Income tax is the essential act that has to take place every year, however, not everyone likes filing it. As the income tax takes away a large chunk of the income, people keep looking for ways to do Tax saving. However, not everyone pays the same amount of tax. Why so? Because tax is paid according to the range of income and the amount is decided by Income Slabs.
Tax slabs are the parametres that determine how much amount you have to give away and how much income will be left behind for you to Save Invest Prosper.
Types of Income Tax Slabs
Amount of tax paid is directly proportional to the income earned, more the income, hence more the tax. There are four income slabs in India – Income not taxed at all, Income taxed at 05 %, Income taxed at 20 % and Income taxed at 30 %. Income tax also depends on age, gender and residence. Along with the tax, cess (10 % of income tax with surcharge) and surcharge (10 % and 15 % in higher income groups respectively) is also charged.
What does Income constitute?
Income does not consist of just the salary you are earning; there are other elements as well and income taxed is charged on the total income that is being earned.
The first is the basic fixed salary that you earn. Along with it, a certain amount is also received as Allowance in the form of Dearness Allowance (DA), Leave Travel Assistance (LTA), House Rent Allowance (HRA), Children’s Education Allowance, etc which can be fully or partly taxable or even nontaxable. Such allowances assist you to Bring Your Own Dreams. Other perks will also come under the umbrella of taxation. In fact, income from other sources like fixed deposit and income from house property is also taxed as they come under income. All these incomes come under Gross Total Income.
Need for different Tax Slabs
Different Income tax slabs make the entire tax filing procedure somewhat complicated, however, they are very much required for keeping the taxation just. Tax slabs have been created keeping in mind the interests of the poor community. If there was just one per cent of tax for everyone, it would have been unfair to the poor as they will be giving away a large chunk of their income whereas comparatively, the rich won’t get that much affected. To ensure that after paying the taxes, everyone has enough to Save & Earn for themselves, tax slabs were created.
Do you need to file a return?
The individuals who are earning below 2.5 lakhs per annum do not necessarily need to file a return. However, preferably, everyone should file a return if possible, as it saves from future complications which occur during taking a loan.
Legal way to reduce tax liability
The Income Tax Act, 1960 has Section 80C, 80CCD, 80CCC, 80CCCE benefit which assists in Tax Saving which can be done by investing up to one lakh in different areas. This can be done by choosing an arrangement of fixed income, market-linked investments and life insurance. You can declare how much you would be saving at the beginning of the financial year to the finance or payroll department.
Filing Income tax return cannot be overlooked; in fact doing so is our constitutional obligation. However, for all those of you who are new to this, do not lose sleep, you will get the hang of it. The article was to help our readers understand the four tax slabs present in India and the necessity of it. Understanding all of it thoroughly will enable you to file the return without any trouble as well as find out ways to Axe Tax.
Paying taxes is as significant as earning in the first place to Save Invest Prosper.
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