The only form of tax that makes you feel proud after you have paid it? Any idea what tax is this and why it is tax named so? The answer to the question is Income tax. It is also known as Progressive Tax, it implies that as the income increases, tax liability increases. In other words, the more you receive , the more tax you pay.
Penalty for not showing the income in IT Return
Here are some common Income Tax doubts. Let’s try to understand them.
Who has to pay tax?
In case of Individual and HUF, there is no tax if there income is less than Rs 2,50,000. But even if income is Rs 2,50,001 then person will be liable to pay tax. Although there won’t be any liability in this case since some deductions are provided by the Act for the same which we will see later.
Company
In case of Domestic Company, Companies having Gross turnover upto 250 Crore in the previous year , tax rate is 25%. Likewise even if turnover increases by Re 1 then you will be liable to pay the tax at rate of 30%.
Difference between Section 44AD, 44ADA and 44AE of IT Act
In case of Individual and HUF the tax rate is applicable as per the age of the assesse and in HUF the age of Karta is seen. Tax slab rate of Individual and HUF for AY 2022-23 are-:
| Income | Age below 60 year | Age above 60 year | Age above 80 year |
| Upto Rs 2.5 lakh | Nil | Nil | Nil |
| Rs 2.5-3 lakhs | 5% | Nil | Nil |
| Rs 3-5 lakhs | 5% | 5% | Nil |
| Rs 5-10 lakhs | 20% | 20% | 20% |
| Above Rs. 10 lakhs | 30% | 30% | 30% |
Don’t Go Blind When Planning Tax To Be Paid On Your Income
Tax slab rate of other assesse for AY 2022-2023 are
| Person | Tax Rate |
| Firm / Local Authority | Flat 30% |
| Domestic company | 30% & 25%* |
| Foreign company | 50% & 40% # |
*Tax rate is 25% if turnover or gross receipts of the domestic company in the previous year 2018-19 doesn’t exceed Rs. 250 crore. Tax rate is 30% if the turnover exceeds Rs 250 crore.
#Royalty received from Government or an Indian concern in pursuance of an agreement made with the Indian concern after March 31, 1961, but before April 1, 1976, or fees for rendering technical services in pursuance of an agreement made after February 29, 1964 but before April 1, 1976 and where such agreement has, in either case, been approved by the Central Government then 50%. In case of any other Income 40%.
Surcharge
The tax assessed in accordance with the above-mentioned rates after being decreased by the amount of the tax rebate shall be increased by a surcharge.
Surcharge for Individuals and HUF
- Total income exceeds Rs.50 lakh up to Rs.1 crore- 10% of income tax
- Total income exceeds Rs.1 crore- 15% of income tax
(However, the amount of Income Tax and Surcharge shall not increase the amount of tax payable on a taxable income by more than the amount of increase in taxable income.)
Summary of Section 194M- TDS on payment to resident contractors and professionals
Surcharge for Domestic Companies
- Taxable Income exceeds Rs 1 Crore – 7% of computed income tax.
- Taxable Income exceeds Rs 10 Crores – 12% of computed income tax.
(However, the amount of Income Tax and Surcharge shall not increase the amount of income tax payable on a taxable income by more than the amount of increase in taxable income.)
Everything about Section 194N- TDS on Cash Withdrawal
Surcharge for LLPs and Firms
Surcharge on LLP and Firms is levied on the tax payable at the rate of 12% when the total income exceeds Rs.1 crore.
Health & Education Cess
Health and Education Cess is computed at 4% of the sum total of Income Tax and Surcharge.
Rebate
In Indian tax laws, it is a beneficial provision to reduce your Tax liability, covered by Section 87A of the Income Tax Act. However, It only provides to reduce the tax burden of the lower income bracket.
Tax on selling of Shares and Securities
Basically, it provides for a marginally lower payment of taxes to individuals earning an income below the specified limit.
Deductions under Chapter- VIA
There are some of the benefits provided by the government under law for reducing tax liabilities.
Some of the common deductions are Interest earned on FD and PPF, Loan taken for the construction of house property and many others.
16 Most Useful Deductions for 2019-20
Above, are the things that are used in Income tax calculation. Here we will see an example of tax calculation for the ASSESSMENT YEAR 19-20.
A person having salary income of Rs 6 lakh with HRA , Special Allowance ,Transport Allowance and other allowances of rs 3 lakh , 1.46 lakhs and 20 thousand respectively. Person pays a rent of Rs 20,000 and lives in Delhi. Income from other sources were Rs 18,400.
Calculation of Income under the head of Salary
| Particulars | Amount (in rs) | |
| Basic salary | 6,00,000 | |
| HRA | 3,00,000 | |
| Less: deduction | 1,80,000 | 1,20,000 |
| Transport Allowance | 20,000 | |
| Less: deduction | 12,000 | 8,000 |
| Special allowance | 1,46,000 | 1,46,000 |
| Standard Deduction | 40,000 | |
| Income under the head salary | 8,34,000 |
Know how to Apply for PAN
Calculation of gross taxable income in India-
| Particular | Amount | Amount |
| Income from House property | – | – |
| Income from Salary | 8,34,000 | |
| Income from Business/ Profession | – | – |
| Income from Capital Gain | – | – |
| Income from Other Source | 18,400 | |
| Gross Total Income | 8,52,400 | 8,52,400 |
| Deductions | ||
| 80C | 1,50,000 | |
| 80D | 12,000 | |
| 80TTA | 8,400 | 1,70,400 |
| Net Total Income | 6,82,000 |
Calculation of Income Tax in India for a 30 years old assesse:
| Up to Rs 2,50,000 | 0 | 0 |
| Rs 2,50,000- 5,00,000 | 5%of(500000-250000) | 12,500 |
| Rs 5,00,000 to Rs 10,00,000 | 20% (Rs 6,82,000 – Rs 5,00,000) | 36,400 |
| More than Rs 10,00,000 | 30% of NIL | |
| Cess | 4% of (Rs 12,500 + Rs 36,400) | 1956 |
| Total Income Tax | Rs 12,500 + Rs 36,400 + 1,956 | Rs 50,856 |
This is how income tax for AY 22-23 is calculated.
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The author of above article is Sneha Bhalotia.
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