returns have become simpler and convenient. You can e-File Income Tax Returns from the comfort of your home or office at any hour of the day. You can follow these simple steps to e-File Income Tax Returns online:-
- Log on the official website of the Income Tax department IncomeTaxIndiaeFiling.gov.in
- Register at the website using your permanent account number or PAN ID
- Select the appropriate Financial Year carefully
- Choose the Income Tax Return Form ITR 1/ITR 4S for the Assessment Year
- Fill in the required details and click the submit button
- Once submission is done successfully, you will be provided with an acknowledgement
- Click on the link to view or generate a printout of acknowledgement/ITR V form
To know more about Income Tax filing, ITR forms, registration on Income Tax Department website, read our guides on Income Tax .
What are the Various Tax Saving Instruments?
There are many tax saving instruments that can be used for tax exemptions under the various sections of the Income Tax Act. Investing in tax saving instruments is an apt way to boost your wealth and save taxes concurrently. Investing in these tax saving instruments will help you save a considerable amount of tax:
- Life insurance
- Health insurance
- ULIPs
- New Pension Scheme (NPS)
- Equity-linked Tax Saving Scheme (ELSS)
- Public Provident Fund (PPF)
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