Income tax in India

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Income Tax in India

Central Revenue collections in 2007-08 (Source: Compiled from reports ofComptroller and Auditor General of Indiafor relevant years) Personal income tax (direct) (17.43%) Corporate tax (direct) (32.76%) Other Taxes (direct) (2.83%) Excise duty (indirect) (20.84%) Customs duty (indirect) (17.46%) Other taxes (indirect) (8.68%)

The Central Government has been empowered by Entry 82 of the Union List of Schedule VII of the Constitution of India to levy tax on all income other than agricultural income (subject to Section 10(1)).
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The Income Tax Law

comprises The Income Tax Act 1961, Income Tax Rules 1962, Notifications and Circulars issued by Central Board of Direct Taxes (CBDT), Annual Finance Acts and Judicial pronouncements by Supreme Court and High Courts. The government of India imposes an income tax on taxable income of all persons including individuals, Hindu Undivided Families (HUFs), companies, firms, association of persons, body of individuals, local authority and any other artificial judicial person. Levy of tax is separate on each of the persons. The levy is governed by the Indian

Income Tax Act, 1961. The Indian Income Tax Department is governed by CBDT and is part of the Department of Revenue under the Ministry of Finance, Govt. of India. Income tax is a key source of funds that the government uses to fund its activities and serve the public. The Income Tax Department is the biggest revenue mobilizer for the Government. The total tax revenues of the Central Government increased from 1392.26 billion in 1997-98 to 5889.09 billion in 2007-08.
Contents
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1 History 2 Residential status, Scope of taxable income & Charge

o o o o

2.1 Charge to income-tax 2.2 Residential status 2.3 Residential status of a person other than an individual 2.4 Scope of total income

3 Heads of income

o o o o o

3.1 Income from salaries 3.2 Income from house property 3.3 Profits and Gains of business or profession 3.4 Income from capital gains 3.5 Income from other sources

4 Agricultural income

o o

4.1 Income partly agricultural and partly business 4.2 Scheme of partial integration of non-agricultural income with agricultural income

5 Permissible deductions from Gross Total Income

o o o o o o o o o

5.1 Section 80C deductions 5.2 Section 80CCC 5.3 Section 80CCD 5.4 Section 80D: Medical insurance premiums 5.5 Section 80DDB : Deduction in respect of medical treatment, etc 5.6 Section 80CCG : RGESS 5.7 Section 80E : Education loan interest 5.8 Section 80TTA : Interest on Savings Account 5.9 Section 80U : Disability

5.10 Section 24 : Interest on housing loans

6 Due date of submission of return 7 Advance tax 8 Tax deducted at source (TDS) 9 Corporate income tax

9.1 Surcharge 1

10 Tax returns

o o o o o

10.1 Normal return 10.2 Belated return 10.3 Revised return 10.4 Defective return 10.5 Returns in response To notices

11 Annual information return and statements

o o o

11.1 Annual information return 11.2 Statements By producers 11.3 Statements by non-resident having a liaison office in India

12 Tax penalties 13 See also 14 References 15 External links

History[edit source | editbeta]

Income tax was introduced in 1860, abolished in 1873 and reintroduced in1886 Income tax levels in India were very high during 1950-1980, in 1970-71 there were 11 tax slabs with highest tax rate being 93.5% including surcharges. In 1973-74 highest rate was 97.75%. But to reduce tax evasion tax rates were reduced later on, by 1992-93 maximum tax rates were reduced to 40%.
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Residential status, Scope of taxable income & Charge[edit source | editbeta]

Charge to income-tax[edit source | editbeta]
Whose income exceeds the maximum amount, which is not chargeable to the income tax, is an assessee, and shall be chargeable to the income tax at the rate or rates prescribed under the finance act for the relevant assessment year, shall be determined on basis of his residential status. Income tax is a tax payable,
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at the rate enacted by the Union Budget (Finance Act) for every Assessment Year, on

the Total Income earned in the Previous Year by every Person.

The chargeability is based on nature of income, i.e., whether it is revenue or capital. The rates of taxation of income are-: Income Tax Rates/Slabs Rate (%) (applicable for assessment year 2014-15)
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Net income range (For resident woman below 60 years on the last day of the previous year)

Net income range Net income range Net income range (For any (For resident (For super senior other person excluding companies and senior citizen1) citizen2) co-operative societies)

Income Tax rates3

Up to 200,000

Up to 250,000

Up to 500,000

Up to 200,000

NIL%

200,001500,000

250,001500,000 -

200,001500,000

10%

500,0011,000,000

500,001 1,000,000

500,001 1,000,000

500,0011,000,000

20%

Above 1,000,000

Above 1,000,000

Above 1,000,000

Above 1,000,000

30%

^1 Senior citizen is one who is 60 years or more at any time during the previous year but not more than 80 years on the last day of the previous year. ^2 Super senior citizen is one who is 80 years or more at any time during the previous year. ^3 These slab-rates aren't applicable for the incomes which are to be taxed at special rates under section 111A, 112, 115, 161, 164 and 167. For instance, long-term capital gains (except the one mentioned in section 10(38))for all assessees is taxable at 20%. For individual assessees whose total income does not exceed 500,000 before giving any deduction under Chapter VI A are eligible for a rebate of up to 2,000 under section 87A (applicable from assessment year 2014-15 onwards). A surcharge of 10% on income tax payable is applicable for every non-corporate assessee, whose total income exceeds 10 million (applicable for assessment year 2014-15).

