Tag: Income

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Income tax is an amount of tax which is paid by workers and business men on their income. There is no age limit for a person to be liable to pay income tax. You have to pay tax whether you are working or a pensioner if your income is more than a certain level but if your annual income is below a particular level, no tax is imposed on you. Income tax in India is charged according to type of income for example employment income, pension income, social security income, self-employed income from a business or profession, property income, savings and investment income and other miscellaneous income. Filing for tax return in India depends upon the residential status of a person. Three types of residents are mostly considered depending upon their stay in India.

Types of residents for income tax return

1. Ordinarily Residents: a person who lives in India for more than one hundred and eighty-two days of a financial year and he has to pay tax.
2. Non-ordinarily Residents: a person who does not live in India for more than one hundred and eighty-two days of a financial year. He has to pay tax for the income accumulated in India.
3. Non Residents: a person who stayed outside India for 7 to 9 years is considered as non resident. He is entitled for income tax only for income produced in India.

Income exempted from income tax India for Assessment Year 2010-11

The income of following individuals / sources is exempted to file income tax return.

1. Men citizens who earn Up to Rs. 1, 60,000.
2. Women citizens who earn up to Rs. 1, 90,000.
3. Senior citizens who are 65 years old or above having income Up to Rs. 2,40,000
4. income gained by agricultural is also exempted from income-tax
5. The investments made in Central Government Health Scheme (CGHS) are considered as tax free.
6. The tax discount of Rs. 20,000 is granted for investments in certain investment bonds.

Tax Rates for income tax India

1. Tax rate is 10% if taxable income is between Rs.1, 60,001 to Rs. 5, 00,000.
2. Tax rate is 20% if income is between Rs.5, 00,001 to Rs. 8,,000,000.
3. Tax rate is 30% if income exceeds from Rs. 8, 00,001.
4. Surcharge of 10 per cent of the total tax liability is applicable if total income is more than Rs 1,000,000.
5. The basic tax rate is 35% with 2.5% surcharge for domestic corporations
6. Foreign corporations pay tax at a basic tax rate of 40% with 2.5% surcharge.
7. In addition, education cess is applicable at the rate of 3% on the income tax.
8. Wealth tax at the rate of 1% is applicable for Corporates if their net wealth exceeds Rs.1.5 mn.

Section 80C Deductions

According to Sec 80C of the Income Tax India the qualifying investments of up to Rs. 1 Lac are deductible from income tax. Some Qualifying Investments which are considered as deductible in are given below.

1. Provident Fund (PF): The payments that are made to Provident Fund are counted as deductible according to Sec 80C Deductions.
2. Voluntary Provident Fund: Under section 80C Voluntary Provident Fund also qualifies for deduction.
3. Public Provident Fund:
4. The payments that are made to Public Provident Fund are also considered as tax free in Section 80C Deductions of income tax India. The investments of Rs. 500 to Rs. 70,000 per year are allowed for Public Provident Fund.
5. Life Insurance Premiums: Any amount paid for life insurance premium is included in Section 80C deduction.
6. Equity Linked Savings Scheme: some mutual fund schemes known as Equity Linked Savings Scheme are eligible for deduction under Sec 80C.

Some other avenues such as National Savings Certificate, Infrastructure Bonds, Pension Funds, Bank Fixed Deposits, Post Office Time Deposit Account, children's education expense are declared as deductions under Sec 80C.

Tax Penalties

There are a lot of defaults in filing income tax return which can tempt charge of penalty. Some important defaults are mentioned here briefly.

1. The default in making payment of tax, source of tax deduction, advance tax or the self assessment tax.
2. Non payment …

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Source by Eartha Haines

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