Income Tax Law & Compliances in India

Income Tax Law & Compliances in India

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.

Who pays income tax?

Income tax is payable by the following –

  1. Individuals
  1. Hindu Undivided Families (HUFs)
  1. Body of Individuals (BOI)
  1. Association of Persons (AOP)
  1. Companies
  1. Firms

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 –

Heads of income

Income from salary

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.

Income from house property

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.

Income from business or profession

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.

Income from capital gains

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.

Income from other sources

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

 

TAXAJ is a consortium of CA, CS, Advocates & Professionals from specific fields to provide you a One Stop Solution for all your Business, Financial, Taxation & Legal Matters under One Roof. Some of them are: Launch Your Start-Up Company/BusinessTrademark & Brand RegistrationDigital MarketingE-Stamp Paper OnlineClosure of BusinessLegal ServicesPayroll Services, etc. For any further queries related to this or anything else visit TAXAJ

 

Watch all the Informational Videos here: YouTube Channel

 

TAXAJ Corporate Services LLP

Address: 1/11, 1st Floor, Sulahkul Vihar, Old Palam Road, Dwarka, Delhi-110078

Contact: 8961228919 ; 8802812345 | E-Mail: connect@taxaj.com

 


    • Related Articles

    • Income Tax Compliances for Businesses in India

      The deadline to file income tax returns (ITR) for the assessment year 2021-22 is 31 December. Though the income tax (I-T) department has introduced an automated filing system, annual information statement (AIS), and other initiatives to ease the ...
    • Income tax e-filing in India

      Online Income Tax Return Filing India An income tax return is a form that enables a taxpayer to declare his income, expenses, tax deductions, investments, taxes, etc. The Income Tax Act, of 1961 makes it mandatory under various scenarios for a ...
    • Foreign Subsidiary Company Compliances in India

      All companies established in India must follow the rules and regulations set up by the government. This is in effect, regardless of whether Indian or Foreign entities or citizens own the companies. The only difference between the two is that ...
    • Annual compliances in India

      In India, businesses are required to comply with various annual compliances to ensure legal and regulatory adherence. The specific compliances vary based on the type of entity, industry, and applicable laws. However, here are some common annual ...
    • Online Income Tax Return Filing India

      An income tax return is a form that enables a taxpayer to declare his income, expenses, tax deductions, investments, taxes, etc. The Income Tax Act, of 1961 makes it mandatory under various scenarios for a taxpayer to file an income tax return. An ...