Income Tax in India - Wikipedia, The Free Encyclopedia

Income Tax in India

Central Revenue collections in

2007-08 (Source: Compiled from

reports of Comptroller and

Auditor General of India for

relevant years)

Personal income tax (direct)

(17.43%)

Corporate tax (direct)

(00.0%%)

Other Taxes (direct) (2.83%)

Excise duty (indirect)

(20.84%)

Customs duty (indirect)

(17.46%)

Other taxes (indirect) (8.68%)

Income tax in IndiaFrom Wikipedia, the free encyclopedia

The Central Government has been empowered by Entry 82 of the Union List of Schedule VII of the Constitution

of India to levy tax on all income other than agricultural income (subject to Section 10(1)).[1]

The Income Tax

Law comprises The Income Tax Act 1961, Income Tax Rules 1962, Notifications and Circulars issued by Central

Board of Direct Taxes (CBDT), Annual Finance Acts and Judicial pronouncements by Supreme Court and High

Courts.

The government of India imposes an income tax on taxable income of all persons including individuals, Hindu

Undivided Families (HUFs), companies, firms, association of persons, body of individuals, local authority and any

other artificial judicial person. Levy of tax is separate on each of the persons. The levy is governed by the Indian

Income Tax Act, 1961. The Indian Income Tax Department is governed by CBDT and is part of the Department of

Revenue under the Ministry of Finance, Govt. of India. Income tax is a key source of funds that the government uses

to fund its activities and serve the public.

The Income Tax Department is the biggest revenue mobilizer for the Government. The total tax revenues of the

Central Government increased from 1392.26 billion in 1997-98 to 5889.09 billion in 2007-08.[2]

Contents

1 History

2 Residential status, Scope of taxable income & Charge

2.1 Charge to income-tax

2.2 Residential status

2.3 Residential status of a person other than an individual

2.4 Scope of total income

3 Heads of income

3.1 Income from salaries

3.2 Income from house property

3.3 Profits and Gains of business or profession

3.4 Income from capital gains

3.5 Income from other sources

4 Agricultural income

4.1 Income partly agricultural and partly business

5 Permissible deductions from Gross Total Income

5.1 Section 80C deductions

5.2 Section 80CCC(pension)

5.3 Section 80CCD

5.4 Section 80D: Medical insurance premiums

5.5 Section 80DDB : Deduction in respect of medical treatment, etc

5.6 Section 80CCG : RGESS

5.7 Section 80E : Education loan interest

5.8 Section 80TTA : Interest on Savings Account

5.9 Section 80U : Disability

5.10 Section 24 : Interest on housing loans

6 Due date of submission of return

7 Advance tax

8 Tax deducted at source (TDS)

9 Corporate income tax

9.1 Surcharge 1

10 Tax returns

10.1 Normal return

10.2 Belated return

10.3 Revised return

10.4 Defective return

10.5 Returns in response To notices

11 Annual information return and statements

11.1 Annual information return

11.2 Statements By producers

11.3 Statements by non-resident having a liaison office in India

12 Tax penalties

13 See also

14 References

15 External links

History

Income tax was introduced in 1860, abolished in 1873 and reintroduced in1886 Income tax levels in India were very high during 1950-1980, in 1970-71

there were 11 tax slabs with highest tax rate being 93.5% including surcharges. In 1973-74 highest rate was 107.75%. But to reduce tax evasion tax rates

were reduced later on, by 1992-93 maximum tax rates were reduced to 40%. [3][4]

Residential status, Scope of taxable income & Charge

Charge to income-tax

Whose income exceeds the maximum amount, which is not chargeable to the income tax, is an assessee, and shall be chargeable to the income tax at

the rate or rates prescribed under the finance act for the relevant assessment year, shall be determined on basis of his residential status.

Income tax is a tax payable, at enacted by the Union Budget (Finance Act) for every Assessment Year, on the Total Income earned in the Previous Year

by every Person.

The chargeability is based on nature of income, i.e., whether it is revenue or capital. The rates of taxation of income are-:

Income Tax Rates/Slabs Rate (%) (applicable for assessment year 2014-15)

Net income range (Individual resident

(Age below 60 Yrs.) or any NRI / HUF

/ AOP / BOI / AJP)

Net income range (For

resident senior citizen1)

Net income range (For

super senior citizen2)

Net income range (For any other

person excluding companies and

co-operative societies)

Income

Tax rates3

Up to 200,000 Up to 250,000 Up to 500,000 Up to 200,000 NIL%

200,001500,000 250,001500,000 - 200,001500,000 10%

500,0011,000,000 500,0011,000,000 500,0011,000,000 500,0011,000,000 20%

Above 1,000,000 Above 1,000,000 Above 1,000,000 Above 1,000,000 30%

^1 Senior citizen is one who is 60 years or more at any time during the previous year but not more than 80 years on the last day of the previous year.

^2 Super senior citizen is one who is 80 years or more at any time during the previous year.

^3 These slab-rates aren't applicable for the incomes which are to be taxed at special rates under section 111A, 112, 115, 161, 164 and 167. For instance, long-term

capital gains (except the one mentioned in section 10(38))for all assessees is taxable at 20%. For individual assessees whose total income does not exceed 500,000

after providing for [5] any deduction under Chapter VI A are eligible for a rebate of up to 2,000 under section 87A (applicable from assessment year 2014-15

onwards). A surcharge of 10% on income tax payable is applicable for every non-corporate assessee, whose total income exceeds 10 million (applicable for

assessment year 2014-15).

