Income tax

Under the Income Tax Act, income is classified into five heads for the purpose of taxation. These heads of income are: 

1. Income from Salary: This includes income received by an individual as salary or wages, including any allowances, perquisites, and profits in lieu of salary. It also encompasses pensions and annuities received by individuals.

2. Income from House Property: This head includes income earned from owning and renting out a house property. It covers both residential and commercial properties. The income is calculated based on factors such as the annual rental value, actual rent received, and municipal taxes paid.

3. Profits and Gains from Business or Profession: This head covers income earned from any business, trade, profession, or vocation carried on by the taxpayer. It includes both regular business income as well as income from self-employment. The income is determined by considering the profits and gains earned after deducting allowable expenses and depreciation.

4. Income from Capital Gains: Capital gains arise when there is a transfer of capital assets such as property, stocks, mutual funds, etc., and the transfer results in a profit or gain. Capital gains can be classified as either short-term capital gains (assets held for less than 24 months) or long-term capital gains (assets held for 24 months or more). The taxability and rates for capital gains vary depending on the type of asset and the duration of its holding.

5. Income from Other Sources: This head includes income that does not fall under the previous four heads. It includes income from sources such as interest on savings accounts, fixed deposits, dividends, lottery winnings, rental income from assets other than house property, etc.

Each head of income has its own rules, deductions, and exemptions specified under the Income Tax Act. Taxpayers are required to calculate their income under each head and aggregate them to arrive at the total taxable income, on which applicable tax rates are applied to determine the tax liability.

Income   Tax Rate

On First ₹3,00,000 NIL
Above ₹3,00,000  upto ₹6,00,000   5%
Above ₹6,00,000  upto ₹9,00,000 10%
Above ₹9,00,000 upto ₹12,00,000 15%
Above ₹12,00,000 upto ₹15,00,000 20%
Above ₹15,00,000 30%

The Cess is payable @ 4% of Tax amount calculate above.

Section 87A of the Income Tax Act provides income rebates for those whose income is upto ₹7,00,000. If the income goes above ₹7,00,000, this rebate is not applicable. Total amount of rebate available is lower of the amount of tax payable and ₹25,000. The rebate was launched to offer relief for taxpayers and is available only for resident individuals. 

Income Tax Rate

On First ₹2,50,000     NIL
Above ₹2,50,000  upto ₹5,00,000     5%
Above ₹5,00,000 upto ₹10,00,000     20%
Above ₹10,00,000     30%

The Cess is payable @ 4% of Tax amount calculate above.

Section 87A of the Income Tax Act provides income rebates for those whose income is upto ₹5,00,000. If the income goes above ₹5,00,000, this rebate is not applicable. The limit for income slab for applicability or rebate is higher in new tax scheme (₹ 7,00,000), since there are virtually no deduction allowed in the new tax regime. The total amount of rebate available is lower of the amount of tax payable and ₹12,500. The rebate was launched to offer relief for taxpayers and is available only for resident individuals. 

Income Tax Rate

On First ₹3,00,000     NIL
Above ₹3,00,000  upto ₹5,00,000     5%
Above ₹5,00,000  upto ₹10,00,000     20%
Above ₹10,00,000     30%

The Cess is payable @ 4% of Tax amount calculate above.

Section 87A of the Income Tax Act provides income rebates for those whose income is upto ₹5,00,000. If the income goes above ₹5,00,000, this rebate is not applicable. The total amount of rebate available is lower of the amount of tax payable and ₹12,500. The rebate was launched to offer relief for taxpayers and is available only for resident individuals. 

Income Tax Rate

On First ₹5,00,000     NIL
Above ₹5,00,000  upto ₹10,00,000     20%
Above ₹10,00,000     30%

The Cess is payable @ 4% of Tax amount calculate above.

Since the rebate is available only to individuals having income less than ₹5,00,000 and income of super senior citizen is not taxable upto ₹5,00,000, the rebate under section 87A is not available to super senior citizens. 