Residential status[edit source | editbeta]

The residential status of the assessee is useful in determining the scope or chargeability of the income for the assessee, i.e., whether taxable or not. For an individual person, to be a resident, any one of the following basic conditions must be satisfied:-

Presence of at least 182 days in India during the previous year. Presence of at least 60 days in India during the previous year and 365 days during 4 years immediately preceding the relevant previous year.

However, in case the individual is an Indian citizen who leaves India during the previous year for the purpose of employment (or as a member of a crew of an Indian ship) or in case the individual is a person of Indian origin who comes on a visit to India during the previous year, then only the first of the above basic condition is applicable. To determine whether the resident individual is ordinarily

resident the following both additional conditions are to be satisfied:-

Resident in India in at least 2 out of 10 years immediately preceding the relevant previous year.

Presence of at least 730 days in India during 7 years immediately preceding the relevant previous year.

If the individual resident satisfies only one or none of the additional conditions, then he is not ordinarily resident. (In case the person is not an individual or an HUF, then the residential status can only be either resident or non-resident)

Residential status of a person other than an individual[edit source | editbeta]

Control & management of affairs of the taxpayer is wholly in India Control & management of Control & management of affairs of affairs of the taxpayer is wholly the taxpayer is partly in India partly outside India outside India

Type of person

HUF1

Resident

Non-resident

Resident

Firm

Resident

Non-resident

Resident

Association of persons

Resident

Non-resident

Resident

Indian company2

Resident

Resident

Resident

Foreign company3

Resident

Non-resident

Non-resident

Any other person Resident except an individual

Non-resident

Resident

^1 After determining whether an HUF is resident or non-resident, the additional conditions (as laid down for an individual) should be checked for the karta to determine whether the HUF is ordinary or not-ordinary resident. ^2 An Indian company is the one which satisfies the conditions as laid down under section 2(26) of the Act. ^3 Foreign company is the one which satisfies the conditions as laid down under section 2(23A) of the Act.

Scope of total income[edit source | editbeta]

Indian income is always taxable in India notwithstanding residential status of the taxpayer. Foreign income is not taxable in the hands of a non-resident in India. For resident (in case of firm, association of persons, company and every other person) or resident & ordinarily resident (in case of an individual or an HUF), foreign income is always taxable. For resident but not ordinarily resident foreign income is taxable only if it is business income and business is controlled wholly or partly in India or it is a professional income and profession is set up in India.
^1 Foreign income is the one which satisfies both the following conditions:1 1

Income is not received (or not deemed to be received under section 7) in India, and Income doesn't accrue (or doesn't deemed to be accrued under section 9) in India.

If such an income satisfies one or none the above conditions then it is an Indian income.

Heads of income[edit source | editbeta]

The total income of a person is segregated into five heads:-

Income from salaries Income from house property Profits and gains of business or profession Capital gains and Income from other sources

Income from salaries[edit source | editbeta]

All income received as salary under employer-employee relationship is taxed under this head, on due or receipt basis, whichever arises earlier. Employers must withhold tax compulsorily (subject to Section 192), if income exceeds minimum exemption limit, as Tax Deducted at Source (TDS), and provide their employees with a Form 16 which shows the tax deductions and net paid income. The Act contains exemptions including (the list isn't exhaustive):-

Particulars

Relevant section for computing exemption

Leave travel concession

10(5)

Death-cum-Retirement Gratuity

10(10)

Particulars

Relevant section for computing exemption

Commuted value of Pension (not taxable for specified Government employees) 10(10A)

Leave encashment

10(10AA)

Retrenchment Compensation

10(10B)

Compensation received at time of Voluntary Retirement

10(10C)

Tax on perquisite paid by employer

10(10CC)

Amount received from Superannuation Fund to legal heirs of employee

10(13)

House Rent Allowance

10(13A)

Some Special Allowances

10(14)

The Act contains list of perquisites which are always taxable in all cases and a list of perquisites which are exempt in all cases (List I). All other perquisites are to be calculated according to specified provision and rules for each. Only two deductions are allowed under Section 16, viz. Professional Tax and Entertainment Allowance (the latter only available for specified government employees).
[show]Computation of exemption for gratuity [Section 10(10)]

