Who Must File Income Tax Returns?

Any person or corporation with income, regardless of the amount received, is required to file income tax reports under the current IT Act regulations. However, at the moment, income tax is only due when a fiscal year's net taxable income above Rs. 2.5 lakh. The primary categories of people and organisations that must pay taxes if their net taxable income for the fiscal year over the specified threshold are as follows:

• Salaried individuals
• Self-employed individuals
• Self-employed professionals
• Hindu Undivided Family (HUF)
• Legally recognised artificial persons
• Body of Individuals (BOI)
• Association of Persons (AOP)
• Companies and corporate firms
• Local Authorities

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Income Tax Slab Rates: What Are They?

In India, income is subject to income tax slab rates that are determined by the tax assessee's net annual income. The income tax slab rates are progressive, meaning that they rise in proportion to an individual's net yearly income. The income tax slab rates are subject to periodic adjustments and are disclosed as part of the Union Budget announcement. The following are the income tax slab rates for the 2024–2025 fiscal year (AY 2025–2026):

Individual Income Tax Slab for FY 2024–2025 (AY 2025–2026)

• General Category (Less than 60 years):

• Senior Citizens (60 years and above but below 80 years):

• Very senior citizens (80 years and above):

Note:

• Between Rs. 50 Lakh to Rs. 1 Crore – A surcharge of 10% of the income tax has to be paid as well.
• Between Rs. 1 Crore to Rs. 2 Crore – A surcharge of 15% of the income tax has to be paid as well.
• Between Rs. 2 Crore to Rs. 5 Crore – A surcharge of 25% of the income tax has to be paid as well.
• Above Rs. 5 Crore – A surcharge of 37% (under old regime) and 25% (under new regime) of the income tax has to be paid.
• Maximum rate of surcharge on income from dividends or income under the provisions of Sections 111A, 112A and 115AD is 15%
• 4% of the income tax has to be paid as Health and Education Cess by all taxpayers irrespective of the slab they fall into.

Business Income Tax Slab

Slab of Income Tax on Domestic Businesses

Health and Education Cess, Marginal Relief, and Surcharge

Surcharge:

• A surcharge of 7% is levied on domestic companies if their total taxable income exceeds Rs. 1 Crore.
• A surcharge of 12% is levied on domestic companies if their total taxable income exceeds Rs. 10 Crore.
• A surcharge of 10% is levied on domestic companies which have opted for taxability u/s 115BAA or Section 115BAB

Marginal Relief:

• Marginal relief is a relief from surcharge, provided in situations where the surcharge payable is more than additional income that makes the person liable to pay surcharge.
• In case of domestic companies, the amount payable as surcharge should not be more than the amount of income earned exceeding Rs. 1 crore and Rs. 10 crore respectively.

Cess for Health and Education:

• Health and Education cess of 4% shall also be levied on the amount of income tax plus surcharge (in case any).

Slab of Income Tax for International Businesses

Health and Education Cess, Marginal Relief, and Surcharge

Surcharge:

• A surcharge of 2% is levied on foreign companies if their total taxable income exceeds Rs. 1 Crore.
• A surcharge of 5% is levied on foreign companies if their total taxable income exceeds Rs. 10 Crore.

Marginal Relief:

• As previously mentioned, marginal relief is a form of surcharge relief that is offered when the amount of the surcharge that must be paid exceeds the additional income that obligates the individual to pay the surcharge.
• If a foreign company earns more than Rs. 1 crore or Rs. 10 crore, the amount of the surcharge that must be paid shall not exceed that amount.

Health and Education Cess:

• Health and Education cess at 4% shall also be levied on the amount of income tax plus surcharge (in case any).

Returns must be filed.

• Activities pertaining to the taxation process fall within the purview of the Income Tax Department.
• Every taxpayer must submit a form that has been specified by the Indian government to the IT Department at the conclusion of the fiscal year in order to disclose their income.
• Regardless of whether tax is withheld at the source, filing a return is required for all persons and organisations receiving income in India.
• The income received during a specific fiscal year is compiled on this ITR (Income Tax Return) form.
• The income may come from a business, a salary, a pension, real estate, or even capital gains.

Preventing Penalties

• You notify the government of your earnings and the taxes paid on them by submitting the Income Tax Return form, or ITR..
• It serves as evidence of the income on which you have paid taxes when you file your income tax return.
• According to the Income Tax Act, an ITR must be submitted every year.
• The consequences of not filing an ITR can be severe. You can be regarded as a tax defaulter by the IT Department..
• The Income Tax Department may impose penalties for it.
• You will receive your money back if you paid more taxes than were necessary.

What are the Different Types of Taxable Income

The main categories of income that are subject to taxation at the relevant rates under the current provisions of the Income Tax Act of 1961 are as follows:

• Income from Salary
• Income from Capital Gains
• Income from House Property
• Income from Business
• Other income such as lottery and other legal gambling, dividend income, etc.