Deduction Amount New Tax Regime Old Tax Regime

Rebate u/s 87A 25000/12500 25,000 12,500
Income Level for Rebate Eligibility - 7,00,000 5,00,000
Standard Deduction [Section 16(i)/(ia)] 50,000 Eligible Eligible
Entertainment Allowance - Not  Eligible Eligible
Professional Tax 2,500 Not  Eligible Eligible
HRA  Exemption [Section 10(13A)] - Not Eligible Eligible
Leave Travel Allowance - Not Eligible Eligible
Food / Meal Allowance - Not Eligible 26,400
(Tax Exempt upto Rs. 50/meal, 2 meals per days *22 meals per Month)
Interest on Home Loan [Section 24(b) on: Self-occupied or vacant property] - Not Eligible Eligible
Interest on Home Loan [Section 24(b) on: Let-out property] - Eligible Eligible
Deduction u/s 80C (EPF | LIC | ELSS | PPF | FD | Children's tuition fee etc.) 1,50,000 Not Eligible Eligible
Employee's (own) contribution to NPS - Not Eligible Eligible
Employer's contribution to NPS - Eligible Eligible
Medical insurance premium - 80D 25,000/50,000 Not Eligible Eligible
Disabled Individual - 80U 75,000/1,25,000 Not Eligible Eligible
Interest on education loan - 80E - Not Eligible Eligible
Interest on Electric vehicle loan - 80EEB - Not Eligible Eligible
Donation to Political party/trust etc - 80G - Not Eligible Eligible
Savings Bank Interest u/s 80TTA and 80TTB 10,0000 Not Eligible Eligible
Other Chapter VI-A deductions - Not Eligible Eligible
All contributions to Agniveer Corpus Fund - 80CCH - Eligible Eligible
Deduction on Family Pension Income Eligible Eligible
Gifts upto Rs 5,000   5,000 Eligible Eligible
Exemption on voluntary retirement 10(10C) - Eligible Eligible
Exemption on gratuity u/s 10(10) - Eligible Eligible
Exemption on Leave encashment u/s 10(10AA) - Eligible Eligible
Daily Allowance - Eligible Eligible
Conveyance Allowance - Eligible Eligible
Transport Allowance for a specially-abled person - Eligible Eligible

TDS

Tax deducted at source (TDS), as the very name implies aims at collection of revenue at the very source of income. It is essentially an indirect method of “collecting tax which combines the concepts of pay as you earn” and “collect as it is being earned.” Its significance to the government lies in the fact that it prepones the collection of tax, ensures a regular source of revenue, provides for a greater reach and wider base for tax. At the same time, to the tax payer, it distributes the incidence of tax and provides for a simple and convenient mode of payment.

TDS on Salary Section 192

Conditions

1.  Payment is made by the employer to the employee.

2. The payment is in the nature of salary .

3. The income under the head salaries is above the maximum amount not chargeable to tax.

When to deduct TDS
At the time of actual payment of salary to the employee. Unlike the provisions of TDS, pertaining to payments other than salary where the obligation to deduct tax arises at the time of credit or payment, which ever is earlier, the responsibility to deduct tax from salaries arises only at the time of payment. Thus, when advance salary and arrears of salary has been paid, the employer has to take the same into account while computing the tax deductible.

Rates
The employer is required to deduct tax at source on the amount payable at the average rate of income tax after considering Surcharge and Cess on tax. This is to be computed on the basis of rates in force for the financial Year in which payment is made. Further, the employer should also take into account any other income as reported by the employee. After considering the incomes exempt, deductions and relief, the tax liability of the employee should be determined on the basis of the rates in force for the financial year. Every month, 1/12 of this net tax liability as computed above is required to be deducted.