[show]Computation of exemption of House Rent Allowance(HRA) [Section 10(13A)]

[show]Computation of exemption for pension [Section 10(10A)]

[show]Computation of exemption for Leave encashment [Section 10(10AA)]

[show]Computation of exemption for Retrenchment compensation [Section 10(10B)]

[show]Computation of exemption for Voluntary Retirement Scheme [Section 10(10C)]

Income from house property[edit source | editbeta]

Income under this head is taxable if the assessee is the owner of a property consisting of building or land appurtenant thereto and is not used by him for his business or professional purpose. An individual or an Hindu Undivided Family (HUF) is eligible to claim any one property as Self-occupied if it is used for own or family's residential purpose. In that case, the Net Annual Value (as explained below) will be nil. Such a benefit can only be claimed for one house property. However, the individual (or HUF) will still be entitled to claim Interest on borrowed capital as deduction under section 24, subject to some conditions. In the case of a self occupied house deduction on account of interest on borrowed capital is subject to a maximum limit of 150,000 (if loan is taken on or after 1 April 1999 and construction is completed within 3 years) and 30,000 (if the loan is taken before 1 April 1999). For let-out property, all interest is deductible, with no upper limits. The balance is added to taxable income. The computation of income from let-out property is as under:Gross annual value (GAV)1 Less:Municipal Taxes paid Net Annual value (NAV) Less:Deductions under section 242 Income from House property xxxx (xxx) xxxx (xxx) xxxx

^1 The GAV is higher of Annual Letting Value (ALV) and Actual rent received/receivable during the year. The ALV is higher of fair rent and municipal value, but restricted to standard rent fixed by Rent Control Act. ^2 Only two deductions are allowed under this head by virtue of section 24, viz.,

30% of Net annual value as Standard deduction Interest on capital borrowed for the purpose of acquisition, construction, repairs, renewals or reconstruction of property (subject to certain provisions).

Profits and Gains of business or profession[edit source | editbeta]

The income referred to in section 28, i.e., the incomes chargeable as "Income from Business or Profession" shall be computed in accordance with the provisions contained in sections 30 to 43D. However, there are few more sections under this Chapter, viz., Sections 44 to 44DA (except sections 44AA, 44AB & 44C), which contain the computation completely within itself. Section 44C is a disallowance provision in the case non-residents. Section 44AA deals with maintenance of books and section 44AB deals with audit of accounts. In summary, the sections relating to computation of business income can be grouped as under: -

Specific deductions

Sections 30 to 37 cover expenses which are expressly allowed as deduction while computing business income.

Specific disallowance

Sections 40, 40A and 43B cover inadmissible expenses.

Deemed Incomes

Sections 33AB, 33ABA, 33AC, 35A, 35ABB, 41.

Special provisions

Sections 42, 43C, 43D, 44, 44A, 44B, 44BB, 44BBA, 44BBB, 44DA, 44DB.

Presumptive Income Sections 44AD, 44AE.

The computation of income under the head "Profits and Gains of Business or Profession" depends on the particulars and information available.
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If regular books of accounts are not maintained, then the computation would be as under: Income (including deemed income) chargeable as income under this head xxx Less: Expenses deductible (net of disallowances) under this head (xx) However, if regular books of accounts have been maintained and profit and loss account has been prepared, then the computation would be as under: -

Net Profit as per profit and loss account

xxx

Add : Inadmissible expenses debited to profit and loss account

xx

Add: Deemed incomes not credited to profit and loss account

xx

Less: Deductible expenses not debited to profit and loss account

(xx)

Less: Incomes chargeable under other heads credited to Profit & Loss A/c (xx)

Income from capital gains[edit source | editbeta]

Transfer of capital assets results in capital gains. A Capital asset is defined under section 2(14) of the I.T. Act, 1961 as property of any kind held by an assessee such as real estate, equity shares, bonds, jewellery, paintings, art etc. but does not include some items like any stock-in-trade for businesses and personal effects. Transfer has been defined under section 2(47) to include sale, exchange, relinquishment of asset extinguishment of rights in an asset, etc. Certain transactions are not regarded as 'Transfer' under section 47. Computation of Capital Gains:Full value of consideration1 Less:Cost of acquisition2 Less:Cost of improvement2 xxx (xx) (xx)

Less:Expenditure pertaining to transfer incurred by the transferor (xx)

^1 In case of transfer of land or building, if sale consideration is less than the stamp duty valuation, then such stamp duty value shall be taken as full value of consideration by virtue of Section 50C. The transferor is entitled to challenge the stamp duty valuation before the Assessing Officer. ^2 Cost of acquisition & cost of improvement shall be indexed in case the capital asset is long term.

