Income tax is a direct tax imposed by the government on the income of its citizens. The Income Tax Act of 1961 regulates that the central government will collect income tax.
Income Tax Returns(ITR) form is a statement that shows the status of a person and their revenue.
The government of India has structured the Income Tax Laws of this country and requires every person, every Hindu undivided family, and other people to pay tax on their taxable income.
Income Tax Slabs and Rates
In India, the Income Tax Slabs are announced by the finance minister every year. Tax-payer cannot avail of tax benefits under the new regime, whereas the old regime allows them to avail themselves of the tax benefits.
There are two alternative personal income tax regimes as of AY 2021-22 that are available for Individuals and HUFs. Such Individuals and HUF tax-payers can continue with the old regime or choose the new regime on the basis of what is beneficial for them.
The new regime aims towards taxable income at lower rates with fewer deductions from the income. The new regime simplifies the income tax framework and makes it easier for individuals to calculate their tax liability and file income tax returns.
What is the Income Tax Slab?
Individual tax-payers are required to pay the income tax based on the slab system under which they fall depending on their income. Therefore, individuals with a higher income pay higher taxes. The slab system was introduced to maintain a fair tax system across the country.
The Income-tax Slab of India imposes taxes on individual taxpayers on the basis of a slab system. It refers to the different tax rates that are prescribed for different ranges of income. The tax rates increase with an increase in tax-payer income. This type of taxation brings progressive and fair tax systems and also undergoes a change during every budget.
There is a difference in different categories of tax-payers which are classified into three categories of individual tax-payers which include:-
- Individuals below the age of 60 years of age including residents and non-residents
- Resident senior citizens between 60 to 80 years of age
- Resident super senior citizens above 80 years
Income Tax Return
An income tax return(ITR) form is filled to provide information about your income and tax to the Income Tax Department. The tax liability of a taxpayer is calculated on the basis of your income. You can also opt for an income tax refund from the Income Tax Department if you are eligible and the return shows that excess tax has been paid during a year.
According to the laws, income tax returns must be filed by all people and businesses that earn any income during a financial year. The income could be in the form of a salary, business profits, and from house property as rent. Tax returns need to be filed before a specified date by tax-payers.
Is It Mandatory to File Income Tax Return?
It is mandatory for individuals to file their income tax returns if the income exceeds the basic exemption limit as per the tax laws in India. The income tax rate is decided in advance for taxpayers and any delay can attract late filing fees.
Who Should File Income Tax Returns?
As per the Income Tax Act, income tax has to be paid only by individuals or businesses falling within certain income brackets.
Here is a list of businesses that require filing their ITRs in India:-
- Individuals up to the age of 59, whose yearly income exceeds Rs 2.5 lakh.
- Senior citizens between the ages of 60 and 79 years whose limit is Rs. 3 lakh.
- Super senior citizens above the age of 80 years whose limit is Rs 5 lakh.
- All registered companies that generate income.
- Individuals who wish to claim a refund on the excess tax deducted.
- Individuals who have assets or financial interest entities that are located outside India.
- Foreign companies that generate benefits on transactions made in India.
- NRIs who earn more than Rs. 5 lakh in India
- Income Tax Rates for Financial Year (FY) 2021-22 / Assessment Year (AY) 2022-23
- There are different tax rates provided for different categories of taxpayers and for different sources of income.
Here is a list of deductions that are not allowed for any taxpayer opting for the new income tax regime:-
- Leave travel concession under section 10 (5)
- House rent allowance under section 10 (13A)
- Some of the allowances under section 10 (14)
- Allowances to MPs/MLAs under section 10 (17)
- Allowance for income of minor under section 10 (32)
As per these laws, tax on a person is dependent upon his residential status. Every individual who qualifies as a resident of India needs to pay tax on his income. Tax-payers have to follow certain rules while filing their Income Tax Returns (ITRs) every financial year.