Income Tax

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Introduction – Income Tax (IT)

 

Income tax act 1961, this resource about to tax act 1961, based on Income tax and its applicable in India. This resource contain introduction of income tax and basics as well as heads of income. types of income is also given in this resource.

HISTORY

The Income Tax was introduced in India for the first time in 1860 by British rulers following the mutiny of 1857. The period between 1860 and 1886 was a period of experiments in the context of Income Tax. This period ended in 1886 when first Income Tax Act came into existence. The pattern laid down in it for levying of Tax continues to operate even to-day though in some changed form. In 1918, another Act- Income Tax Act, 1918 was passed but it was short lived and was replaced by Income Tax Act, 1922 and it remained in existence and operation till 31st. March, 1961.

Introduction:

In India Income tax is governed by the Income tax Act 1961. It was first came into force on 1-4-1962. Income tax Act is used for determination of taxable income, tax liability and also provides procedure for assessment, appeal, penalties and prosecutions. Every year Finance Act bring amendment to this Act. Income Tax Act Contain 298 sections and XIV Schedules.
Income Tax is charge on total income earned by every person during the relevant previous year.

Basic concept of Income Tax:-

A Business who stays aloof of tax matters cannot remain competitive. Tax laws are an economic reality in the Business world. A Tax Dollar is just as real one derived from other source.”

  1. a) Previous Year (sec. 3):-In Income tax Act the meaning of Previous year is “year in which income is earned” previous year is represented by PY.
  2. b) Assessment Year(Sec.2(9)):-In Income tax Act the meaning of Assessment year is “year which start on 1-April and ending on 31-march”
  3. c) Assessee(sec.2(7)):-Assessee means a person who paid or payable any sum of money under the income tax act 1961.
  4. d) Person(sec.2(31)):-In income tax person is defined to includes:
    1. an individual
    2. a Hindu undivided family
  • a company
  1. a firm
  2. an association of person and body of individuals
  3. local authority
  • every artificial juridical person not falling within any of the above mentioned categories.

Heads of income

a)salary
b)House property
c)Capital gain
d)Business/Profession
e)Other sources

Deductions:

Deductions for your taxable amount are available under various sections of the Income Tax Act , 1961

Section 80C:

Deductions under this section are only available to individuals and HUF. This section allows for certain investments like NSC, PPF, Insurance, Principal Repayment of Housing Loan, Tax Saving FDR etc. and expenditures to be exempt from taxation up to the amount of Rs. 1,50,000.

Section 80CCC:

Deductions under this section are on payments made to LIC or any other approved insurance company under an approved pension plan. The pension policy must be up to Rs.1,50,000 and be taken for the individual himself out of the taxable income.

Section 80CCD:

Deductions under this section are for contributions to the New Pension Scheme by the assesse and the employer. The deduction is equal to the contribution, not exceeding 10% of his salary.

The total deduction available under Section 80C , 80CCC and 80CCD is Rs.1,50,000. However, contributions to the Notified Pension Scheme under Section 80CCD are not considered in the Rs.1,50,000 limit.

Section 80D:

This is the section that deals with income tax deductions on health insurance premiums paid. In the case of individuals, the insurance policy can be taken to cover himself, spouse, dependent children – for up to Rs.25,000 and parents (whether dependent or not) – for up to Rs.25,000. An additional deduction of Rs.5,000 is applicable if the insured is a senior citizen. In the case of HUF, any member can be insured and the general deduction will be for up to Rs.15,000 and an additional deduction of Rs.5,000.

A total of Rs.2,25,000 can be claimed as deductions whether the assesse is an individual or a HUF.

Section 80DDB:

This section is for deductions on medical expenses that arise for treatment of a disease or ailment as specified in the rules (11DD) for the assesse, a family member or any member of a HUF.

Section 80E:

This section deals with the deductions that are applicable on the interest paid on education loans for an education in India.

Section 80EE:

This section deals with tax savings applicable to first time home-owners. Applies for individuals whose first home purchased has a value less than Rs.40 lakh and the loan taken for which is Rs.25 lakh or less.

Section 80RRB:

Deductions with respect to income by way of royalties or patents can be claimed under this section. Income tax can be saved on an amount up to Rs.3,00,000 for patents registered under the Patents Act, 1970.

Section 80TTA:

This section deals with the tax savings that are applicable on interest earned in savings bank accounts, post office or co-operative societies. Individuals and HUFs can claim a deduction on an interest income of up to Rs.10,000.

Section 80U:

This section deals with the flat deduction on income tax that applies to disabled people, when they produce their disability certificate. Up to Rs.1,00,000 can be non-taxed, depending on the severity of the disability.

Section 24:

This section deals with the interest paid on housing loans that is exempt from taxation. An amount of up to Rs.2,00,000 can be claimed as deductions per year, and is in addition to the deductions under Sections 80C, 80CCF and 80D. This is only for self occupied properties. Properties that have been rented out, 30% of rent received and municipal taxes paid are eligible for tax exemption.

 

 

R.K. Gupta & Associates is now an integral part of business management. It involves not only due compliance of law in timely and regular manner, but also arranging the affairs in such a manner that it reduces the tax liability burden. Specifics are :

  • Filling of Return
  • Maintenance of Accounts
  • Getting the Accounts Audited.
  • Complying with the notices of Income Tax Department.
  • Payment of Advance Tax
  • Timely deduction of Tax at Source and its payment.

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