For tax purposes, there are two types of capital assets: Long term and short term. Transfer of long term assets gives rise to long term capital gains. The benefit of indexation is available only for long term capital assets. If the period of holding is more than 36 months, the capital asset is long term, otherwise it is short term. However, in the below mentioned cases, the capital asset held for more than 12 months will be treated as long term:-

Any share in any company Government securities Listed debentures Units of UTI or mutual fund, and Zero-coupon bond

Also, in certain cases, indexation benefit is not be available even though the capital asset is long term. Such cases include depreciable asset (Section 50), Slump Sale (Section 50B), Bonds/debentures (other than capital indexed bonds) and certain other express provisions in the Act. There are different scheme of taxation of long term capital gains. These are:

1.

As per Section 10(38) of Income Tax Act, 1961 long term capital gains on shares or securities or mutual funds on which Securities Transaction Tax (STT) has been deducted and paid, no tax is payable. STT has been applied on all stock market transactions since October 2004 but does not apply to off-market transactions and company buybacks; therefore, the higher capital gains taxes will apply to such transactions where STT is not paid.

2.

In case of other shares and securities, person has an option to either index costs to inflation and pay 20% of indexed gains, or pay 10% of non indexed gains. The cost inflation index rates are released by the I-T department each year.

3.

In case of all other long term capital gains, indexation benefit is available and tax rate is 20%.

All capital gains that are not long term are short term capital gains, which are taxed as such:

Under section 111A, for shares or mutual funds where STT is paid, tax rate is 10% from Assessment Year (AY) 2005-06 as per Finance Act 2004. With effect from AY 2009-10 the tax rate is 15%.

In all other cases, it is part of gross total income and normal tax rate is applicable.

For companies abroad, the tax liability is 20% of such gains suitably indexed (since STT is not paid). Besides exemptions under section 10(33), 10(37) & 10(38) certain specific exemptions are available under section 54, 54B, 54D, 54EC, 54F, 54G & 54GA.

Section 54

Secti on 54B

Sectio n 54D

Sectio n 54EC

Section 54F

Section 54G

Section 54GA

Section 54GB

Who is eligible to Individu Any pers Any pers Individual/HUF Individual/HUF Any person claim al on on exempt ion

Any person

Individual/ HUF

Agricult ural land (if used by individu al or his Which parents asset is for A residential eligible agricultu house property for ral (long term) exempt purpose ion during at least 2 years immedia tely prior to transfer)

Land/buil ding forming part of an industrial undertaki ng which is compulso rily acquired by the Governm ent & which is used during 2 years for industrial purposes prior to acquisitio n

Any long term capital asset (other than house property) Any long provided that term on the date of capital transfer the asset assessee does not own more than one residential house property

Long-term residential property if Land/building/plant/ transfer Land/building/plant/ machinery in order takes place machinery in order to shift an industrial between if to shift an industrial undertaking from transfer undertaking from urban area to takes place urban area to rural any Special during area Economic Zone April 1, 2012 and March 31, 2017

Which Residential asset should house property be acquire

Land/buil Agricult ding for ural land industrial in rural purpose or urban

Bonds of Nation A residential house property al Highways Authority

Land/building/plant/ machinery in order to shift undertaking to rural area

Land/building/plant/ machinery in order to shift undertaking to any SEZ

Equity shares in eligible company

Section 54

Secti on 54B area

Sectio n 54D

Sectio n 54EC of India or R ural Electrific ation Corporati on Limited; Maximu m exemptio n in one financial year is 5 million

Section 54F

Section 54G

Section 54GA

Section 54GB

d to claim exempt ion

What is the time limit for acquiri ng the new asset

Purchase: 1year backward or 2 years 2 years forward;Constr forward uction:3 years forward

3 years forward

Purchase: 1year backward 6 months or 2 years 1-year backward or forward forward;Constr 3 years forward uction:3 years forward

1-year backward or 3 years forward

Equity shares in an eligible company to be acquired on or before due date of filing return of income as under section 139(1). The eligible company should utilize this amount for the purchase of a new asset within one year from the date of subscriptio n in equity shares

How Investment in much is the new asset or exempt capital gain, whichever is

Investm ent in the new asset or

Investme nt in the new asset or capital

Investme nt in the new asset or capital

Investment in the new assetNet sale consideration

Investment in the new asset or capital gain, whichever is lower (The new

Investment in the new asset or capital gain, whichever is lower (The new

Investment in the new asset capital

Section 54

Secti on 54B capital gain, whichev er is lower (The new asset should not be transferr ed within 3 years of its acquisiti on)

Sectio n 54D

Sectio n 54EC gain, whicheve r is lower (The new asset should not be transferre d within 3 years of its acquisitio n); The new asset should not be converted into money or any loan/adva nce should not be taken on the security of the new asset within 3 years from the date of its acquisitio n