Exemption of Tax on Non-Monetary Perquisites
The income-tax law provides option to the employer to pay tax on the non-monetary perquisites. However, by virtue of section 10(10CC), tax paid by employer (on behalf of employee) on non-monetary perquisites will be exempt from tax in the hands of employees.

As per the provisions of the Income Tax Act, 1961, the due dates of filing return of income for the Financial Year 2022-23 (Assessment Year 2023-24) is usually July 31, 2023 for taxpayer whose accounts are not required to be audited under the Act. However, taxpayers who are required to get their accounts audited under the Act, such as companies, LLPs, and some individuals, the due date for filing the ITR is usually October 31, 2023. Although the due dates are more or less same, the CBDT, for the benefits of taxpayers gives some additional time to the borrower by way extentions which is given in extraordinary situations. These extensions are announced by the CBDT and the taxpayers need to fill their returns within the extended times. Given below is a tabular representation of the due dates.

 Category of Taxpayer Due Date for Tax Filing (unless extended)

a) Individual / HUF/ AOP/ BOI (Audit not required)     31st July 2023

b) Businesses (Requiring Audit) 31st October 2023    

c) Businesses requiring transfer pricing reports  30th November 2023    

d) Revised return 31th December 2023

e) Belated/late return 31th December 2023

*If you file your return after the due date, you will have to pay interest under Section 234A @ 1% per month or part month on the unpaid tax amount. In addition to this a late fee of ₹5,000 under Section 234F will need to be paid which is reduced to ₹1,000 if the total income is less than ₹5 lakhs.    

**Another drawback of not filing return within due date is you will not be able to carry forward the loss to the subsequent years.

***Belated Return: If you miss the ITR filing due date, you can file a return after the due date, often known as a belated return. However, you will still have to pay the late fee and interest, and will also not be allowed to carry forward the losses for future adjustments. The income tax department has also specified the due date of filing the belated return which is 31st December of the assessment year (unless extended by the government). For this year, you may file the belated return latest by 31 December 2023.

Income tax return (ITR) is the form in which assessee files information about his/her income and tax thereon to Income Tax Department. The CBDT has issued different forms for segregated based on the type of assessee, type of income etc. The CBDT has issued forms ITR 1, ITR 2, ITR 3, ITR 4, ITR 5, ITR 6 and ITR 7. The details of these forms and applicability of these forms are given below.

ITR 1 - ITR 1 is used for filing return of individuals being a resident (other than not ordinarily resident) having total income upto Rs.50 lakh, having Income from Salaries, one house property, other sources (Interest etc.), and agricultural income upto Rs.5000.

ITR 2 - ITR 2 is used for filing returns of Individuals and HUFs not having income from profits and gains of business or profession. In a nutshell, an individual will have to file ITR 2 in case they have income from Capital gains.

ITR 3 - ITR 3 is used for filing returns of Individuals and HUFs having income from profits and gains of business or profession.

ITR 4 - ITR 4 can be used for filing returns of Individuals, HUFs and Firms (other than LLP) being a resident having total income upto Rs.50 lakh and having income from business and profession which is computed under sections 44AD, 44ADA or 44AE (presumptive income) and agricultural income upto Rs.5000.

ITR 5 - ITR 5 can be used for filing returns of persons other than- (i) individual, (ii) HUF, (iii) company and (iv) person filing Form ITR-7 (persons filing form ITR 7 include Charitable and Religious Trusts, Political Parties, Scientific research institutions, University/ college or other institution). In simple terms ITR 5 is used by firms, LLPs, Associations of Persons (AOPs), BOIs, Artificial Judicial Persons, Cooperative Societies, Local Authorities and representative assesses.

ITR 6 - ITR 6 can be used for filing returns of Companies other than companies claiming exemption under section 11.

ITR 7 - ITR 7 can be used for filing returns of persons including companies required to furnish return under sections 139(4A) - Income of Charitable and Religious Trusts or 139(4B) - Political Parties or 139(4C) - Scientific research institutions or 139(4D) - University, college or other institution only.