Residential status

The residential status of the assessee is useful in determining the scope or chargeability of the income for the assessee, i.e., whether taxable or not. For

an individual person, to be a resident, any one of the following basic conditions must be satisfied:-

Presence of at least 182 days in India during the previous year.

Presence of at least 60 days in India during the previous year and 365 days during 4 years immediately preceding the relevant previous year.

However, in case the individual is an Indian citizen who leaves India during the previous year for the purpose of employment (or as a member of a crew of an Indian ship) or in case the

individual is a person of Indian origin who comes on a visit to India during the previous year, then only the first of the above basic condition is applicable. India origin means those

person which are born in India before partition of India. To determine whether the resident individual is ordinarily resident the following both additional

conditions are to be satisfied:-

Resident in India in at least 2 out of 10 years immediately preceding the relevant previous year.

Presence of at least 730 days in India during 7 years immediately preceding the relevant previous year.

If the individual resident satisfies only one or none of the additional conditions, then he is not ordinarily resident. (In case the person is not an individual or an HUF, then the residential

status can only be either resident or non-resident).

Residential status of a person other than an individual

Income tax in India - Wikipedia, the free encyclopedia http://en.wikipedia.org/wiki/Income_tax_in_India

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Type of personControl & management of affairs of

the taxpayer is wholly in India

Control & management of affairs of

the taxpayer is wholly outside India

Control & management of affairs of the

taxpayer is partly in India partly outside

India

HUF1 Resident Non-resident Resident

Firm Resident Non-resident Resident

Association of persons Resident Non-resident Resident

Indian company2 Resident Resident Resident

Foreign company3 Resident Non-resident Non-resident

Any other person

except an individualResident Non-resident Resident

^1 After determining whether an HUF is resident or non-resident, the additional conditions (as laid down for an individual) should be checked for the karta to

determine whether the HUF is ordinary or not-ordinary resident.

^2 An Indian company is the one which satisfies the conditions as laid down under section 2(26) of the Act.

^3 Foreign company is the one which satisfies the conditions as laid down under section 2(23A) of the Act.

Scope of total income

Indian income1 is always taxable in India notwithstanding residential status of the taxpayer.

Foreign income1 is not taxable in the hands of a non-resident in India. For resident (in case of firm, association of persons, company and every other

person) or resident & ordinarily resident (in case of an individual or an HUF), foreign income is always taxable. For resident but not ordinarily resident

foreign income is taxable only if it is business income and business is controlled wholly or partly in India or it is a professional income and profession is

set up in India.

^1 Foreign income is the one which satisfies both the following conditions:-

Income is not received (or not deemed to be received under section 7) in India, and

Income doesn't accrue (or doesn't deemed to be accrued under section 9) in India.

If such an income satisfies one or none the above conditions then it is an Indian income.

Heads of income

The total income of a person is segregated into five heads:-

Income from salaries

Income from house property

Profits and gains of business or profession

Capital gains and

Income from other sources

Income from salaries

All income received as salary under employer-employee relationship is taxed under this head, on due or receipt basis, whichever arises earlier.

Employers must withhold tax compulsorily (subject to Section 192), if income exceeds minimum exemption limit, as Tax Deducted at Source (TDS), and

provide their employees with a Form 16 which shows the tax deductions and net paid income. The Act contains exemptions including (the list isn't

exhaustive):-

Particulars Relevant section for computing exemption

Leave travel concession 10(5)

Death-cum-Retirement Gratuity 10(10)

Commuted value of Pension (not taxable for specified Government employees) 10(10A)

Leave encashment 10(10AA)

Retrenchment Compensation 10(10B)

Compensation received at time of Voluntary Retirement 10(10C)

Tax on perquisite paid by employer 10(10CC)

Amount received from Superannuation Fund to legal heirs of employee 10(13)

House Rent Allowance 10(13A)

Some Special Allowances 10(14)

The Act contains list of perquisites which are always taxable in all cases and a list of perquisites which are exempt in all cases (List I). All other

perquisites are to be calculated according to specified provision and rules for each. Only two deductions are allowed under Section 16, viz. Professional


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Tax and Entertainment Allowance (the latter only available for specified government employees).

Computation of exemption for gratuity [Section 10(10)]

In case of Government employee it is fully exempt from tax.

In case of non-government employee covered by Payment of Gratuity Act, 1972 it is exempt from tax up to the least of the following:-

15 days' salary for each year of service or part thereof exceeding six months(i.e., 15/26*last drawn salary*completed year of service or part thereof

exceeding 6 months), or

1 million, or

Gratuity actually received

In case of non-government employee not covered by Payment of Gratuity Act, 1972 it is exempt from tax up to the least of the following:-

1 million, and

Half month's salary for each completed year of service(i.e.,15/30*Average salary*completed year of service), or

Gratuity actually received

Average salary for above purpose is average salary drawn during 10 months immediately preceding the month in which the employee retired or ceased to exist.