Section 54F

Section 54G

Section 54GA

Section 54GB

lower (The new asset should not be transferred within 3 years of its acquisition)

gain, whicheve r is lower (The new asset should not be transferre d within 3 years of its acquisitio n)

Capital gain; The assessee should not complete construction of another residential house property within 3 years from the date of transfer of original asset nor should he purchase within 2 years from the date of transfer of original asset another house property

asset should not be transferred within 3 years of its acquisition)

asset should not be transferred within 3 years of its acquisition)

gain net sale considerati on. (The exemption is revoked if equity shares are sold/transf erred within 5 years from acquisition or the new asset is sold/transf erred by the company within 5 years from acquisition )

Income from other sources[edit source | editbeta]

This is a residual head, under this head income which does not meet criteria to go to other heads is taxed. There are also some specific incomes which are to be always taxed under this head.

1. 2. 3. 4. 5. 6. 7.

Income by way of Dividends. Income from horse races/lotteries. Employees' contribution towards staff welfare scheme. Interest on securities (debentures, Government securities and bonds). Any amount received from keyman insurance policy as donation. Gifts (subject to certain conditions and exemptions). Interest on compensation/enhanced compensation.

Agricultural income[edit source | editbeta]

Agricultura income is exempt from tax by virtue of section 10(1). Section 2(1A) defines agricultural income as :-

Any rent or revenue derived from land, which is situated in India and is used for agricultural purposes.

Any income derived from such land by agricultural operations including processing of agricultural produce, raised or received as rent-in-kind so as to render it fit for the market or sale of such produce.

Income attributable to a farm house (subject to some conditions). Income derived from saplings or seedlings grown in a nursery.

Income partly agricultural and partly business[edit source | editbeta]

Income in respect of the below mentioned activities is initially computed as if it is business income and after considering permissible deductions. Thereafter, 40,35 or 25 percent of the income as the case may be, is treated as business income, and the rest is treated as agricultural income.

Incomea

Business income

Agricultural income

Growing & manufacturing tea in India

40%

60%

Sale of latex or cenex or latex based crepes or brown crepes manufactured from field latex or coalgum obtained from rubber plants grown by a seller in India

35%

65%

Sale of coffee grown & cured by seller in India

25%

75%

Sale of coffee grown, cured, roasted & grounded by seller in India

40%

60%

^a For apportionment of a composite business-cum-agricultural income, other than the above mentioned, the market value of any agricultural produce, raised by the assessee or received by him as rent-in-kind and utilized as raw material in his business, should be deducted. No further deduction is permissible in respect of any expenditure incurred by the assessee as a cultivator or receiver of rent-in-kind.

Scheme of partial integration of non-agricultural income with agricultural income[edit

source | editbeta]

Permissible deductions from Gross Total Income[edit source | editbeta]

This section requires expansion.(November 2012)

Deductions allowed under Chapter VI-A i.e., sections 80C to 80U, cannot exceed gross total income of an assessee excluding short term capital gains under section 111A and any long term capital gains. Some deductions under sections 80C to 80DDB are listed below.

Section 80C deductions[edit source | editbeta]

Deduction under this section is available only to an individual or an HUF. Section 80C of the Income Tax Act allows certain investments and expenditure to be deducted from total income up to the maximum of Rs 100,000.
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1.

Contribution to approved superannuation fund/public provident fund/recognized provident fund/statutory provident fund. Provident fund contribution should not exceed /5 of salary & public provident fund.
1

2.

Payment of life insurance premium. It is allowed on premium paid on self, spouse and children even if they are not dependent on father or mother (subject to a maximum of 20% of sum assured up to FY 2012-13, from FY 2013-14 20% has been reduced to 10%).

3. 4. 5. 6. 7.

Payment in respect of non-commutable deferred annuity. Unit linked Insurance policy of UTI/LIC Mutual fund Dhanraksha. Subscriptions to National Savings Certificates VIII issues. Deposits with National Housing Bank. Principal part of loan taken for acquiring Residential House Property; provided that the house should not be transferred within 5 years Loan for land cost for residential house is also qualified.

8.

Subscriptions to schemes of PSU's providing long term finance for housing, or of housing boards constituted in India for infrastructural development of cities/towns.

9.

Notified annuity plan of LIC or of any other approved insurer.

