The income tax return filing deadline is around the corner, most workers, particularly first-time taxpayers, have just a single thing on their mind, and that is the income tax. Regardless of whether you are working for an organization or run a business, it is basic for you to pay income tax on your income and file it every year. The income tax that is paid is reliant on a few parameters – this incorporates pay and its sources, age, exemptions and investments that are qualified for a tax deduction, tax slab
Different Sources of Income
In order to compute your taxable income, you need to understand all these factors.
Income from Salary
This is the monthly pay one gets from the employer they work for. The salary amount can incorporate Basic Salary, Dearness Allowance (DA), Annuity & Gratuity benefits received in that financial year, Allowances on transport, medical expenses, etc. The total of the above- mentioned earnings is called Gross Salary.
Income from Business or Profession
The income that one earns through business or profession is covered under this head and it is taxable.
Income from Capital Gains
Any profit or gain that emerges from sales or transfer of capital assets, (for example, stocks, Mutual Funds, Real estate, and so forth) is taxable under the head capital gains. This addition is additionally sorted as Short Term Capital Gains (STCG) and Long Term Capital Gains (LTCG).
Income from Rent on House Property
Income from House property includes any rental income that an individual earns as rent from a residential or commercial property, and is subject to taxation.
Income from Other Sources
Any income that can’t be included under the other four heads of pay will go under the head pay from different sources.
Note that all the above components set up comprise your Gross Income. However, know that Gross pay isn’t your taxable income. Whenever you compute your gross pay, the next step is to know all the tax exemptions available to you
- Standard exemption: A standard exemption of Rs 50,000 is available to all individuals irrespective of their income.
- HRA exemptions under Section 10:Any person who lives in a rented house can likewise avail tax exemption under sector 10. HRA exemption for a salaried individual is the minimum of the genuine HRA received from the employer or half of the basic salary and dearness allowance for people living in metro urban areas, 40% of the equivalent for people living in non-metro cities or Actual rent paid less 10% of basic salary and dearness allowance. Self-employed people can guarantee actual rent paid or Rs 60,000, whichever is less.
Income- Tax Slabs
Income taxpayers (both salaried & self-employed) have been categorized into three age groups and the tax slabs are different for the three categories.
Individuals Who are Below the Age of 60 Years
Senior citizens who are between 60 years and 80 years old
Super senior citizens who are above 80 years old
Gross Total Income
The gross total income is the amount of pay from all 5 heads in the wake of setting the misfortunes under the important heads of income. The Gross total income is to be categorized in two sections, for example, one which is to be taxed at normal slab rates and others which is liable to tax at specific rates
Deductions Under Chapter VI-A
There are a lot more deductions aside from those under Section 80C and 80D that can be claimed by the assessee. Ensure that you claim all the important deductions from your Gross total income which are given under sections 80C to 80U. In the event that the amount of deductions surpasses the Gross total income (GTI), at that point the measure of deductions will be limited to the amount of GTI.
Deduction under section VI-A can be claimed from the normal pay. A portion of the ventures/expenditures which can be claimed as deductions include investment for NSC, PPF, ULIPs, ELSS, NPS, VPF, Tuition charge, Mediclaim policy, Life insurance policy, donations given to certain approved institutions, royalty income received by the author of books, rent paid (subject to conditions) etc.
How to Compute Taxable Income?
Subtract the deductions under Chapter VI-A from your Gross Total Income to get your total taxable income. Subsequent to the calculation of your total taxable income, apply the tax rates pertinent for the financial year for which the income has been calculated to process your tax liability. Note that taxable pay is the net income computed after thinking about the deductions and exemptions. Regardless of whether your total taxable income falls underneath the basic exemption limit yet your gross total income surpasses the basic exemption limit, you are needed to file a tax return.
There are a variety of tax calculators available online which can help you decide your taxable income and your income tax liability. You can utilize the income tax calculator in the Income Tax Department site to make the repetitive errand considerably simpler.
For more information, visit the website of All India ITR