Computation of exemption of House Rent Allowance(HRA) [Section 10(13A)]

The least of the following is exempt:-

HRA received by the employee in respect of the period during which rental accommodation is occupied by the employee during the previous year; or

50%/40% of salary where residential house is situated in metro/non metro city respectively.

Excess of rent paid over 10% of salary.

Salary for this purpose means basic plus dearness allowance (if terms of employment so provide) plus fixed percent commission on turnover.

Computation of exemption for pension [Section 10(10A)]

Uncommuted pension is taxable in all cases. Commuted pension is exempt for specified Government employees. In any other case, commuted pension is exempt to

the extent given below:-

1/3 of normal pension is exempt if the employee is in receipt of gratuity

1/2 of normal pension is exempt if the employee is not in receipt of gratuity

Computation of exemption for Leave encashment [Section 10(10AA)]

It is fully exempt in case of specified Government employees

In other case, it is exempt from tax to the extent of least of the following:-

Amount actually received at the time of retirement

300,000

10 months average salary

Cash equivalent of leave salary in respect of the period of earned leave at the credit of the employee at the time of retirement, but it cannot exceed 30 days

of average salary for every completed year of service

Average salary for the above purpose means average salary drawn during 10 months immediately preceding retirement

Computation of exemption for Retrenchment compensation [Section 10(10B)]

It is exempt to the extent of least of the following:-

500,000, or

Amount calculated under section 25F(b) of the Industrial Disputes Act

Computation of exemption for Voluntary Retirement Scheme [Section 10(10C)]

Least of the following three amounts is exempt in case of approved/recognized scheme:-

Actual received

Rs500,000,

Last drawn salary*3*Completed years of service, or, last drawn salary*remaining months of service; whichever is lower

Income from house property

Income under this head is taxable if the assessee is the owner of a property consisting of building or land appurtenant thereto and is not used by him for

his business or professional purpose. An individual or an Hindu Undivided Family (HUF) is eligible to claim any one property as Self-occupied if it is

used for own or family's residential purpose. In that case, the Net Annual Value (as explained below) will be nil. Such a benefit can only be claimed for

one house property. However, the individual (or HUF) will still be entitled to claim Interest on borrowed capital as deduction under section 24, subject to

some conditions. In the case of a self occupied house deduction on account of interest on borrowed capital is subject to a maximum limit of 150,000 (if

loan is taken on or after 1 April 1999 and construction is completed within 3 years) and 30,000 (if the loan is taken before 1 April 1999). For let-out


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property, all interest is deductible, with no upper limits. The balance is added to taxable income.

The computation of income from let-out property is as under:-

Gross annual value (GAV)1 xxxx

Less:Municipal Taxes paid (xxx)

Net Annual value (NAV) xxxx

Less:Deductions under section 242 (xxx)

Income from House property xxxx

^1 The GAV is higher of Annual Letting Value (ALV) and Actual rent received/receivable during the year. The ALV is higher of fair rent and municipal value, but

restricted to standard rent fixed by Rent Control Act.

^2 Only two deductions are allowed under this head by virtue of section 24, viz.,

30% of Net annual value as Standard deduction

Interest on capital borrowed for the purpose of acquisition, construction, repairs, renewals or reconstruction of property (subject to certain provisions).

Profits and Gains of business or profession

The income referred to in section 28, i.e., the incomes chargeable as "Income from Business or Profession" shall be computed in accordance with the

provisions contained in sections 30 to 43D. However, there are few more sections under this Chapter, viz., Sections 44 to 44DA (except sections 44AA,

44AB & 44C), which contain the computation completely within itself. Section 44C is a disallowance provision in the case non-residents. Section 44AA

deals with maintenance of books and section 44AB deals with audit of accounts.

In summary, the sections relating to computation of business income can be grouped as under: -

Specific deductions Sections 30 to 37 cover expenses which are expressly allowed as deduction while computing business income.

Specific disallowance Sections 40, 40A and 43B cover inadmissible expenses.

Deemed Incomes Sections 33AB, 33ABA, 33AC, 35A, 35ABB, 41.

Special provisions Sections 42, 43C, 43D, 44, 44A, 44B, 44BB, 44BBA, 44BBB, 44DA, 44DB.

Presumptive Income Sections 44AD, 44AE 55.

The computation of income under the head "Profits and Gains of Business or Profession" depends on the particulars and information available.[6]

If regular books of accounts are not maintained, then the computation would be as under: -

Income (including deemed income) chargeable as income under this head xxx

Less: Expenses deductible (net of disallowances) under this head (xx)

However, if regular books of accounts have been maintained and profit and loss account has been prepared, then the computation would be as under: -

Net Profit as per profit and loss account xxx

Add : Inadmissible expenses debited to profit and loss account xx

Add: Deemed incomes not credited to profit and loss account xx

Less: Deductible expenses not debited to profit and loss account (xx)

Less: Incomes chargeable under other heads credited to Profit & Loss A/c (xx)

Income from capital gains

Transfer of capital assets results in capital gains. A Capital asset is defined under section 2(14) of the I.T. Act, 1961 as property of any kind held by an

assessee such as real estate, equity shares, bonds, jewellery, paintings, art etc. but does not include some items like any stock-in-trade for businesses and

personal effects. Transfer has been defined under section 2(47) to include sale, exchange, relinquishment of asset extinguishment of rights in an asset,

etc. Certain transactions are not regarded as 'Transfer' under section 47.