10. Units of Mutual Fund or UTI. 11. Notified pension fund by UTI or approved mutual fund. 12. Tuition fees (not including donation or development fees) towards full-time education including play-school activities, pre-nursery & nursery classes,

of any 2 children of an individual, paid to University, College or School in India. 13. Investments in shares or debentures with a lock-in-period of 3 years, of approved public company exclusively engaged in infrastructure facility or power sector. 14. Subscription to the bonds issued by NABARD as specified by Central Government. 15. Any sum deposited as 5 years time deposit under Post Office Term Deposit. 16. Any sum deposited in Senior Citizen Savings Scheme. 17. Any sum deducted from salary of Government employee (subject to maximum 20% of salary) towards deferred annuity plan for benefit of self, spouse or any children. 18. Term deposit with scheduled bank for a period of not less than 5 years as per scheme notified by Central Government. 19. Investing in units of notified mutual fund investing in approved public companies engaged in infrastructure facility or power sector.

Section 80CCC[edit source | editbeta]

Payments made to LIC or to any other approved insurer under an approved pension plan is admissible for deduction under this section. Then pension plan policy should be for individual himself out of his taxable income. The deduction is least of the amount paid or 100,000

Section 80CCD[edit source | editbeta]

Contribution made by the assessee and by employer to New Pension Scheme is admissible for deduction under this section. The assessee should be an individual who is employed on or after 1 January 2004. The deduction shall be equal to the amount contributed by the assessee and/or by the employer, not exceeding 10% of his salary (basic+dearness allowance). Even a self-employed person can claim this deduction which will be restricted to 10% of gross total income. The total deduction available to an assessee under sections 80C, 80CCC & 80CCD is restricted to 100,000 per annum. However, employer's contribution to Notified Pension Scheme under section 80CCD is not a part of the limit of 100,000.

Section 80D: Medical insurance premiums[edit source | editbeta]

Health insurance, popularly known as Mediclaim Policies, provides a deduction of up to 35,000.00 (15,000.00 for premium payments towards policies on self, spouse and children and 15,000.00 for premium payment towards non-

senior citizen dependent parents or 20,000.00 for premium payment towards senior citizen dependent). This deduction is in addition to 100,000 savings under IT deductions clause 80C. For consideration under a senior citizen category, the incumbent's age should be 60 years during any part of the current fiscal, e.g. for the fiscal year 2010-11, the incumbent should already be 60 as on 31 March 2011), This deduction is also applicable to the cheques paid by proprietor firm.

Section 80DDB : Deduction in respect of medical treatment, etc[edit source | editbeta]

Deduction is allowed to resident individual or HUF in respect of expenditure actually during the PY incurred for the medical treatment of specified disease or ailment as specified in the rules 11DD for himself or a dependent relative or a member of a HUF
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Section 80CCG : RGESS[edit source | editbeta]

Deduction of 50% is allowed on investments up to Rs:50,000 under the Rajiv Gandhi Equity Savings Scheme on select securities.
[10]

Section 80E : Education loan interest[edit source | editbeta]

Interest payment on education loan for education in India or abroad gets deduction under this section. Education loan should be for self, spouse, child or the one whose legal guardian the assessee is.
[11]

Section 80TTA : Interest on Savings Account[edit source | editbeta]

Up to Rs 10,000 earned as interest from savings account in bank, post office or a co-operative society can be claimed for deduction under this section. This rebate is applicable for individuals and HUFs .
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Section 80U : Disability[edit source | editbeta]

Disabled persons can get a flat deduction on Income Tax on producing their disability certificate. If disability is severe Rs 1 lakh can be claimed else Rs 50,000.
[13]

Section 24 : Interest on housing loans[edit source | editbeta]

For self occupied properties, interest paid on a housing loan up to Rs150,000 per year is exempt from tax. This deduction is in addition to the deductions under sections 80C, 80CCF and 80D. However, this is only applicable for a residence constructed within three financial years after the loan is taken and also the loan if taken after 1 April 1999. If the house is not occupied due to employment, the house will be considered self occupied. For let out properties, the entire interest paid is deductible under section 24 of the Income Tax act. However, the rent is to be shown as income from such properties. 30% of rent received and municipal taxes paid are available for deduction of tax. P. Chidambaram while announcing his Budget 2013 speech on 28 Feb 2013 also announced that for the year 201314, an additional deduction of 100,000 would be allowed to be deducted for the payment of Interest on Home Loan

u/s 80ee. This deduction would be allowed provided that the total value of the loan is not more than 2.5 million and the total value of the house is not more than 4 million and the loan should be a fresh loan taken during the financial year 2013-14. This deduction would be over and the 150,000 deduction The losses from all properties shall be allowed to be adjusted against salary income at the source itself. Therefore, refund claims of T.D.S. deducted in excess, on this count, will no more be necessary.
[14]

Due date of submission of return[edit source | editbeta]

The due date of submission of return shall be ascertained according to section 139(1) of the Act as under:-

30 September of the Assessment Year(AY)

-If the assessee is a company (not having any inter-nation transaction), or -If the assessee is any person other than a company whose books of accounts are required to be audited under any law, or -If the assessee is a working partner in a firm whose books of accounts are required to be audited under any law.