Advantages of Filing Income Tax Return (ITR)

Individuals with taxable income are required to file tax returns. You are excused from paying income tax if you are under 60 and earn up to Rs. 2.5 lakh annually. Many salaried people have been seen to believe that since their employer has already deducted taxes at the source, they are no longer liable. Income tax payment and IT return filing are two different duties. You should still file your income tax returns even if you have no tax liability. Filing tax returns has the following benefits:

• Facilitates easy processing of loans
• For VISA processing, return filing is mandatory
• Quick registration of immovable properties is possible
• A credit card will not be issued by the bank till an applicant files his returns regularly
• Filing income tax returns helps set up a record with the Income Tax Department

Filing Income Tax Returns

The Income Tax Act mandates that income tax returns be filed if:

• If your gross total income is over Rs. 2,50,000 in a financial year. This limit exceeds to Rs. 3,00,000 for senior citizens and Rs. 5,00,000 for citizens who are above 80 years.
• Whether you experience a profit or a loss, your business still exists.
• If you live in India and have assets outside of the country, you must file an income tax return.
• if you receive funds from a political party, a research organisation, a news agency, an educational institution, a medical facility, a medical organisation, or a property held in trust for charitable and religious reasons.
• Income earned in India is taxable for non-resident Indians (NRIs).

Income tax e-filing

• During 2006-2007, the Income Tax Department initially made the e-filing facility available.
• E-filing has been made available to all assessees.
• For businesses and enterprises that need a statutory audit under section 44AB, it is required.
• Currently, a sizable portion of taxpayers file their income tax filings electronically.
• The goal of the income tax department is to move all returns online.
• E-filing returns offers a number of benefits, such as eliminating the need for paperwork and the time spent organising it.
• You can file income tax returns online and log in to the secure website with a single mouse click.

You should have a basic understanding of how income tax is calculated before you file your taxes. In addition to providing you with an estimate of the amount you must pay, this will also help you identify methods to save money on taxes. Calculating the tax amount is simple if you know the income tax slabs. Applying the current tax rates and subtracting the taxes paid through TDS (tax deduction at source) yields the total amount of tax that must be paid.

You must review the deductions that have been established under the various provisions of the IT Act, 1961, in order to save the most tax possible. Section 80C of the IT Act of 1961 permits deductions for specific investment routes, including Public Provident Funds and National Savings Certificates. Nonetheless, the majority of taxpayers frequently overlook a variety of investment opportunities that qualify for tax breaks. A brief summary of investments that are eligible for deductions under various provisions of the Income Tax Act is provided below:The following income tax deductions are permitted under section 80C:

1.  Tax Saving Mutual Fund
2. Tax Saving Fixed Deposit
3. National Savings Certificate
4. Repayment of the principal on a housing loan
5. Life insurance policy premium
6. Equity Oriented Mutual Funds
7. Contributions made to Employee Provident Fund
8. Under section 80C, the tax exemption limit is Rs. 1.5 lakh.

Allowable Deductions under Different Sections

A taxpayer can claim for additional deductions under various sections. Some of these are mentioned below:

• Under Section 80CCC, contributions to annuity plans such as LIC are considered for tax benefit up to Rs. 1.5 lakh.

• Section 80TTA exempts interest on savings accounts up to Rs 10,000 per year..
• Section 80CCG allows for the deduction of investments made in the Rajiv Gandhi Saving Scheme.
• According to Section 80D, a person can claim an income tax deduction for Rs. 25,000 if he pays for his spouse's, children's, or his own medical insurance premium. The upper limit has been raised to for senior citizens.30,000 rupees. Tax deductions are also available for preventive health checkup expenses up to Rs. 5000 per family.
• According to Section 80DD, a taxpayer's family member who has a 40% disability may deduct up to Spending Rs. 75,000 on medical care for dependents with disabilities.
• A person is eligible for deductions under Section 80DDB if he spends Rs. 40,000 or more on the treatment of certain illnesses, such as AIDS, neurological disorders, chronic renal failure, malignant malignancies, and haematological disorders.
• You will be eligible for Section 80E income tax deductions if you have taken out an education loan and are repaying the interest. However, the principal amount of the student loan cannot be repaid with deductions.
• A person is eligible for deductions under Sections 80G, 80GGA, 80GGB, and 80GGC if he has donated to a recognised organisation within a fiscal year.
• With , a typical deductionThe Budget 2022 introduced Rs. 50,000 for the salaried class. This deduction is permitted regardless of the employee's expenses. To be eligible for this deduction, the assessee does not need to present real bills.

About Income Tax Rebate

A number of confusions arise when terms like income tax rebate, income tax exemption and income tax deduction are used. Although all these terms are beneficial to the tax payer, they have different meanings.

• Items that can be deducted from the total amount of tax due are included in the income tax refund.
• While rebates are claimed from the tax payable, tax deductions and exemptions are sought from the income.
• When you file your income tax returns, you can receive an income tax refund under section 87A.
• If the taxpayer is a resident individual who has not reached the age of 80 and whose taxable income is , they will be eligible for a refund.5,00,000 or less in rupees.
• Tax refunds are not available to Hindu undivided families, corporations, trusts, limited liability partnerships, or non-resident individuals.