Computation of Capital Gains:-

Full value of consideration1 xxx

Less:Cost of acquisition2 (xx)

Less:Cost of improvement2 (xx)

Less:Expenditure pertaining to transfer incurred by the transferor (xx)

^1 In case of transfer of land or building, if sale consideration is less than the stamp duty valuation, then such stamp duty value shall be taken as full value of

consideration by virtue of Section 50C. The transferor is entitled to challenge the stamp duty valuation before the Assessing Officer.

^2 Cost of acquisition & cost of improvement shall be indexed in case the capital asset is long term.


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For tax purposes, there are two types of capital assets: Long term and short term. Transfer of long term assets gives rise to long term capital gains. The

benefit of indexation is available only for long term capital assets. If the period of holding is more than 36 months, the capital asset is long term,

otherwise it is short term. However, in the below mentioned cases, the capital asset held for more than 12 months will be treated as long term:-

Any share in any company

Government securities

Listed debentures

Units of UTI or mutual fund, and

Zero-coupon bond

Also, in certain cases, indexation benefit is not be available even though the capital asset is long term. Such cases include depreciable asset (Section 50),

Slump Sale (Section 50B), Bonds/debentures (other than capital indexed bonds) and certain other express provisions in the Act. There are different

scheme of taxation of long term capital gains. These are:

As per Section 10(38) of Income Tax Act, 1961 long term capital gains on shares or securities or mutual funds on which Securities Transaction Tax

(STT) has been deducted and paid, no tax is payable. STT has been applied on all stock market transactions since October 2004 but does not apply

to off-market transactions and company buybacks; therefore, the higher capital gains taxes will apply to such transactions where STT is not paid.

1.

In case of other shares and securities, person has an option to either index costs to inflation and pay 20% of indexed gains, or pay 10% of non

indexed gains. The cost inflation index rates are released by the I-T department each year.

2.

In case of all other long term capital gains, indexation benefit is available and tax rate is 20%.3.

All capital gains that are not long term are short term capital gains, which are taxed as such:

Under section 111A, for shares or mutual funds where STT is paid, tax rate is 10% from Assessment Year (AY) 2005-06 as per Finance Act 2004.

With effect from AY 2009-10 the tax rate is 15%.

In all other cases, it is part of gross total income and normal tax rate is applicable.

For companies abroad, the tax liability is 20% of such gains suitably indexed (since STT is not paid).

Besides exemptions under section 10(33), 10(37) & 10(38) certain specific exemptions are available under section 54, 54B, 54D, 54EC

(http://topcafirms.com/index.php/white-paper/4376-capital-gains-exemption-us-54ec-of-income-tax-act-1961), 54F, 54G & 54GA.


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Section 54Section

54B

Section

54D

Section

54ECSection 54F

Section

54G

Section

54GA

Section

54GB

Who is

eligible to

claim

exemption

Individual/HUF Individual Any person Any person Individual/HUF Any person Any person Individual/HUF

Which

asset is

eligible

for

exemption

A residential house

property (long term)

Agricultural

land (if

used by

individual

or his

parents for

agricultural

purpose

during at

least 2

years

immediately

prior to

transfer)

Land/building

forming part

of an

industrial

undertaking

which is

compulsorily

acquired by

the

Government

& which is

used during 2

years for

industrial

purposes

prior to

acquisition

Any long term

capital asset

Any long term capital

asset (other than house

property) provided that

on the date of transfer

the assessee does not

own more than one

residential house

property

Land/building

/plant

/machinery in

order to shift

an industrial

undertaking

from urban

area to rural

area

Land/building

/plant

/machinery in

order to shift

an industrial

undertaking

from urban

area to any

Special

Economic

Zone

Long-term

residential

property if

transfer takes

place between

if transfer takes

place during 1

April 2012 and

31 March 2017

Which

asset

should be

acquired

to claim

exemption

Residential house

property

Agricultural

land in rural

or urban

area

Land/building

for industrial

purpose

Bonds of

National

Highways

Authority of

India or Rural

Electrification

Corporation

Limited;

Maximum

exemption in

one financial

year is

5 million

A residential house

property

Land/building

/plant

/machinery in

order to shift

undertaking

to rural area

Land/building

/plant

/machinery in

order to shift

undertaking

to any SEZ

Equity shares

in eligible

company

What is

the time

limit for

acquiring

the new

asset

Purchase: 1-year

backward or 2 years

forward;Construction:3

years forward

2 years

forward

3 years

forward

6 months

forward

Purchase: 1-year

backward or 2 years

forward;Construction:3

years forward

1-year

backward or

3 years

forward

1-year

backward or

3 years

forward

Equity shares

in an eligible

company to be

acquired on or

before due date

of filing return

of income as

under section

139(1). The

eligible

company

should utilize

this amount for

the purchase of

a new asset

within one year

from the date

of subscription

in equity shares

How

much is

exempt

Investment in the new

asset or capital gain,

whichever is lower

(The new asset should

not be transferred

within 3 years of its

acquisition)

Investment

in the new

asset or

capital gain,

whichever

is lower

(The new

asset should

not be

transferred

within 3

years of its

Investment in

the new asset

or capital

gain,

whichever is

lower (The

new asset

should not be

transferred

within 3 years

of its

acquisition)

Investment in

the new asset

or capital

gain,

whichever is

lower (The

new asset

should not be

transferred

within 3 years

of its

acquisition);

Investment in the new

assetNet sale

considerationCapital

gain; The assessee

should not complete

construction of another

residential house

property within 3 years

from the date of

transfer of original

asset nor should he

purchase within 2

Investment in

the new asset

or capital

gain,

whichever is

lower (The

new asset

should not be

transferred

within 3

years of its

acquisition)

Investment in

the new asset

or capital

gain,

whichever is

lower (The

new asset

should not be

transferred

within 3

years of its

acquisition)

Investment in

the new asset

capital gain

net sale

consideration.

