Our FAQ section provides answers to common queries, offering helpful insights and solutions under three sections:
INCOME TAX - ADVANCE TAX - SOURCE OF INCOME
Gain clarity on various topics by exploring our concise and informative FAQ section.
Income tax is a direct tax that a government levies on the income of its citizens. The Income Tax Act of 1961 mandates that the central government collect this tax.
Income tax is the actual tax that we pay to the government on our income. This is either deducted at the source of income in the form of TDS, collected in the form of TCS, or deposited by a tax payer. An income tax return is basically a record of all your income earned and tax deposited, which is filed with the IT department by everyone who is a tax payer. It can be an individual, a group, or a company. It helps both the taxpayer and the government.
An Income tax return (ITR) is a form used to file information about your income and taxes with the Income Tax Department. The tax liability of a taxpayer is calculated based on his or her income.
Filing returns is a sign that you are responsible. The government mandates that individuals who earn a specified amount of annual income file a tax return by a predetermined due date. Failure to pay tax will invite penalties from the Income Tax Department.
One of the biggest benefits of an income tax return is claiming tax deductions. There are several ways in which you can reduce your overall tax liability. If you have made such tax-saving investments but have paid more income tax in the form of TDS, you can claim a refund for the same by filing tax returns.
What income tax rate a person pays depends on the slab they fall into. The government has categorised incomes into slabs like
It is compulsory to file income tax returns (ITRs) for People whose gross total income (before allowing any deductions under sections 80C to 80U) exceeds Rs 2.5 lakh in FY 2018-19. This limit is Rs 3 lakh for senior citizens (aged above 60 but less than 80) and Rs 5 lakh for super senior citizens (aged above 80).
Yes. Income from every source including exempt income must be disclosed. The same can be shown under the Schedule of Exempted Income.
The income tax department has divided income into five broad heads, namely:
A source of income refers to the origin or means through which an individual or entity earns money or generates revenue. It can include salary, business profits, capital gains, rental income, interest, dividends, royalties, and other similar sources.
The different types of taxable income sources include:
Income from salary is taxed based on the applicable income tax slabs and rates. Employers deduct tax at source (TDS) from the employee's salary based on the estimated tax liability. The final tax liability is calculated at the time of filing the income tax return, taking into account deductions and exemptions.
Income from business or profession is taxed based on the net profit earned. The income is computed by deducting allowable expenses and deductions from the gross receipts. The net profit is then added to the individual's total income and taxed at the applicable income tax rates.
Income from capital gains is taxed based on the duration of holding the capital asset (short-term or long-term) and the type of asset (such as shares, property, etc.). The gains are calculated by deducting the cost of acquisition/improvement from the selling price. Short-term capital gains are usually taxed at higher rates compared to long-term capital gains.
Income from house property is taxed based on the annual value of the property. The annual value is calculated after deducting municipal taxes and standard deductions. If the property is self-occupied, a notional rent is considered for taxation purposes. The taxable income from house property is added to the individual's total income and taxed at applicable rates.
Income from other sources, such as interest, dividends, royalties, etc., is taxed as per the applicable income tax rates. Some specific types of income may have special provisions or lower tax rates. Certain deductions may be available to reduce the taxable income from other sources.
Yes, income earned from foreign sources is subject to specific rules. It may be taxed in India based on residency status, double taxation avoidance agreements (DTAA), and foreign tax credits. Non-resident Indians (NRIs) and individuals with foreign income need to follow the guidelines provided by the Income Tax Act and DTAA, if applicable.
To report income from multiple sources, you need to consolidate all your income and report it in the relevant sections of your income tax return. Provide the necessary details of each income source, including income from salary, business, capital gains, house property, and other sources, as per the specified format in the income tax return form.
Yes, certain tax deductions are available specific to certain sources of income. For example, deductions for home loan interest are available for income from house property. Similarly, specific deductions are available for certain business expenses, investments, or contributions to specified schemes. These deductions help in reducing the taxable income and thereby the overall tax liability.
Advance tax is a system where taxpayers are required to pay their estimated tax liability in instalments during the financial year, rather than paying it all at once at the end of the year. It ensures the timely collection of taxes and helps taxpayers manage their tax obligations.
Individuals, freelancers, self-employed professionals, and businesses whose tax liability for the year (after considering TDS deductions) exceeds Rs. 10,000 are liable to pay advance tax. Salaried individuals usually don't need to pay advance tax as their employer deducts tax at source.
To calculate advance tax, estimate your total income for the year and subtract eligible deductions. Apply the applicable tax rates to arrive at the estimated tax liability. Divide this liability into instalments as per the due dates provided by the Income Tax Department.
If you miss the deadline for paying advance tax, you may be liable to pay interest under Sections 234B and 234C of the Income Tax Act. The interest is calculated based on the delay in payment and the amount of tax remaining unpaid.
Yes, you can pay advance tax in multiple instalments. It is advisable to calculate and pay advance tax based on your income and tax liability at regular intervals during the financial year to avoid any interest or penalties.
Under the Income Tax Act, there is no specific penalty for non-payment of advance tax. However, interest is levied on the unpaid amount. For underpayment of advance tax, interest is charged on the shortfall amount.
You can make advance tax payments online through the Income Tax Department's website or authorized bank portals. Use the Challan 280 form to provide your details, select the correct tax applicable, and make the payment using internet banking, credit card, or debit card.
Yes, any excess advance tax paid can be adjusted against your future tax liability. If you have paid more advance tax than required, it will be treated as an overpayment, and you can claim a refund or adjust it against your tax liability for the subsequent financial year.
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