Income tax is a direct tax that you are supposed to pay to the Indian Government if you earn an income in India. Whether you are an Indian citizen or an NRI, any income generated in India is taxable as per the Indian Income Tax Act passed in 1961. Indian citizens pay income tax on their global income (income earned in India and abroad), while NRIs pay income tax in India only on the income they earn in India. Thus, if you earn an income, you make an income tax online payment on it.
Income tax is payable by the following –
The term ‘income’, from the point of view of income tax calculation, consists of all types of incomes which you earn in a year. As per the income tax rules, five heads of income are recognized and your income is apportioned to each relevant head of income. The five heads in which income is segregated include the following –
This is the most common and also the most popular head of income. If you are a salaried employee, the salary that you earn is categorized under the head income from salary.
If you have a house property and you rent it out, the rental income generated is called income from house property. The house property, in this context, can be a residential property or a commercial one.
If you have a self-proprietorship business or a profession, the income you earn from the business or profession is placed under the head income from the business or profession.
Capital gains are incurred when you sell a capital asset at a profit. A capital asset is any type of property (except inventory and accounts receivable) that is owned by the taxpayer. If the capital asset is sold at a price higher than at which it was acquired, a capital gain is incurred. The gain can be short-term or long-term depending on the period for which the capital asset was held before it was sold. Capital gains are added to your income and taxed depending on the type of gains incurred and the type of asset on which the gain is incurred. Alternatively, if the capital asset is sold at a price lower than at which it was purchased, a capital loss is incurred. This loss is used to reduce the taxable income and consequently the tax liability.
Any other income that you earn in a year and which cannot be placed in any of the above-mentioned four heads is placed under the head ‘income from other sources’. Common examples include interest earned from savings accounts or fixed deposits, dividends earned from equity investments, gifts received, etc.
Created & Posted by Pooja
Income Tax Expert at TAXAJ
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