(The exemption

is revoked if

equity shares

are

sold/transferred

within 5 years

from


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Section 54Section

54B

Section

54D

Section

54ECSection 54F

Section

54G

Section

54GA

Section

54GB

acquisition)

The new asset

should not be

converted into

money or any

loan/advance

should not be

taken on the

security of the

new asset

within 3 years

from the date

of its

acquisition

years from the date of

transfer of original

asset another house

property

acquisition or

the new asset is

sold/transferred

by the company

within 5 years

from

acquisition)

Income from other sources

This is a residual head, underthis head income which does not meet criteria to go to other heads is taxed. There are also some specific incomes which are

to be always taxed under this head.

Income by way of Dividends.1.

Income from horse races/lotteries.2.

Employees' contribution towards staff welfare scheme.3.

Interest on securities (debentures, Government securities and bonds).4.

Any amount received from keyman insurance policy as donation.5.

Gifts (subject to certain conditions and exemptions) (http://www.indiantaxupdates.com/2012/10/21/tax-on-gift-received-cash-or-non-cash/).6.

Interest on compensation/enhanced compensation.7.

Income from renting of other than house property.8.

Family pension received by family members after the death of the pensioner.9.

Income by way of interest on other than securities.10.

Gifts received by the assessee.11.

Agricultural income

Agricultural income is exempt from tax by virtue of section 10(1). Section 2(1A) defines agricultural income as :-

Any rent or revenue derived from land, which is situated in India and is used for agricultural purposes.

Any income derived from such land by agricultural operations including processing of agricultural produce, raised or received as rent-in-kind so as

to render it fit for the market or sale of such produce.

Income attributable to a farm house (subject to some conditions).

Income derived from saplings or seedlings grown in a nursery.

Income partly agricultural and partly business

Income in respect of the below mentioned activities is initially computed as if it is business income and after considering permissible deductions.

Thereafter, 40,35 or 25 percent of the income as the case may be, is treated as business income, and the rest is treated as agricultural income.

Incomea Business

income

Agricultural

income

Growing & manufacturing tea in India 40% 60%

Sale of latex or cenex or latex based crepes or brown crepes manufactured from field latex or coalgum obtained

from rubber plants grown by a seller in India35% 65%

Sale of coffee grown & cured by seller in India 25% 75%

Sale of coffee grown, cured, roasted & grounded by seller in India 40% 60%

^a For apportionment of a composite business-cum-agricultural income, other than the above mentioned, the market value of any agricultural produce, raised by the

assessee or received by him as rent-in-kind and utilized as raw material in his business, should be deducted. No further deduction is permissible in respect of any

expenditure incurred by the assessee as a cultivator or receiver of rent-in-kind.

.

Permissible deductions from Gross Total Income

Deductions allowed under Chapter VI-A i.e., sections 80C to 80U, cannot exceed gross total income of an assessee excluding short term capital gains

under section 111A and any long term capital gains. Some deductions under sections 80C to 80DDB are listed below.


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Section 80C deductions

Deduction under this section is available only to an individual or an HUF.

Section 80C of the Income Tax Act allows certain investments and expenditure to be deducted from total income up to the maximum of Rs 100,000.

Contribution to approved superannuation fund/public provident fund/recognized provident fund/statutory provident fund. Provident fund

contribution should not exceed 1/5 of salary & public provident fund.

1.

Payment of life insurance premium. It is allowed on premium paid on self, spouse and children even if they are not dependent on father or mother

(subject to a maximum of 20% of sum assured up to FY 2012-13, from FY 2013-14 20% has been reduced to 10%).

2.

Payment in respect of non-commutable deferred annuity.3.

Unit linked Insurance policy of UTI/LIC Mutual fund Dhanraksha.4.

Subscriptions to National Savings Certificates VIII issues.5.

Deposits with National Housing Bank.6.

Principal part of loan taken for acquiring Residential House Property; provided that the house should not be transferred within 5 years Loan for

land cost for residential house is also qualified.

7.

Subscriptions to schemes of PSU's providing long term finance for housing, or of housing boards constituted in India for infrastructural

development of cities/towns.

8.

Notified annuity plan of LIC or of any other approved insurer.9.

Units of Mutual Fund or UTI.10.

Notified pension fund by UTI or approved mutual fund.11.

Tuition fees (not including donation or development fees) towards full-time education including play-school activities, pre-nursery & nursery

classes, of any 2 children of an individual, paid to University, College or School in India.

12.

