Introduction and Basic Concept of Income Tax
What is Income Tax ?
An Income tax return (ITR) is a form used to file information about your income and tax to the Income Tax Department. The tax liability of a taxpayer is calculated based on his or her income. In case the return shows that excess tax has been paid during a year, then the individual will be eligible to receive a tax refund from the Income Tax Department. As per the income tax laws, the return must be filed every year by an individual or business that earns any income during a financial year. Tax returns have to be filed by an individual or a business before a specified date. If a taxpayer fails to abide by the deadline, he or she has to pay a penalty.
What are the 5 heads of Income?
As per the tax laws laid down in India, it is compulsory to file your income tax returns if your income is more than the basic exemption limit. The income tax rate is pre-decided for taxpayers.
A delay in filing returns will not only attract late filing fees but also hamper your chances of getting a loan or a visa for travel purposes.
Who should file Income Tax Returns?
According to the Income Tax Act, income tax has to be paid only by individuals or businesses who fall within certain income brackets. Mentioned below are entities or businesses that are required to compulsorily file their ITRs in India:
1. All individuals whose total income for a financial year exceeds Rs 5 lakh. It is important to note that the income amount should be calculated before factoring in the deductions allowed under Sections 80C to 80U and other exemptions under section 10.
2. All registered companies that generate income, regardless of whether they’ve made any profit or not through the year.
3. Those who wish to claim a refund on the excess tax deducted/income tax they’ve paid.
4. Individuals who have assets or financial interest entities that are located outside India.
5. Foreign companies that enjoy treaty benefits on transactions made in India.
6. NRIs who earn or accrue more than Rs. 2.5 lakh in India in a single financial year.
Which ITR Form should you fill?
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