Income tax in IndiaFrom Wikipedia, the free encyclopedia

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)).[1] 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.[2]

Contents

  [hide] 

1 History

2 Residential status, Scope of taxable income & Charge

o 2.1 Charge to income-tax

o 2.2 Residential status

o 2.3 Residential status of a person other than an individual

o 2.4 Scope of total income

3 Heads of income

o 3.1 Income from salaries

o 3.2 Income from house property

o 3.3 Profits and Gains of business or profession

o 3.4 Income from capital gains

o 3.5 Income from other sources

4 Agricultural income

o 4.1 Income partly agricultural and partly business

o 4.2 Scheme of partial integration of non-agricultural income with agricultural income

5 Permissible deductions from Gross Total Income

o 5.1 Section 80C deductions

o 5.2 Section 80CCC

o 5.3 Section 80CCD

o 5.4 Section 80D: Medical insurance premiums

o 5.5 Section 80DDB : Deduction in respect of medical treatment, etc

o 5.6 Section 80CCG : RGESS

o 5.7 Section 80E : Education loan interest

o 5.8 Section 80TTA : Interest on Savings Account

o 5.9 Section 80U : Disability

o 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

o 9.1 Surcharge 1

10 Tax returns

o 10.1 Normal return

o 10.2 Belated return

o 10.3 Revised return

o 10.4 Defective return

o 10.5 Returns in response To notices

11 Annual information return and statements

o 11.1 Annual information return

o 11.2 Statements By producers

o 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%. [3][4]

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,[5] 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)[6]

Net income range (For resident woman below 60

years on the last day of the previous year)

Net income range (For resident

senior citizen1)

Net income range (For super senior

citizen2)

Net income range (For any other person excluding companies and

co-operative societies)

Income Tax rates3

Up to 200,000₹ Up to 250,000₹ Up to 500,000₹ Up to 200,000₹ NIL%

200,001–500,000₹ 250,001–500,000₹ - 200,001–500,000₹ 10%

500,001–1,000,000₹ 500,001–₹1,000,000

500,001–₹1,000,000

500,001–1,000,000₹ 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]

Type of personControl & management of affairs of the taxpayer is

wholly in India

Control & management of affairs of the taxpayer is wholly

outside India

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

outside India

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 except an individual

Resident 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 1  is always taxable in India notwithstanding residential status of the taxpayer.

Foreign income 1  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:-

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 xxxxLess:Municipal Taxes paid (xxx)Net Annual value (NAV) xxxxLess:Deductions under section 242 (xxx)Income from House property 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 deductionsSections 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.[7]

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 xxxLess: 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 xxxLess:Cost of acquisition2 (xx)Less:Cost of improvement2 (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 54Section

54B

Section 54D

Section

54ECSection 54F Section 54G Section 54GA

Section 54GB

Who is eligible to claim exemption

Individual/HUFIndividual

Any person

Any person

Individual/HUF Any person Any personIndividual/HUF

Which asset is eligible for exemption

A residential house property (long term)

Agricultural land (if used by individual or his parents for agricultural purpose during at least 2 years immediately prior to transfer)

Land/building forming part of an industrial undertaking which is compulsorily acquired by the Government & which is used during 2 years for industrial purposes prior to acquisition

Any long term capital asset

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

Land/building/plant/machinery in order to shift an industrial undertaking from urban area to rural area

Land/building/plant/machinery in order to shift an industrial undertaking from urban area to any Special Economic Zone

Long-term residential property if transfer takes place between if transfer takes place during April 1, 2012 and March 31, 2017

Which asset

Residential house property

Agricultural land

Land/building

Bonds of Nation

A residential house property

Land/building/plant/machinery in

Land/building/plant/machinery in

Equity shares in

Section 54Section

54B

Section 54D

Section

54ECSection 54F Section 54G Section 54GA

Section 54GB

should be acquired to claim exemption

in rural or urban area

for industrial purpose

al Highways Authority of India or Rural Electrification Corporation Limited; Maximum exemption in one financial year is ₹5 million

order to shift undertaking to rural area

order to shift undertaking to any SEZ

eligible company

What is the time limit for acquiring the new asset

Purchase: 1-year backward or 2 years forward;Construction:3 years forward

2 years forward

3 years forward

6 months forward

Purchase: 1-year backward or 2 years forward;Construction:3 years forward

1-year backward or 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 subscription in equity shares

