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Income Tax Features

When the Government levies taxes on the direct income of its citizens within their jurisdiction, this amount payable is commonly known as Income Tax. Income tax in India comes with a plethora of complexities, hindrances, issues and features. Even though the entire process may seem a little difficult, sometimes proper handling of the matter might also have repercussions on the citizens of the country.

Income tax is a medium through which the Government ensures that activities for the community are taken care of and public duties are catered to effectively and in a timely manner. Income tax law in India allows every salaried as well as self-employed citizen of the country to file an income tax return on a yearly basis to compute whether taxes are owed or whether they are eligible for a tax refund.

Types of Income Tax in India

The law of Income tax in India varies from that of other countries. Indian tax system is more organised, while most countries follow a more progressive income tax system wherein high income earners are liable to pay more tax than a low income earner. To cite an example, The United States has employed the Internal Revenue Service (IRS) to collect taxes every year and set tax norms and laws.

Hence, Income tax in India can be further classified into the following sub categories:

  • Direct Tax: In case an individual or an organisation pays his/her tax directly to an entity, it is called a direct tax. Direct taxes, as directed by the Government is levied on individuals and these encircle property tax, personal property tax, taxes on assets and so on.

  • Indirect Tax: As the name suggests, this type of tax is completely different from direct tax. An indirect tax is paid by a different entity. An indirect tax is levied on a single entity, for example, a product. However, it is finally paid off as a sales tax (GST) by a buyer in the retail setting.

  • Property and Sales Tax: Property tax is levied on multiple properties and possessions, as per the current value at that point of time. Businesses, entities or persons owning that piece of property are thereby required to remit the tax to the governing authority.

  • Business Income Tax: Businesses and trades that are managed by entrepreneurs are entitled for a share of income tax every financial year. These entities report their business and their tax rate is slightly different than that of a salaried individual. Their taxable business income comprises of the main difference.

Importance of online or e-filing of income tax

In order to avail the facility of payment of direct taxes online, it is necessary to have an net-banking enabled account in any one of the authorized banks. Tax Information Network, also called TIN, makes optimum use of the latest and most modern technology to implement it in the current system to have smoother collection, processing, monitoring and accounting of direct taxes. Tax Information Network, one of the biggest and successful initiatives of the Income Tax Department of India, makes use of information technology to smoothen the process of tax collection, thereby making it an extremely seamless process.

Procedure to pay Income Tax online

The process of paying income tax online is fairly simple to understand and hence, very easy to execute. Follow the steps mentioned below to know more:

  • Log on to the website of TIN and select ‘Challan 280’.

  • Enter relevant information or details of your PAN card number, assessment year, taxpayer’s address, the holding bank, mode of payment and minor head code. On the official website of Tax Information Network, NSDL, you will come across a webpage of the list of Authorised Banks. With the help of this webpage, one can easily make an online payment of their income tax.

  • Post this, you must verify the information that you have recorded. In case there seems to be a discrepancy, click on the ‘Edit’ button and correct the same before submitting. Once you are done checking for the last time, click on the ‘Submit’ button and you will be redirected to the net banking site provided by your holding bank.

  • Now, log onto the net banking portal with the help of your username and password which has been provided by the bank. Enter your payment details at the bank site. It is important to note that you segregate your payable taxes into multiple components such as “Income Tax”, “Education Cess” etc.

  • Once all of this is successfully done, your bank processes your online transaction by debiting the indicated bank account, thereby generating a printable acknowledgement receipt. This receipt is called as the Challan Identification Number (CIN). The Challan Counterfoil contains the CIN, payment details, and bank name, which serves as the proof of payment being made.

Income tax return filing in India – Last words

While the concept of understanding the terms associated with Income Tax might seem like a humongous task, the process of filing an income tax return might seem all the more tedious. But one cannot deny that it is one of the strongest foundations holding up the basic concept of taxation in our country. Hence, here are some points to be kept in mind when filing income tax in India.

  • A tax return can be defined as a statement of all your earnings from multiple sources.

  • A tax return furnishes the details such as tax liability, tax refund to be given by the Government and other such information.

  • Deadline to file tax returns is four months from the end of the financial year. This is done so as to offer enough time to taxpayers so that they can aggregate all information in one place, for the whole year and present an accurate report to the government.

  • In case you fail to file your tax returns on time, most likely, you are susceptible to attract extra interest, penalty, scrutiny and prosecution from the Income Tax Department. However, loss of benefits for not filing tax return is way higher than the penal provisions imposed by the government or income tax officials.

FAQs

What is income tax?

An income tax is a tax imposed on individuals or entities (taxpayers) that varies with respective income or profits (taxable income). Income tax generally is computed as the product of a tax rate times taxable income.

What are the different types of income tax in India?

There are different types of income tax in India like-

  • Direct Tax

  • Indirect Tax

  • Property and Sales Tax

  • Business Income Tax

Is Temporary income taxable?

It is immaterial whether the income comes from a permanent or temporary source, from a tax point of view. Even temporary income is considered as taxable.

What does one mean by income on the basis of receipt and accrual?

A taxpayer’s income may arise either on receipt basis or on accrual basis. This income may accrue to a taxpayer without the actual receipt of the amount. Also, in certain cases, income is deemed to accrue or arise to a person without its actual accrual or receipt.

What are three types of gifts that are subject to income tax deduction?

From 1st October 2009 in case of individual or H.U.F., subject to certain exceptions, the following three kinds of gifts are treated as income under the head other sources under section 56(2) (vii) ;

  • Monetary gifts: Any sum of money received from any person or persons without consideration exceeding Rs.50000 in aggregate during a previous year. The entire sum here, is considered as taxable.

  • Gift of immovable property: A gift as immovable property received from any person without consideration having stamp duty value exceeding Rs.50000. In this case the income considered is the stamp duty value of such immovable property.

  • Gift of property (specified) other than immovable property: This consists of two scenarios-

    • Without consideration: Any specified property other than immovable property received from any person without consideration, the aggregate F.M.V of which exceeds Rs.50,000.

    • For inadequate consideration: Any specified property other than immovable property received from any person for a consideration less than the aggregate F.M.V. of the property and such consideration is less than the aggregate F.M.V of the property by an amount exceeding Rs.50,000.

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