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Income Tax Law And Income Tax Research Team | Posted On Saturday, February 16,2019, 02:37 PM

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Income Tax Law And Income Tax



About Income Tax:

Income tax refers to the tax directly paid to the Government. The Government has levied two types of taxes; Direct taxes and Indirect taxes. Direct taxes are levied on profits and income. Indirect taxes are levied on goods and services. Service tax paid in restaurants is an indirect tax. Income tax deducted from salary through TDS is a direct tax.

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Income Tax Law And Income Tax

What are the types of taxes in India?

Income Tax: Every person whose income exceeds the basic threshold limit must pay income tax. It’s Rs 2.5 Lakhs for individuals under 60 years and Rs 3 Lakhs for senior citizens and Rs 5 Lakh for super seniors.

Capital Gains Tax: Capital gains tax is a tax on the gains in capital. If you sell property, bonds, shares, mutual funds, gold within a set time period, you pay capital gains tax on capital gain. Capital gain is the difference between price received on the asset and the price paid for the asset. Depending on the time frame of investment, you pay short term or long term capital gains tax.

Securities Transaction Tax (STT): STT is a direct tax levied on purchase and sale of securities which are listed on stock exchanges like NSE and BSE.

Perquisite Tax: Perquisites are benefits like:

  • Rent free accommodation and Company Car.
  • Concession in rent.
  • Free or concessional educational facilities
  • Interest-free loan
  • Free or concessional food.

Perquisites could be fully or partially taxable or even fully exempt. Perquisites could be in cash and kind. Perquisites are taxed at 30% of the value of fringe benefits. The perquisite tax is paid by employer who furnishes fringe benefits to employees.

Corporate Taxes: Corporate tax is tax on profits earned by businessmen in a particular time period. Corporate Tax is charged on Company revenue after deductions like depreciation, cost of goods sold, selling and administrative expenses are accounted.

Range of Income

Rate of Tax


Income up to Rs 1 Crore



Income above Rs 1 Crore to Rs 10 Crores



Income exceeding Rs 10 Crores



Sales Tax: Sales tax is charged on sale of moveable goods. You have inter-state sale, sale during export/import, and intra-state sale. Central Sales Tax (CST) is payable on inter-state sale at 2%.

Gift tax: If you receive a gift, its value is clubbed with your income and you (receiver), pay tax on it. There’s no gift tax on gifts received on the occasion of your wedding or gifts from certain specified relatives.

SEE ALSO: How To File Income Tax Returns?

GST (Goods and Services Tax):

GST or the Goods and Services Tax are a single indirect tax for the whole of India. It’s a single comprehensive tax levied on all goods and services which are produced in India as well as those imported from other countries. GST is a comprehensive, multi-stage, destination-based tax, levied on every value addition. The GST Tax slabs are 0%, 5%, 12%, 18% and 28%.

Who are the tax payers?

Income tax returns (ITR) data was made public by the Central Board of Direct Tax (CBDT), from e-filed returns. These are returns digitally signed, e-verified or where ITR- V has been received, up to August 31st 2018.

Just 94 tax payers with income of over Rs 500 Crores paid Rs 1.64 Lakh Crores during FY 2016-17. During the three-year period (Assessment Year 2014-15 to 2017-18), the number of salaried increased from 1.7 Crores to 2.33 Crores. The average income declared was Rs 6.84 Lakhs.

The average tax paid by Corporate Tax payers increased from Rs 32.28 Lakhs in AY 2014-15 to Rs 49.95 Lakhs in AY 2017-18, which is a growth of 55%.

Total Collection = Direct Tax + Indirect Tax for 2015-16 was Rs 14.55 Lakh Crores.

Income tax collected in India was Rs 10.03 Lakh Crores during 2017-18.

SEE ALSO:How To Reduce Income Tax In India?

Income Tax Slabs:

How is income tax collected?

The Central Board of Direct Taxes (CBDT) which is a part of Revenue and Ministry of Finance, is responsible for administration of direct taxes through IT Department.

The CBDT will soon have a single-window financial information database of taxpayers which has a 360 degree profiling of income, source of income and spending.

CBDT will improve data mining and business intelligence vis-a-vis the database which has information like TDS, annual information reports, excise, service tax and value added tax (VAT).

There are around 3.5 crores ITR filed annually, and the tax department selects 3 to 4 Lakh cases for scrutiny based on risk profiling.

What are the income tax return?

Income Tax Return or ITR is the process of declaring total income of an individual or a firm, to the IT Department of India at the end of each financial year.

Financial Year: The financial year begins on 1st April of the current year and ends on 31st March of the next year.

Assessment Year: This is the year which follows the Financial Year. FY is the year you earn the income and AY is the year you pay tax on the income earned in FY.

Benefits of filing Income Tax Returns when income is below exemption slab:

Claiming of tax refund:  Let’s say TDS or Tax Deducted at Source, has been deducted from an investment. If your salary is below the minimum tax exemption limit, you can claim tax refund after filing ITR.

Loan processing: When you apply for loans, the eligibility and the quantum of loans depends on income and the income proof is ITR. Income Tax Returns shows total income earned during the year and taxes deducted on it.

Carry Forward Losses: Income Tax rules allow carry-forward of losses and set them off against capital gains, if you file ITR in the relevant assessment year. You can carry forward losses incurred and set it off against income of subsequent years.

Compensation: ITR establishes income proof to arrive at the compensation if applicable.

What is Income Tax Act?

Income Tax Act, 1961 which came into force on 1st April 1962 is an act to levy, administrate, collect and recover income tax in India.

As per income tax act 1961, the total income of a resident Indian earned during the previous year includes income irrespective of source which is received or accrued in India in the previous year.

Heads of Income under Income Tax 1961:

·         Income from Salary

·         Income from house property

·         Profits and gains from business and profession

·         Capital gains

·         Income from other sources.

Income tax e-filing:

Income tax e-filing is the process of submitting tax returns over internet using tax preparation software, pre-approved by relevant tax authority.

If you are salaried with salary/income exceeding Rs 5 Lakhs a year, or you have to claim refund on taxes already deducted/paid, e-filing is mandatory.

Piyush Goyal opinion on income tax law:

Piyush Goyal the interim Finance Minister has said simplifying Income Tax Act, automating tax collection and return processing are priorities. Tax assessment will be Information Technology driven and completely anonymous. IT systems will be upgraded and tax department will process tax returns and issue refunds on the same day.

Tax concessions are provided to the poor and middle-class people living on a tight budget. Individuals earning up to Rs 9.5 Lakhs a year can escape tax liability by taking advantage of saving schemes. 

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