What is Income Tax & Advantages of Filing IT Returns

In simple words, IT is nothing but the tax which is levied on the income of the business (which can be legal entities or corporations and other individual’s income). This tax is called the INCOME TAX (IT).

Income Tax

As per the act 1961 on income tax, every individual whose annual income is more than the certain provided limit needs to pay the income tax. We can say this as the individual is sharing their earned money to the central government. If this tax is levied on the company’s income this can be called the profit tax or as well as corporate tax.

The calculation of the tax is depended on the individual’s net taxable income. In India, the cycle of the income tax is decided according to the financial year which is also said as a fiscal year. The fiscal year in India starts on April 1st of the year and ends next year on 31st March. As per the incremental income slab rates only, the income tax is decided in India. Lower slab rates for individuals who have lower income and higher slab rates for the ones who have higher income rates.

For knowing more details about the INCOME TAX, you can follow the complete post. This post contains the information regarding the following-

  • Which are Taxable Income?
  • Types of Taxes?
  • Who Need To File Income Tax Return?
  • Income tax slabs for both the Business and Individuals.
  • What are the advantages of filing ITR?
  • E-filing income tax.

  What are TAXABLE INCOMES?

According to the rules made for Income Tax Act 1961, the following individuals who earn from the below-given sources have to pay the income tax. These tax rates are applicable depending on the income.

  • The income source from the salary.
  • The source of the income from the Capital gains/Business/ House Property.
  • Even the income tax has to be paid even if the source of the income is from legal gambling, dividend income, entertainment, and lottery.

TYPES OF INCOME TAXES-

Basically there are two types of taxes as Indirect tax and Direct tax. There is a difference between both the taxes. In indirect taxes, the complete procedure will be followed by the other individuals or entities once it is paid by the individual to the Government.

The Indirect taxes are said to be as GST (Goods and Services Tax) and VAT which is known as a value-added tax. These indirect tax rates are completely changing from time to time as per the changes in the rates of the products and services like e-commerce, restaurant, etc.

Direct taxes must be paid by the individuals directly to the Government. Corporation tax and income tax comes under this direct tax.

WHO NEED TO FILE INCOME TAX RETURN (ITR)- 

Here are the necessary reasons why one should file for the income tax.

  • If the individual is the resident of India and also if they are having the assets in other countries apart from India.
  • Tax is levied on an NRI also if their income is generated from India.
  • Tax is also applicable for the following entities-
  • Medical Institutions.
  • Charitable trusts
  • Religious trusts
  • Research associations
  • Political parties
  • News agencies.
  • If you own a company or an entity filing a tax is applicable even though the company makes a profit or a loss.

The tax slabs for an individual is as below-

  • Income exceeding ₹ 2,50,000.
  • If you are a Sr.Citizen income exceeding ₹ 3,00,000.
  • If you are above 80-year income exceeding ₹ 5,00,000.
  • The candidates whose income is from the following sources should also have to pay the income tax.
  • BOI Body of Individuals.
  • AOP Association of Persons
  • Local Authorities
  • Corporate firms and even companies.
  • HUF Hindu Undivided Families.
  • Salaried individuals.
  • Self-employed professionals/ individuals.
  • Artificial persons who are legally recognized.

WHAT ARE THE ADVANTAGES OF FILING IT Returns?

As per the law, it is compulsory to file a tax by every individual who is earning income which is taxable. The tax is exempted for the one who is below 60 years of age and their annual income is up to Rs.2.5 Lakhs. Both Paying and filing the income tax are completely different aspects.

As most of the employees think that once the tax is deducted at the source there ends their responsibility. But filing a tax completes the entire procedure. Income tax should also be filed if you are not under the tax bracket also. As there are many advantages of filing tax returns. Below here know the advantages of it-

  • If an individual doesn’t file there IT returns, the banks will hesitate to issue a credit card.
  • A loan procedure becomes easy for individuals.
  • It is a must to file an ITR for Visa Processing.
  • The procedure of registering the immovable properties becomes fast and easy.
  • Filing ITR will keep a record of the individuals at the IT Department.

INCOME TAX BY E-FILING –

IT department has been introduced the e-filing facility first time in the year 2006-2007. This e-filing benefit was for all the individuals/ companies/ the ones who are paying this IT. Auditors must be applied as per the section 44AB. E-filing income tax is easy as the individuals save their time and need not perform the many paperwork procedures. Before paying the taxes all the individuals should have knowledge about how this income tax is computed and these tax slabs.

income tax

By this, they will come to know exactly how much they have to pay for their income and they can also save tax.  The final income tax of the individual is calculated on how much of TDS is deducted and the slab rates which are decided for the particular year. TDS is Tax deduction at source (example:-If you are an employee in an organization then the finance department calculates the income and then tax is deducted as per the slab rates for that FY)

Before e-filing, the e-verification of the individuals should be done. The e-verification can be done by following the below procedure.

income tax E-verification

Without taking the help of a consultant also individuals can plan for tax reduction. Following points need to be followed in order to reduce the tax burdens-

  • One must have a thorough knowledge of the various exemptions like Sec 80C, 80D.
  • Under 80C you can get an exemption up to Rs.1, 50,000/- by showing investments/ home loans, etc.
  • It will be challenging for individuals if they do tax planning by themselves. The main motto of planning a tax to reduce the tax burden.