Are you just out of college and looking for job or starting of new business? or have you already got a job or started business and going to filing your first time income tax return. If you are getting confused about income tax this article “Let’s Talk About Tax” will help to you. our motivation behind this article is to simplify income tax and Make your lives easier and happier.
Basically, everybody who earn income is liable to file income tax return and pay taxes today we are bring to basic of income tax that you will be need to understand before starting Job and Business.
Page Contents
1. Previous Year
Previous year and financial year and tax year is 12 month period that begging from 1st April to ended with 31st march. No matter when you start your job or business
but your tax year closed on 31st march every year and start with 1st April so it is most important to plan taxes each financial year. let’s take an example to understand.
Ex. Suppose your first income tax return will filed after April 2019 than your financial year 2018-19 and it started from 1st April to 31st march 19.
2. Assessment year
Assessment year means your income assess in next year is called assessment year. Suppose your earn income in last year 2018-19 (Financial year) it will assess in 2019-20.
In simple term income earned during previous year is assessed to tax in assessment year.
3. Income on which you pay tax
Suppose you earn income from salary and you may be also receive income from other several other sources. Your total income is the sum of all heads of income is under……
Section 14 include total five Heads of income:
| No | Source of income | Particular |
| 1 | Income from salary (sec 15 to 17) | Salary, allowances, perquisites. “Salary include all the money you received while rendering job as resulting as employment agreement”. |
| 2 | Income from House property (H.P) (Sec 22 to 27)
|
Income from rent of residential house or commercial building. It may be self-occupied or rented |
| 3 | Income from Business or profession. (PGBP)
(Sec 28 to 44D) |
Profit/Gain or losses carrying on Business or profession. |
| 4. | Income from Capital Gain. (CG)
(Sec 45 To 55A) |
Income from Gain or losses when you sell the capital asset. Like Building, share and etc.. |
| 5. | Income from Other sources. (OS)
(Sec 56 To 59) |
This is residual head suppose income from savaing Bank A/c. Fixed deposits, gift Income and etc. |
We will talk on Head of Income in deep later.
4. Deduction (sec 80)
Deduction reduce your Gross income, these are the amount (Limits) income tax department allows to you to reduce your income and pay less your tax Liability.
(Gross Income Means sum of all heads of income = Gross Income.)
(Taxable Income means Gross Income – Deduction)
The more use of deduction will allowed make the lower your tax. Deduction are allowed U/s 80C to 80U of income tax Act.(the section wise deduction will discuss later with example)
5. Tax deduction at source (TDS)
TDS is Tax Deducted at Source – it means that the tax is deducted by the person making payment. The payer has to deduct an amount of tax based on the rules prescribed by the income tax department.
For Example, An employer will estimate the total annual income of an employee and deduct tax on his Income if his Taxable Income exceeds 2,50,000/-
6. Calculating tax payable
On your Taxable Income, tax slabs or rates are applied and final tax payable is calculated. From this tax payable, you can reduce all the TDS that has already been deducted.
| Do You Know ?
Total Tax Payable = Tax Payable On Total Taxable Income – TDS Already Deducted |
Author Bio
A Sr. Ctzn.’s taxable income is Rs. 1.89 L. MF LTCG
over last 5 year investment of Rs.50,000/- works out to Rs. 11,050/-
Please show the tax liability calculations and how is the tax paid, if applicable ?
Thanks.