Income Tax

In finance, income tax is part of public finance like Government budget. In simple words, Income tax is the main source of Income of Government. It is also main element of government budget. Any tax which is levied on the total income of assessee is called income tax. It is progressive tax. High income holders have to pay high income tax and low income holders have to pay low income tax. It is the personal liability of individual to pay income tax on the total income which he earned pervious year, if it is exceed from exemption limit of total income.

Income Tax in India

Indian government collects income tax under Indian income tax law 1961. This law state that govt. of India has to collect income tax under the rules and regulation of income tax law 1961. Ministry of finance can change the rates of income tax and amend some rules of this law for giving relief to middle family. We are seeing that 4 years ago, a person whose income was more than Rs. 50000 had to pay income tax but from 1st April 2010, a person whose income is Rs. 160000 or less need not pay income tax.

Income Tax Rates in India

• Income up to Rs. 160000 or Rs. 190000 for women or Rs. 240000 for senior citizens = Nil

• 160000 to 500000 = 10% of amount more than 160000 or should apply women or senior citizens exempt income limit

• 500000 to 800000 = 20% of amount more than 500000 + Rs. 34000

• Above Rs. 800000 = 30% of amount more than Rs. 800000 + Rs. 94000

• 10% surcharge on tax, if taxable income is above Rs. 10 Lakh

• 2% on tax as Education cess

• 1% on tax as secondary and higher education cess.

• Fringe Benefit Tax = Nil from financial year 2009-10.

Corporate income tax rates

• 30% tax with flat rate on the income which is earned by Indian companies. + 3% education cess on tax = effective tax rate = 33.99%

• 10% surcharge if gross sale is more than Rs. 1 crore.

• 40% tax with flat rate on the income which is earned by foreign companies in India. +3% education cess = effective tax rates 41.2% for foreign companies.

Heads of Income

First of all, total income of a person is calculated and then tax is charged on that total income. The total income of a person is divided into five heads, viz., taxable

1. Income from Salary

2. Income from House Property

3. Income from profits and gains of Business or Profession

4. Income from Capital gains or losses

5. Income from Other sources

Deduction of Income Tax at Source ( TDS )

It is the duty of a person who pays other to deduct income tax at source and deposit it to govt. Now, assessee has to deposit income tax deduction at source with e-tds return. Learn how to file e-tds return?