Investments in shares or debentures with a lock-in-period of 3 years, of approved public company exclusively engaged in infrastructure facility or

power sector.

13.

Subscription to the bonds issued by NABARD as specified by Central Government.14.

Any sum deposited as 5 years time deposit under Post Office Term Deposit.15.

Any sum deposited in Senior Citizen Savings Scheme.16.

Any sum deducted from salary of Government employee (subject to maximum 20% of salary) towards deferred annuity plan for benefit of self,

spouse or any children.

17.

Term deposit with scheduled bank for a period of not less than 5 years as per scheme notified by Central Government.18.

Investing in units of notified mutual fund investing in approved public companies engaged in infrastructure facility or power sector.19.

Section 80CCC(pension)

Payments made to LIC or to any other approved insurer under an approved pension plan is admissible for deduction under this section. Then pension

plan policy should be for individual himself out of his taxable income. The deduction is least of the amount paid or 1,00,000

Section 80CCD

Contribution made by the assessee and by employer to New Pension Scheme is admissible for deduction under this section. The assessee should be an

individual who is employed on or after 1 January 2004. The deduction shall be equal to the amount contributed by the assessee and/or by the employer,

not exceeding 10% of his salary (basic+dearness allowance). Even a self-employed person can claim this deduction which will be restricted to 10% of

gross total income.

The total deduction available to an assessee under sections 80C, 80CCC & 80CCD is restricted to 100,000 per annum. However, employer's

contribution to Notified Pension Scheme under section 80CCD is not a part of the limit of 100,000.

Section 80D: Medical insurance premiums

Health insurance, popularly known as Mediclaim Policies, provides a deduction of up to 35,000.00 ( 15,000.00 for premium payments towards policies

on self, spouse and children and 15,000.00 for premium payment towards non-senior citizen dependent parents or 20,000.00 for premium payment

towards senior citizen dependent). This deduction is in addition to 100,000 savings under IT deductions clause 80C. For consideration under a senior

citizen category, the incumbent's age should be 60 years during any part of the current fiscal, e.g. for the fiscal year 2010-11, the incumbent should

already be 60 as on 31 March 2011), This deduction is also applicable to the cheques paid by proprietor firm.

Section 80DDB : Deduction in respect of medical treatment, etc

Deduction is allowed to resident individual or HUF in respect of expenditure actually during the PY incurred for the medical treatment of specified

disease or ailment as specified in the rules 11DD for himself or a dependent relative or a member of a HUF[7]

Section 80CCG : RGESS

Deduction of 50% is allowed on investments up to Rs:50,000 under the Rajiv Gandhi Equity Savings Scheme on select securities.[8]

Section 80E : Education loan interest

Interest payment on education loan for education in India or abroad gets deduction under this section. Education loan should be for self, spouse, child or


9 of 13 1/30/2014 7:36 PM

the one whose legal guardian the assessee is.[9]

Section 80TTA : Interest on Savings Account

Up to Rs 10,000 earned as interest from savings account in bank, post office or a co-operative society can be claimed for deduction under this section.

This rebate is applicable for individuals and HUFs .[10]

Section 80U : Disability

Disabled persons can get a flat deduction on Income Tax on producing their disability certificate. If disability is severe Rs 1 lakh can be claimed else Rs

50,000.[11]

Section 24 : Interest on housing loans

For self occupied properties, interest paid on a housing loan up to Rs 150,000 per year is exempt from tax. This deduction is in addition to the deductions

under sections 80C, 80CCF and 80D. However, this is only applicable for a residence constructed within three financial years after the loan is taken and

also the loan if taken after 1 April 1999.

If the house is not occupied due to employment, the house will be considered self occupied.

For let out properties, the entire interest paid is deductible under section 24 of the Income Tax act. However, the rent is to be shown as income from such

properties. 30% of rent received and municipal taxes paid are available for deduction of tax.

P. Chidambaram while announcing his Budget 2013 speech on 28 Feb 2013 also announced that for the year 2013-14, an additional deduction of

100,000 would be allowed to be deducted for the payment of Interest on Home Loan u/s 80EE.[12]

This deduction would be allowed provided that the

total value of the loan is not more than 25,00,000 and the total value of the house is not more than 40,00,000 and the loan should be a fresh loan

taken during the financial year 2013-14. This deduction would be over and above the 150,000 deduction

The losses from all properties shall be allowed to be adjusted against salary income at the source itself. Therefore, refund claims of T.D.S. deducted in

excess, on this count, will no more be necessary.[13]

Due date of submission of return

The due date of submission of return shall be ascertained according to section 139(1) of the Act as under:-

30 September of the Assessment

Year(AY)

-If the assessee is a company (not having any inter-nation transaction), or

-If the assessee is any person other than a company whose books of accounts are required to be audited under

any law, or

-If the assessee is a working partner in a firm whose books of accounts are required to be audited under any

law.

30 November of the AYIf the assessee is a company and it is required to furnish report under section 92E pertaining to international

transactions.