The distinction between "exemption" and "deduction"

• The government offers tax relief to taxpayers in the form of tax exemptions and tax deductions.
• A certain income will not be subject to taxation if it qualifies for tax exemption.
• It indicates that the income is entirely exempt from taxes and is not taken into account when calculating the total amount of taxable income.
• When calculating the total income, the income is initially included in the deductions.
• You will be eligible to take advantage of the income tax deduction if you meet the requirements outlined.
• In the event of a tax deduction, investing in a certain avenue results in a specified reduction in the income tax burden.
• While there is often no cap on exemptions, there may be a monetary ceiling on deductions.

Useful Income Tax Exemptions for the Salaried

Salaried workers are entitled to a number of income tax exclusions under the Income Tax Act. The paid workers must notify their employer that they are requesting these exclusions. The employer would calculate the tax on the remaining income after subtracting the TDS. Let's examine the tax deductions in more detail:

• The majority of firms provide their workers with a housing allowance. A portion of the HRA is tax-exempt under the Income Tax Act.
• Additionally, some firms provide their staff with unique allowances. As long as the trip was taken in India, a portion of this sum is tax-exempt.
• Most of the time, workers who work for a company are entitled to leave. They have the option to cash these leaves if they do not claim them. It is also possible to claim an exemption for the amount received as leave encashment.
• Pensions are also exempt from taxes up to a certain amount.
• Before reaching the retirement age, some workers occasionally choose to take a voluntary retirement (VRS). In these situations, the employer gives the worker a certain sum of money. In the event of VRS, the employee receives this sum, which is tax-free.
• A number of additional benefits, such the children's education allowance and the transit allowance, are tax-exempt, but only to a certain extent.

A Better Understanding of Tax Planning

• You should understand tax planning techniques as a taxpayer in order to reduce your tax liability.
• You can fully benefit from deductions, exemptions, reliefs, and rebates while closely adhering to the law by using tax planning.
• You can lower your tax liability and pay less in taxes if you arrange your taxes properly.
• You should concentrate on the areas where you can save the most money.
• One of the most popular tools for tax savings for a long time has been insurance.
• Getting health and life insurance coverage is a smart option for young earners between the ages of 23 and 30.
• Since their career is just getting started, now is the ideal moment to begin saving for the future.
• It is best to contact a tax specialist for tax planning.
• Tax consultants, sometimes referred to as tax counsellors, are knowledgeable in the laws governing both individuals and corporations.

Tax Planning Without a Consultant's Assistance

• Reducing tax liabilities should be the main goal of tax planning.
• Every taxpayer wants to be able to keep as much of his income as possible.
• Planning taxes well in advance and taking use of exemptions and deductions would be entirely beneficial to the assessee.
• Tax planning can be lucrative and demanding if you do it yourself.
• The benefit is that you can select the tax-saving option that best fits your requirements.Tax planning can be lucrative and demanding if you do it yourself.
• It is difficult, though, since if you make a poor choice, you will be stuck with an inappropriate investment for at least three to five years.

Avoid Tax Evasion

The shockingly low number of tax payers in India, which suggests widespread tax evasion, is one of the country's main issues. Tax evasion is defined as any unlawful behaviour, including failing to file income tax returns or giving false information about the amount of taxes owed.

You will face penalties if the income tax authorities investigate and find that you have consciously attempted to lower your tax liability. The fine may exceed nearly three times the amount that was hidden. Because there could be major financial repercussions if a return is examined for an irregularity, it is therefore best to be cautious while filing an income tax return.

FAQs

Q. What is the distinction between income tax and TDS?

If you have paid more taxes than you owed for the relevant fiscal year, you are qualified to get a refund from the government. The amount of your applicable refund will be determined when you file your ITR and credited to your account as soon as the income tax authorities have completed processing the refund.

Q. What distinguishes income tax from professional tax?

A professional tax is a state-level tax that is levied on people's income in that state. Only people who live in certain Indian states that collect professional tax are now subject to professional tax, and each state has a different professional tax rate and exemption cap. However, income tax is a central tax, meaning that the tax assessee must pay it to the central government tax officials, and the tax rate is the same throughout India. The fact that the sum paid in lieu of professional tax is subtracted from the tax assessee's income tax due at the time of income tax filing is also noteworthy.

Q. What distinguishes an income tax return from an income tax?

Income tax is the amount of tax that a person, business, or organisation must pay for the money they made during the relevant fiscal year. The applicable income tax slab rate and additional variables, such as rebates and tax-saving investments, are used to determine a tax assessee's income tax due. An income tax return, on the other hand, is a yearly account of all income received, taxes owed, taxes paid, investments made, etc. for the relevant year. The income tax return form, which is the required format, must be used to submit this data to the relevant tax authorities. Income tax return filing is the process of submitting the income tax return form. Therefore, income tax is the tax that must be paid on income.

Q. What distinguishes an obligation from a tax?

A tax is a kind of payment that an individual or organisation must make in relation to their income or expenses. While consumption tax is referred to as indirect tax, income tax is referred to as income tax and is an example of a direct tax. A duty is a form of tax as well, however it only applies to imports and exports. This duty is referred to as import duty when it is applied by the importing nation and export duty when it is applied by the exporting nation.