Be a tax expert-in eight days-day -1

Day 1- WHAT IS INCOME AND WHAT ARE THE TYPES OF INCOME?

The Income tax department cannot charge all receipts received by an individual; it can only charge the receipts that amount to income.

From the Income tax point of view, the term ‘Income’ means is of an inclusive nature. For the purpose of income tax, there are 5 heads of income:

1. SALARY - Income which arises out of an employee – employer relationship;
2. HOUSE/PROPERTY INCOME - Income from letting out of house/commercial property;
3. BUSINESS/PROFESSION INCOME – Profits/gains arising out of business/professional work;
4. CAPITAL GAINS – Profits/gains on sale of assets;
5. OTHER SOURCES (not covered above) – Any other income not covered under above heads (of income).

The income earned under each head of income (above) is calculated separately and totalled for computing total tax liability of the individual for the relevant year.

Filing of tax return (or ITR) is compulsory for all those whose gross total income – the aggregate income under the five heads (salary, business, capital gains, house property and/or other sources) before allowing for any deductions such as insurance premium - exceeds the basic exemption limit.

All persons with annual salary income of up to Rs 5 lakh along with Form 16 would not have to file returns for the Financial Year 2011-12 (Assessment Year 2012-13). Click here to find out more…

For different types of income, there are different types of ITR that we need to choose and file.
For people with income from salary, interest (investment income) and rental income (from 1 house property) - need to select ITR 1-SAHAJ;

For those with capital gains, rental income (from more than 1 house property) and other sources – need to select ITR 2.

For example, if a person has salary income and rental income from more than 1 house property, he can select ITR 2 itself.

TAX QUIZ

1. Who is mandated to file Income Tax Return?

2. What does TDS stand for?

3. Which ITR form should an individual choose if he has the following income - income from salary, house property and capital gains?

4. Which of the following is an advantage of online filing of Income Tax Return (ITR)?

5. What is the due date for filing income tax return for individuals?

LEARNING OUTCOME

• All income is divided into 5 heads – salary, house property,
  capital gains, business income, and other sources.
• ITR filing is not mandatory for all individuals, however,
  owning a PAN card is.
• A person needs to choose ITR form as per his source(s)
  of income.
• ITR filing can be done offline (manually) as well as online.
  Online filing of ITR is convenient, hassle-free.

THINGS TO DO

• Figure out which Income Head(s) your annual income falls into.
• Figure out which ITR form you need to choose for the
  current Financial Year 2011-12.
• This year file your income tax return online and experience
  hassle free and speedy filing of return in minutes.