Income Tax in India: Taxes in India can be categorized as direct and indirect taxes. Direct tax is a tax you pay on your income directly to the government. Indirect tax is a tax that somebody else collects on your behalf and pays to the government e.g. restaurants, theatres and e-commerce websites recover taxes from you on goods you purchase or a service you avail. This tax is, in turn, passed down to the government. Direct Taxes are broadly classified as:
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.
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). Your income could be salary, pension or could be from a savings account that’s quietly accumulating a 4% interest. Even, winners of a lottery, or even ‘Kaun Banega Crorepati’ have to pay tax on their prize money.
The Tax year begins from 1st April to 31st March every year and is called “Financial Year (F.Y.)” and for tax purposes since it is declared after the year end in the subsequent year, the returns are classified under the year in which they are filed hence that year is referred to as “Assessment Year (A.Y.)”
For simpler classification, the Income Tax Department breaks down income into five heads:
Taxpayers in India, for the purpose of income tax includes:
Each of these taxpayers is taxed differently under the Indian income tax laws. While firms and Indian companies have a fixed rate of tax of 30% of profits, the individual, HUF, AOP and BOI taxpayers are taxed based on the income slab they fall under. 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 Tax slab for individuals below 60 years:
Income Tax Slab for individuals between 60 years and 75 years:
Income Tax Slab for individuals who are non-residents:
Besides this, the income tax slab for HUF (Hindu Undivided Family), as well as AOP (Associations of Persons), BOI (Body of Individuals), and Artificial Juridical Person remains the same as for non-resident individuals.
One must bear in mind that not all income can be taxed on slab basis. Capital gains income is an exception to this rule. Capital gains are taxed depending on the asset you own and how long you’ve had it. The holding period would determine if an asset is long term or short term. The holding period to determine nature of asset also differs for different assets. A quick glance of holding periods, nature of asset and the rate of tax for each of them is given below.
Levy of income tax in India is dependent on the residential status of a taxpayer. Individuals who qualify as a resident in India must pay tax on their global income in India i.e. income earned in India and abroad. Whereas, those who qualify as Non-residents need to pay taxes only on their Indian income. The residential status has to be determined separately for every financial year for which income and taxes are computed. For details please refer to “taxation of NRI” given separately.
a. The due date to file income tax returns (non audit) is 31 July every year.
b. The due date for tax audit u/s 44AB is 30th September every year.
c. The due date for audit cases is 31st October every year.
d. The last date of making payment under Vivaad se Vishwas Scheme without additional amount stands extended to 31 December 2020.
e. For Salaried Employees below are the deadlines for submission of Investments for the purpose of appropriate tax deduction against your salary income.
Note: For AY 2021-22, CBDT extends the deadlines due to COVID 19 vide its circular No.9 dated 20th May 2021. Currently, last date to file tax returns has been extended to 30th September 2021. Similarly last date to file tax returns for tax audit cases and for audit cases have been extended to 31st October 2021 and 30th November 2021 respectively.
Union Budget 2021 Update:
Exemption from ITR filing to senior citizens aged 75 years and above, earning only pension and interest income.