31 July of the AY In any other case.

If the Income of a Salaried Individual is less than 500,000 and he has earned income through salary or Interest or both, such Individuals are exempted

from filing their Income Tax return provided that such payment has been received after the deduction of TDS and this person has not earned interest

more than 10,000 from all source combined. Such a person should not have changed jobs in the financial year.[14]

CBDT has announced that all individual/HUF taxpayers with income more than 500,000 are required to file their income tax returns online. However,

digital signatures wont be mandatory for such class of taxpayers.[14]

Advance tax

Under this scheme, every assessee is required to pay tax in a particular financial year, preceding the assessment year, on an estimated basis. However, if

such estimated tax liability for an individual who is not above 60 years of age at any point of time during the previous year and does not conduct any

business in the previous year, and the estimated tax liability is below Rs. 10,000, advance tax will not be payable. The due dates of payment of advance

tax are:-

In case of corporate assessee Otherwise

On or before 15 June of the previous year Up to 15% of advance tax payable -

On or before 15 September of the previous year Up to 45% of balance ofadvance tax payable Up to 30% of advance tax payable

On or before 15 December of the previous year Up to 75% of balance of advance tax payable Up to 60% of advance tax payable

On or before 15 March of the previous year Up to 100% of balance of advance tax payable Up to 100% of advance tax payable


10 of 13 1/30/2014 7:36 PM

Income-wise number of corporate assessee in India

Any default in payment of advance tax attracts interest under section 234B and any deferment of advance tax attracts interest under section 234C.

Tax deducted at source (TDS)

The general rule is that the total income of an assessee for the previous year is taxable in the relevant assessment year. However, income-tax is recovered

from the assessee in the previous year itself by way of TDS. The relevant provisions therein are listed below. (To be used for reference only. The detailed

provisions therein are not listed below.1)

Section Nature of paymentThreshold limit (up to which no tax

is deductible)TDS to be deducted

192 Salary to any person Exemption limitAs specified for individual in Part III of I

Schedule

193 2 Interest on securities to any resident

Subject to detailed provisions of

given section10%

194A 2Interest (other than interest on securities) to any

resident

10000 (for Bank/cooperative

bank) & 5000 otherwise10%

194B Winning from lotteries etc. to any person 10000 30%

194BB Winning from horse races to any person 5000 30%

194C 2 Payment to resident contractors

30000 (for single contract) &

75000 (for aggregate consideration in

a financial year)

2% (for companies/firms) & 1% otherwise

194D Insurance commission to resident 20000 10%

194EPayment to non-resident sportsmen or sports

associationNot applicable 10%

194EEPayment of deposit under National Savings Scheme

to any person 2500 20%

194G Commission on sale of lottery tickets to any person 1000 10%

194H 2 Commission/brokerage to a resident 5000 10%

194-I 2 Rents paid to any resident 180000

2% (for plant,machinery,equipment) & 10% (for

land,building,furniture)

194IA Payment for Purchase of Immovable Property 5000000 1%

194J 2 Fees for professional/technical services; Royalty 30000 10%

194LB

Interest paid by Infrastructure Development Fund

under section 10(47) to non-resident or foreign

company

- 5%

195

Interest or other sums (not being salary,which is

covered under section 192) paid to non-residents or

foreign company except under section 115O

Amount as computed by the

Assessing Officer on application

made under section 195(2) or 195(3)

As per double taxation avoidance treaty or

regular provisions of Income Tax Act, which is

beneficial to the recipient

^1 At what time tax has to be deducted at source and some other specifications are subject to the above sections.

^2 In most cases, these payments shall not to deducted by an individual or an HUF if books of accounts are not required to be audited under the provisions of the

Income Tax Act,1961 in the immediately preceding financial year.

In most cases, the tax deducted should be deposited within 7 days from the end of the month in which tax was deducted.

Corporate income tax

For companies, income is taxed at a flat rate of 30% for Indian companies. Foreign

companies pay at the income tax at the rate of 40%.[15]

An education cess of 3% (on both

the tax and the surcharge) are payable. [16]

From 2005-06, electronic filing of company

returns is mandatory.[17]

Surcharge 1

Total income in the ranestic

company

15% of income tax

payable

10% of income tax

payable

Foreign

company12% of income tax payable

5% of income tax

payable

^1 Applicable from assessment year 2014-15 onwards.


11 of 13 1/30/2014 7:36 PM

Tax returns

There are five categories of Income Tax returns.

Normal return u/s 139(1)1.

Belated return2.

Revised return3.

Defective return4.

Returns in response to notices5.

Normal return

Returns filed within the return filing due date, that is 31 July or 30 September of concerned assessment year.[18]

Belated return

In case of failure to file the return on or before the due date, belated return can be filed before the expiry of one year from the end of the relevant

assessment year.

Revised return

In case of any omission or any wrong statement mentioned in the normal return can be revised at any time before the expiry of one year from the end of

the relevant assessment year.

Defective return

Assessing Officer considers that the return is defective, he may intimate the defect. One has to rectify the defect within a period of fifteen days from the

date of such intimation. If the assessee wants more time, he can file an application to the A O and a further 15 days can be granted at the instance of the

A O.

Returns in response To notices

Assessing officer in the process of making assessment, may serve a notice under various sections like 142(1), 148(1), 153A(a) or 153C. Returns are

required to be furnished within the date specified on the respective notices.

Annual information return and statements

Annual information return

Those who are responsible for registering, or, maintaining books of account or other documents containing a record of any specified financial

transaction,[19]

shall furnish an annual information return in Form No.61A.

