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Income Tax Guide: Slab rates, IT return, e-filing

Prince Grover 
on 20 March 2020

LinkedIn


Income Tax is a tax levied directly on the income or wealth of a person, it is a direct tax. The person who pays Income Tax to the Government cannot recover it from somebody else i.e. the burden of income tax cannot be shifted. Section 4 of the Income Tax Act, 1961 defines Income Tax as a tax levied on the total income of the previous year of every person. A person includes an individual, Hindu Undivided Family (HUF), Association of Persons (AOP), Body of Individuals (BOI), a firm, a company, etc.

The Income Tax Act 1961

The Income Tax Act came into force on the 1st of April 1962. The Act governs the law of Income Tax in India. It undergoes various amendments introduced via the Finance Act or the Taxation Laws Amendment Act.

How is Income Tax calculated?

Tax on income is computed as per the prescribed rates on the total income of the previous year of every person in the assessment year. The income is computed under five different heads. The total income of the person is the sum total of the income under different heads reduced by deductions u/s 80C to 80U. The tax on normal income is computed as per the slab rates and the tax on special income(Casual Income, LTCG, STCG(u/s 111A) is computed at special rates. The income of Individuals/HUF/BOI/AOP/ Artificial Juridical Persons is taxable at the slab rates if the income exceeds the basic exemption limit. Whereas the income of Firm/LLP, Local Authorities, and Companies are taxable at a flat rate of 30%.

Different heads of Income

    

1. INCOME FROM SALARY

Income for salary includes wages, pension, annuity, gratuity, fees, commission, profits, leave encashment, annual accretion and transferred balance in recognized Provident Fund (PF) and contribution to employees pension account.

2. INCOME FROM HOUSE PROPERTY

Rental Income from properties owned by a person other than those which are occupied by him is charged as income from house property. If the property is vacant then a notional income is included under this head.

 

3. PROFITS AND GAINS FROM BUSINESS AND PROFESSION

Income from business or profession includes profit/loss from a business entity or a profession, any interest, salary or bonus to a partner of a firm.

 

4. INCOME FROM CAPITAL GAINS

Income from capital gains includes long term capital gains (LTCG) and short term capital gains (STCG) on sale of any capital assets.
 

5. INCOME FROM OTHER SOURCES

Income from other sources includes interest on bank deposits and securities, dividend, royalty income, winning on lotteries and races and gifts received among others.

 

Income Tax Slab Rates for FY 2020-21

The Union Budget 2020 announced a New Tax Regime for the taxpayers for Financial Year 2020-21. However, the New Tax Regime is optional for the taxpayers i.e. an assessee can either opt for the new tax regime or old tax regime.

Income Tax Guide: IT return, e-filing

New tax regime

    

Total income (Rs)

Tax rates

Up to 2.5 lakh

Nil

From 2,50,001 to Rs 5,00,000

5 percent

From 5,00,001 to Rs 7,50,000

10 percent

From 7,50,001 to Rs 10,00,000

15 percent

From 10,00,001 to Rs 12,50,000

20 percent

From 12,50,001 to 15,00,000

25 percent

Above 15,00,000

30 percent

However, individuals opting for the new tax regime shall not be entitled to the following exemptions/ deductions:

(i) Leave travel concession as contained in clause (5) of section 10;

(ii) House rent allowance as contained in clause (13A) of section 10;

(iii) Some of the allowance as contained in clause (14) of section 10;

(iv) Allowances to MPs/MLAs as contained in clause (17) of section 10;

(v) Allowance for the income of minor as contained in clause (32) of section 10;

(vi) Exemption for SEZ unit contained in section 10AA;

(vii) The standard deduction, the deduction for entertainment allowance and employment/professional tax as contained in section 16;

(viii) Interest under section 24 in respect of self-occupied or vacant property referred to in sub-section (2) of section 23. (Loss under the head income from house property for the rented house shall not be allowed to be set off under any other head and would be allowed to be carried forward as per extant law);

(ix) Additional deprecation under clause (iia) of sub-section (1) of section 32;

 

(x) Deductions under section 32AD, 33AB, 33ABA;

(xi) Various deduction for donation for or expenditure on scientific research contained in sub-clause (ii) or sub-clause (iia) or sub-clause (iii) of sub-section (1) or sub-section (2AA) of section 35;

(xii) Deduction under section 35AD or section 35CCC;

(xiii) Deduction from family pension under clause (iia) of section 57;

1. Any deduction under chapter VIA (like section 80C, 80CCC, 80CCD, 80D, 80DD, 80DDB, 80E, 80EE, 80EEA, 80EEB, 80G, 80GG, 80GGA, 80GGC, 80IA, 80-IAB, 80-IAC, 80-IB, 80-IBA, etc). However, deduction under sub-section (2) of section 80CCD (employer contribution on account of employee in notified pension scheme) and section 80JJAA (for new employment) can be claimed. The basic tax exemption limit for an individual depends on their age and residential status. According to age, resident individual taxpayers are divided into three categories:

1. Resident individuals below the age of 60 years (Basic Exemption upto 250000)
2. Resident senior citizens above 60 years but below 80 years (Basic Exemption upto 300000)
3. Resident super senior citizens above the age of 80 years (Basic Exemption upto 500000)

Old Tax Regime

    

Upto Rs. 2,50,000

Nil.

Rs. 2,50,001 to Rs. 5,00,000

5 percent.

Rs.5,00,001 to Rs.10,00,000

20 percent

Above Rs 10,00,000

30 percent.

Individuals with a net taxable income of up to Rs 5 lakh will be able to avail tax rebate of Rs 12,500 under section 87A in both, the existing and new, tax regimes. Effectively, this would mean that individual taxpayers having net taxable income of up to Rs 5 lakh will continue to pay no income tax.

Income Tax Calculator

There was a great debate after the Budget 2020 was introduced as to whether it is beneficial to stick to the old tax regime or opt for a new tax regime. To clear the clouds the CBDT announced an Income Tax Calculator that offers a comparative view of Tax Payable in the new tax regime and in the old tax regime.

Download income tax calculator for comparison of old tax regime with new tax regime.


Who is liable to pay Income Tax?

Individuals/HUF/BOI/AOP/ Artificial Juridical Persons are liable to pay Income Tax at the slab rates if the income exceeds the basic exemption limit. Whereas the income of Firm/LLP, Local Authorities, and Companies are taxable at a flat rate of 30%.

 

What is the due date to file an Income Tax Return?

A taxpayer can e-file his Income Tax Return on the Income Tax Department Portal.

Due date

Categories

30th September of the assessment year

If an assessee is:

(a) a person (other than a company) whose accounts are required to be audited under the Income-tax Act, 1961 or any other law for the time being in force; or

(b) companies

(c) a working partner of a firm whose accounts are required to be audited under the Income-tax Act, 1961 or any other law for the time being in force.

30th November of the assessment year

the assessee who is required to furnish a report referred to in section 92E.

31st July of the assessment year

any other assessee.

Also read-How to file Income Tax Return


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