30 November of the AY

If the assessee is a company and it is required to furnish report under section 92E pertaining to international transactions.

31 July of the AY

In any other case.

If the Income of a Salaried Individual is less than 500,000 and he has earned income through salary or Interest or both, such Individuals are exempted from filing their Income Tax return provided that such payment has been received after the deduction of TDS and this person has not earned interest more than 10,000 from all source combined. Such a person should not have changed jobs in the financial year.
[15]

CBDT has announced that all individual/HUF taxpayers with income more than 500,000 are required to file their income tax returns online. However, digital signatures wont be mandatory for such class of taxpayers.
[15]

Advance tax[edit source | editbeta]

Under this scheme, every assessee is required to pay tax in a particular financial year, preceding the assessment year, on an estimated basis. However, if such estimated income is less than 10000, then no advance tax is payable.
[16]

The due dates of payment of advance tax are:-

In case of corporate assessee

Otherwise

On or before 15 June of the previous year

Up to 15% of advance tax payable

On or before 15 September of the previous year Up to 45% of advance tax payable

Up to 30% of advance tax payable

On or before 15 December of the previous year Up to 75% of advance tax payable

Up to 60% of advance tax payable

On or before 15 March of the previous year

Up to 100% of advance tax payable Up to 100% of advance tax payable

Any default in payment of advance tax attracts penalty under section 234B and any deferment of advance tax attracts penalty under section 234C.
[17]

Tax deducted at source (TDS)[edit source | editbeta]

The general rule is that the total income of an assessee for the previous year is taxable in the relevant assessment year. However, income-tax is recovered from the assessee in the previous year itself by way of TDS. The relevant provisions therein are listed below. (To be used for reference only. The detailed provisions therein are not listed below. )
1

Section

Nature of payment

Threshold limit (up to which no tax is deductible)

TDS to be deducted

192

Salary to any person

Exemption limit

As specified for individual in Part III of I Schedule

193 2

Interest on securities to any resident

Subject to detailed provisions of given section

10%

194A 2

Interest (other than interest on securities) to 10000 (for Bank/cooperative any resident bank) & 5000 otherwise

10%

194B

Winning from lotteries etc. to any person

10000

30%

194BB Winning from horse races to any person

5000

30%

194C 2 Payment to resident contractors

30000 (for single contract) & 2% (for companies/firms) & 1% 75000 (for aggregate consideration otherwise in a financial year)

194D

Insurance commission to resident

20000

10%

194E

Payment to non-resident sportsmen or sports association

Not applicable

10%

194EE

Payment of deposit under National Savings 2500 Scheme to any person

20%

194G

Commission on sale of lottery tickets to any 1000 person

10%

194H 2 Commission/brokerage to a resident

5000

10%

194-I 2 Rents paid to any resident

180000

2% (for plant,machinery,equipment) & 10% (for land,building,furniture)

194IA

Payment for Purchase of Immovable Property

5000000

1%

194J 2

Fees for professional/technical services; Royalty

30000

10%

Interest paid by Infrastructure Development 194LB Fund under section 10(47) to non-resident or foreign company

5%

195

Interest or other sums (not being salary) paid to non-residents or foreign company except under section 115O

As per double taxation avoidance treaty

^1 At what time tax has to be deducted at source and some other specifications are subject to the above sections. ^2 In most cases, these payments shall not to deducted by an individual or an HUF if books of accounts are not required to be audited in the immediately preceding financial year.

In most cases, the tax deducted should be deposited within 7 days from the end of the month in which tax was deducted.

Corporate income tax[edit source | editbeta]

Income-wise number of corporate assessee in India

For companies, income is taxed at a flat rate of 30% for Indian companies. Foreign companies pay at the income tax at the rate of 40%.
[18]

An education cess of 3% (on both the tax and the surcharge) are payable.
[20]

[19]

From 2005-06,

electronic filing of company returns is mandatory.

Surcharge 1[edit source | editbeta]

Total income in the range of 10 million to 100 million Total income above 100 million

Domestic company 5% of income tax payable

10% of income tax payable

Foreign company

2% of income tax payable

5% of income tax payable

^1 Applicable from assessment year 2014-15 onwards.

Tax returns[edit source | editbeta]

There are five categories of Income Tax returns.

1. 2. 3. 4. 5.

Normal return Belated return Revised return Defective return Returns in response to notices

Normal return[edit source | editbeta]

Returns filed within the return filing due date, that is 31 July or 30 September of concerned assessment year.
[21]

Belated return[edit source | editbeta]

In case of failure to file the return on or before the due date, belated return can be filed before the expiry of one year from the end of the relevant assessment year.

Revised return[edit source | editbeta]

In case of any omission or any wrong statement mentioned in the normal return can be revised at any time before the expiry of one year from the end of the relevant assessment year.