Statements By producers

Producers of a cinematographic film during the financial year shall, prepare and deliver to the Assessing Officer a statement in the Form No.52A,

within 30 days from the end of such financial year or

within 30 days from the date of the completion of the production of the film,

whichever is earlier.

Statements by non-resident having a liaison office in India

With effect from 01,June 2011, Non-Resident having a liaison office in India shall prepare and deliver a statement in Form No. 49C to the Assessing

Officer within sixty days from the end of such financial year.

Tax penalties

The major number of penalties initiated every year as a ritual by I-T Authorities is under section 271(1)(c)[20]

which is for either concealment of income

or for furnishing inaccurate particulars of income.

"If the Assessing Officer or the Commissioner (Appeals) or the Commissioner in the course of any proceedings under this Act, is satisfied that any

person-

(b) has failed to comply with a notice under sub-section (1) of section 142 or sub-section (2) of section 143 or fails to comply with a direction issued

under sub-section (2A) of section 142, or


12 of 13 1/30/2014 7:36 PM

(c) has concealed the particulars of his income or furnished inaccurate particulars of such income,

he may direct that such person shall pay by way of penalty,-

(ii) in the cases referred to in clause (b), in addition to any tax payable by him, a sum of ten thousand rupees for each such failure;

(iii) in the cases referred to in clause (c), in addition to any tax payable by him, a sum which shall not be less than, but which shall not exceed three

times, the amount of tax sought to be evaded by reason of the concealment of particulars of his income or the furnishing of inaccurate particulars of such

income.

See also

Service tax in India

Central Excise (India)

Value Added Tax (India) (http://www.indiantaxupdates.com/2013/02/11/value-added-tax-clear-your-concepts-with-faqs/)

References

^ Institute of Chartered Accountants of India (2011). Taxation.

ISBN 978-81-8441-290-1.

1.

^ "Growth of Income Tax revenue in India"

(http://shodhganga.inflibnet.ac.in/bitstream/10603/2876/12

/12_chapter%205.pdf). Retrieved 16 November 2012.

2.

^ 50-year trend of Indian personal tax rates - Business Today - Business

News (http://businesstoday.intoday.in/story/50-year-trend-of-indian-

personal-tax-rates/1/13502.html)

3.

^ Income Tax India (http://www.incometaxindia.gov.in/HISTORY

/PRE-1922.ASP)

4.

^ http://www.thetaxinfo.com/2013/12/income-tax-rebate-of-2000-

calculation-sec-87a/

5.

^ Business Income (http://www.v-krishnan-and-company.com

/business_income.html)

6.

^ The institute of Cost accountants of India (Jan 2012). Applied direct

taxation. Directorate of Studies,The Institute of Cost accountants of India.

p. 238.

7.

^ 80CCG 23 November 2012, Government of India

(http://www.bseindia.com/rgess/downloads

/Dept_Of_Revenue%20_MoF_Notification%20_November_23_2012.pdf)

8.

^ http://www.tax.fintotal.com/Sections/80E-Tax-Rebate/5913/689.

^ http://www.tax.fintotal.com/Sections/80TTA-Tax-Rebate/6212/6810.

^ http://www.tax.fintotal.com/Sections/80U-Tax-Rebate/5916/6811.

^ http://www.thetaxinfo.com/2014/01/additional-deduction-on-interest-

on-housing-loan/

12.

^ http://www.incometaxindia.gov.in/publications

/1_Compute_Your_Salary_Income/2_Income_from_house_property.asp

13.

^ a b http://www.caclubindia.com/articles/e-filing-is-mandatory-income-

is-more-than-5-lacs-17646.asp

14.

^ Income Tax Act, tax rates for foreign companies

(http://www.taxmann.com/DitTaxmann/IncomeTaxActs/2006ITAct/gr.htm)

15.

^ Finance Act 201016.

^ Surcharge has been revised from 10% to 7.5% w.e.f AY

2010-11.Corporate taxpayers must file electronically, point 4 of I T

circular. (http://incometaxindiaefiling.gov.in/download

/Circular%20No.9-2006.pdf)

17.

^ "Return Filing Due Dates" (http://www.accounting-n-taxation.com

/Income-Tax-Deadline.html#return). Retrieved 21 July 2012.

18.

^ "Annual Information return" (http://www.accounting-n-taxation.com

/Annual-Information-Return.html#nature).

19.

^ Section 271 of India IT Act (http://law.incometaxindia.gov.in

/DIT/File_opener.aspx?page=ITAC&schT=&csId=cfe34160-c33a-4b5b-

a08e-a9738122b797&rdb=sec&yr=e5be6bdb-1fc4-42d6-

ac7b-34a44fd65485&sec=271&

sch=&title=Taxmann%20-%20Direct%20Tax%20Laws)

20.

External links

Union budget and Economic Survey (http://indiabudget.nic.in)

Department of Public Expenditure and Reform (http://budget.gov.ie/Budgets/2013/2013.aspx)

Indian Income Tax Department (http://www.incometaxindia.gov.in)

Electronic Filing of Income Tax returns (https://incometaxindiaefiling.gov.in/portal/index.jsp)

Read on how to Save Income Tax in India (http://taaism.com/how-to-save-income-tax-an-article-for-the-beginners)

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