Section 54Section

54B

Section 54D

Section

54ECSection 54F Section 54G Section 54GA

Section 54GB

How much is exempt

Investment in the new asset or capital gain, whichever is lower (The new asset should not be transferred within 3 years of its acquisition)

Investment in the new asset or capital gain, whichever is lower (The new asset should not be transferred within 3 years of its acquisition)

Investment in the new asset or capital gain, whichever is lower (The new asset should not be transferred within 3 years of its acquisition)

Investment in the new asset or capital gain, whichever is lower (The new asset should not be transferred within 3 years of its acquisition); The new asset should not be converted into money or any loan/advance should not be taken on the security of the new asset within 3 years from the date of its acquisition

Investment in the new asset÷Net sale consideration×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

Investment in the new asset or capital gain, whichever is lower (The new asset should not be transferred within 3 years of its acquisition)

Investment in the new asset or capital gain, whichever is lower (The new asset should not be transferred within 3 years of its acquisition)

Investment in the new asset × capital gain ÷ net sale consideration. (The exemption is revoked if equity shares are sold/transferred within 5 years from acquisition or the new asset is sold/transferred 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. Income by way of Dividends.

2. Income from horse races/lotteries.

3. Employees' contribution towards staff welfare scheme.

4. Interest on securities (debentures, Government securities and bonds).

5. Any amount received from keyman insurance policy as donation.

6. Gifts (subject to certain conditions and exemptions) .

7. 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.[8]

1. Contribution to approved superannuation fund/public provident

fund/recognized provident fund/statutory provident fund. Provident fund

contribution should not exceed 1/5 of salary & public provident fund.

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. Payment in respect of non-commutable deferred annuity.

4. Unit linked Insurance policy of UTI/LIC Mutual fund Dhanraksha.

5. Subscriptions to National Savings Certificates VIII issues.

6. Deposits with National Housing Bank.

7. 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[9]

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 .[12]

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 2013-

14, 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 AYIf 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 paymentThreshold limit (up to which no

tax is deductible)TDS to be deducted

192 Salary to any person Exemption limitAs specified for individual in Part III of I Schedule

193 2 Interest on securities to any residentSubject to detailed provisions of given section

10%

194A 2 Interest (other than interest on securities) to any resident

10000 (for Bank/cooperative ₹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) & ₹ ₹

75000 (for aggregate consideration in a financial year)

2% (for companies/firms) & 1% otherwise

194D Insurance commission to resident 20000₹ 10%

194EPayment to non-resident sportsmen or sports association

Not applicable 10%

194EEPayment of deposit under National Savings Scheme to any person

2500₹ 20%

194GCommission on sale of lottery tickets to any person

1000₹ 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)

194IAPayment for Purchase of Immovable Property

5000000₹ 1%

194J 2 Fees for professional/technical services; Royalty

30000₹ 10%

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

- 5%

195Interest 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. [19] From 2005-06,

electronic filing of company returns is mandatory.[20]

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. Normal return

2. Belated return

3. Revised return

4. Defective return

5. 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,

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,

whichever is earlier.

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) [23] which is

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-

(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]

Service tax in India

Central Excise (India)

Value Added Tax (India)

[24]

References[edit source | editbeta]

1. ̂  Institute of Chartered Accountants of India (2011). Taxation. ISBN 978-81-8441-

290-1.

2. ̂  "Growth of Income Tax revenue in India". Retrieved 16 November 2012.

3. ̂  50-year trend of Indian personal tax rates - Business Today - Business News

4. ̂  Income Tax India

5. ̂  "Tax Planning – How to save tax in FY 2013-14 (AY: 2014-15)". Retrieved 30

March 2013.

6. ̂  "Latest Income tax slab India". Retrieved 28 February 2013.

7. ̂  Business Income

8. ̂  "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-than-

5-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]

Union budget and Economic Survey

Department of Public Expenditure and Reform

Indian Income Tax Department

Electronic Filing of Income Tax returns

Categories: 

Income tax in India

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