Defective return[edit source | editbeta]

Assessing Officer considers that the return is defective, he may intimate the defect. One has to rectify the defect within a period of fifteen days from the date of such intimation. If the assessee wants more time, he can file an application to the A O and a further 15 days can be granted at the instance of the A O.

Returns in response To notices[edit source | editbeta]

Assessing officer in the process of making assessment, may serve a notice under various sections like 142(1), 148(1), 153A(a) or 153C. Returns are required to be furnished within the date specified on the respective notices.

Annual information return and statements[edit source | editbeta]

Annual information return[edit source | editbeta]
Those who are responsible for registering, or, maintaining books of account or other documents containing a record of any specified financial transaction,
[22]

shall furnish an annual information return in Form No.61A.

Statements By producers[edit source | editbeta]

Producers of a cinematographic film during the financial year shall, prepare and deliver to the Assessing Officer a statement in the Form No.52A,

whichever is earlier.

within 30 days from the end of such financial year or within 30 days from the date of the completion of the production of the film,

Statements by non-resident having a liaison office in India[edit source | editbeta]

With effect from 01,June 2011, Non-Resident having a liaison office in India shall prepare and deliver a statement in Form No. 49C to the Assessing Officer within sixty days from the end of such financial year.

Tax penalties[edit source | editbeta]

The major number of penalties initiated every year as a ritual by I-T Authorities is under section 271(1)(c) for either concealment of income or for furnishing inaccurate particulars of income. "If the Assessing Officer or the Commissioner (Appeals) or the Commissioner in the course of any proceedings under this Act, is satisfied that any person[23]

which is

(b) has failed to comply with a notice under sub-section (1) of section 142 or sub-section (2) of section 143 or fails to comply with a direction issued under sub-section (2A) of section 142, or (c) has concealed the particulars of his income or furnished inaccurate particulars of such income, he may direct that such person shall pay by way of penalty,(ii) in the cases referred to in clause (b), in addition to any tax payable by him, a sum of ten thousand rupees for each such failure; (iii) in the cases referred to in clause (c), in addition to any tax payable by him, a sum which shall not be less than, but which shall not exceed three times, the amount of tax sought to be evaded by reason of the concealment of particulars of his income or the furnishing of inaccurate particulars of such income.

See also[edit source | editbeta]

[24]

Service tax in India Central Excise (India) Value Added Tax (India)

References[edit source | editbeta]

1. ^ Institute of Chartered Accountants of India (2011). Taxation. ISBN 978-81-8441290-1. 2. 3. 4. 5. ^ "Growth of Income Tax revenue in India". Retrieved 16 November 2012. ^ 50-year trend of Indian personal tax rates - Business Today - Business News ^ Income Tax India ^ "Tax Planning How to save tax in FY 2013-14 (AY: 2014-15)". Retrieved 30 March 2013. 6. 7. 8. ^ "Latest Income tax slab India". Retrieved 28 February 2013. ^ Business Income ^ "Deduction under section 80C and tax planning". IndianTaxUpdates.in. Retrieved 16 March 2013. 9. ^ The institute of Cost accountants of India (Jan 2012). Applied direct taxation. Directorate of Studies,The Institute of Cost accountants of India. p. 238. 10. ^ 80CCG 23rd November 2012, Government of India 11. ^ http://www.tax.fintotal.com/Sections/80E-Tax-Rebate/5913/68 12. ^ http://www.tax.fintotal.com/Sections/80TTA-Tax-Rebate/6212/68

13. ^ http://www.tax.fintotal.com/Sections/80U-Tax-Rebate/5916/68 14. ^http://www.incometaxindia.gov.in/publications/1_Compute_Your_Salary_Income/2 _Income_from_house_property.asp 15. ^ a b http://www.caclubindia.com/articles/e-filing-is-mandatory-income-is-more-than5-lacs-17646.asp 16. ^ "Due Dates and Calculation of Advance Tax". IndianTaxUpdates.com. Retrieved 23 March 2013. 17. ^ "Interest and Penalty on Non Payment of Advance Tax". IndianTaxUpdates.com. Retrieved 25 March 2013. 18. ^ Income Tax Act, tax rates for foreign companies 19. ^ Finance Act 2010 20. ^ Surcharge has been revised from 10% to 7.5% w.e.f AY 2010-11.Corporate taxpayers must file electronically, point 4 of I T circular. 21. ^ "Return Filing Due Dates". Retrieved 21 July 2012. 22. ^ "Annual Information return". 23. ^ Section 271 of India IT Act 24. ^ Penalties and Limitations of late filing of I-T returns

External links[edit source | editbeta]

Categories: Union budget and Economic Survey Department of Public Expenditure and Reform Indian Income Tax Department Electronic Filing of Income Tax returns

Income tax in India

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