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ITR FILING

Income

Tax in India

There are two types of taxes in India – direct and indirect. A direct tax is a tax you pay on your income directly to the government. Indirect tax is a tax that restaurants, theatres and e-commerce websites charge you on for goods or a service. This tax is, in turn, passed down to the government. Indirect taxes take many forms: service tax on restaurant bills and movie tickets, value added tax or VAT on goods such as clothes and electronics. Goods and services tax, which has recently been introduced is a unified tax that has replaced all the indirect taxes that business owners have to deal with. Let us discuss the entire process of income tax in India.
Income Tax Basics

Everyone who earns or gets an income in India is subject to income tax. (Yes, be it a resident or a non-resident of India ). Income earned could be salary, pension or could be from a savings account that’s quietly accumulating a 4% interest.
, the Income Tax Department breaks down income into five heads:
Head of Income Nature of Income covered
Income from Salary Income from salary and pension are covered under here
Income from Other Sources Income from savings bank account interest, fixed deposits, winning KBC
Income from House Property This is rental income mostly
Income from Capital Gains Income from sale of a capital asset such as mutual funds, shares, house property
Income from Business and Profession This is when you are self-employed, work as a freelancer or contractor, or you run a business. Life insurance agents, chartered accountants, doctors and lawyers who have their own practice, tuition teachers


Tax Slabs

People’s incomes are grouped into blocks called tax brackets or tax slabs. And each tax slab has a different tax rate. In India, we have four tax brackets each with an increasing tax rate.
  • Income earners of up to 5 lakhs
  • Income earners of between 5 lakhs and 10 lakhs
  • And those who make more than 10 lakhs per year
Income Range Tax rate Tax to be paid
Up to Rs.2,50,000 0 No tax
Between Rs 2.5 lakhs and Rs 5 lakhs 5% 5% of your taxable income
Between Rs 5 lakhs and Rs 10 lakhs 20% Rs 12,500+ 20% of income above Rs 5 lakhs
Above 10 lakhs 30% Rs 1,12,500+ 30% of income above Rs 10 lakhs
This is the income tax slab for FY 2017-18 for taxpayers under 60 years. There are two other tax slabs for two other age groups: those who are 60 and older and those who are above 80.

A word of note: People often misunderstand that if they earn let’s say Rs.12 lakhs, they will be paying a 30% tax on Rs.12 lakhs i.e Rs.3,60,000. That’s incorrect. A person earning 12 lakhs in the progressive tax system, will pay Rs.1,12,500+ Rs.60,000 = Rs. 1,72,500.


Filing your Income Tax Return

    Filing income tax return online: The process
  • E-file online. It is a more complete and better alternative to filing on the income tax website. Also it is for more than just e-filing your income tax return. ClearTax helps you claim all the deductions you’re eligible for and helps you invest.
  • Send ITR V or e-verify your tax return
  • Get income tax refund
  • The deadline to e-file your income tax return is 31 July.
  • There’s income tax return form ranging from ITR 1 to ITR 7 for different types of income. Some income tax forms are longer than the others and they may need additional disclosures such balance sheet and a profit and loss statement.
  • The documents you are going to need to file your tax return are largely going to depend on your source of income. The only documents you are going to need is your Form 26AS and Form 16 if you are salaried.
Tax deductions

    There are broad themes to what the government incentivizes. These are covered under Section 80 of the Income Tax Act.