Franklin D. Roosevelt said; "Taxes, after all, are dues that we pay for the privileges of membership in an organised society." Tax is a compulsory payment made to the Government for services it provides us, though people may not be completely satisfied or convinced with these services.
Eligibility
• Any individual or group of
Individuals or artificial bodies who or which have earned income during the
previous years is required to pay income tax on it
• When companies pay taxes
under the Income tax Act it is called Corporate Tax• The IT Act recognises the earners of income under different categories
• Each category is called a status, which includes: Individuals, Hindu Undivided Family (HUF), Association of Persons (AOP), Body of individuals (BOI), Firms and Companies, Local Authority
Entry Age
• No age is specified
• Income arising or accruing to minor
is to be included in the total income of that parent whose total income (before
such inclusion) is greater
• Income arising to the minor child
as a result of some manual-work done by him or from such activity involving
application of his skill, talent or specialized knowledge and experience is not
to be included in the hands of the parents. For example, income of a child
actor or singer derived from acting or singing is not covered by this clubbing
provision
Other Aspects
• Need a PAN (permanent account
number) to file returns
• Need to have adequate income to
file returns
• Condition of residency
Tax Payee
• Individual
• Hindu Undivided Families
(HUF)
Income tax is an
instrument used by the government to achieve its social and economic
objectives. Simply put, tax is duty or tariff that income earning individuals
pay to the Government in exchange of certain benefits such as law and order,
healthcare, education and a lot more. With proper planning, your tax liability
can be reduced and optimized effectively, leaving you with a greater share of
your income in your hands than being paid out as tax. Income earned in the
twelve months contained in the period from 1st April to 31st March (Financial
Year) is taken into account when calculating income tax. Under the Income Tax
Act this period is called the previous year.
Assessment Year: It is the twelve-month period 1st April to 31st March
immediately following the previous year. In the assessment year a person files
his return for the income earned in the previous year. For example for FY:
2012-13 the AY is 2013-14. You are required to pay tax if your income in a
particular year is above the minimum threshold in the category of taxpayer that
you fall in. There is however, certain other criterion that decides that you
need to pay income tax depending on your residential status in India.
The
three different residential statuses' are:
• Resident Indian
• Non-Resident Indian
(NRI)
• Not Ordinarily
Resident (NOR)
What is Gross Total
Income?
The gross total income
is the sum of all sources of income that an individual has or the total income
he earns in a financial year. It can fall into one of the five heads:
1. Income from Salary
2. Income from House
Property
3. Income from
Profits and Gains of Business or Profession
4. Income from
Capital Gains
5. Income from other
Sources
Tax Deductions
Deduction is the
reduction that one can claim under different heads to reduce the tax liability,
thereby reducing the income tax that pays.
Section 80C
Section 80C offers a
window of investment opportunities on up to Rs 1 lakh investment in each
financial year. This benefit is available to everyone, irrespective of their
income levels. For instance, if you are in the highest tax bracket of 30 per
cent, the investment of Rs 1 lakh under this section will save you Rs 30,000
each year. The various financial products that qualify for Section 80C benefits
are as follows:
• Life Insurance premium payment
• Home loan principal,
wherein the principal portion of the home loan EMI qualifies for deduction
under Section 80C
• Employees Provident
Fund (EPF) where 12 per cent of your salary is deducted every month and an
equal amount is contributed by your employer and put into a fund maintained by
the government or your company’s provident fund trust. Only your contribution
towards the fund is eligible for deduction from taxable income of the basic
salary towards EPF
• Tuition fees up to children can be claimed for. However, any payment towards
any development fees or donation to institutions is excluded
• Contributions to the
public provident fund
• Investments in the
senior citizens savings scheme
• Savings in notified
term deposits in scheduled banks with a minimum period of five years under the bank
term deposit scheme, 2006. Savings in post office time deposits with 5-year
lock-in
• National Savings Certificate, six-year government-backed security available
at post offices
• Investments in tax planning mutual funds, popularly known as Equity-Linked
Savings Scheme (ELSS)
• Investments in pension plans
Other Deductions
• Section 80D: Premium
payments towards medical insurance for self, spouse, children and parents
qualify for deduction. The limit is Rs 15,000 for self, spouse and dependent
children up to Rs 15,000. Additional deduction up to Rs 15,000 for the parents
going up Rs 20,000 if the parent, for whom the policy is bought is aged 60
years. Preventive health check-ups up to Rs 5,000 within limits qualify for tax
deductions under section 80D.
• Section 24: Interest on home loan with a maximum deduction of Rs 1.5 lakh as interest payment on home loan for self-occupied property and unlimited for property that is let out.
• Section 80E: Interest on educational loan qualifies for deduction on full-time studies for any graduate or post graduate course. However, there is no benefit on principal repayments.
• Section 80G: Donations to funds and charities from 50 or 100 per cent of the donated amount, depending on the charity, is deductible from income. But this shouldn’t exceed 10 per cent of your gross total income.
• Section 80DD: Deduction up to Rs 50,000 or Rs 1 lakh on the medical treatment of a dependent with a disability, certified by a medical authority.
• Section 80DDB: Deduction up to Rs 40,000 for assessee under 65 years and Rs 60,000 for senior citizens on costs incurred for treatment of specified illnesses such as malignant cancer, chronic renal failure, Parkinson’s disease and other listed diseases.
Source: www.valueresearchonline.com
