Income Tax

Everyone who earns or gets an income in India is subject to income tax. Income could be salary, pension or could be from a savings account that’s quietly accumulating a 4% interest. Even, winners of ‘any reality shows’ have to pay tax on their prize money.
For simpler classification, the Income Tax Department breaks down income into five heads:

Head of incomeNature of income covered
SalaryIncome from salary and pension
House PropertyRental Income
Capital GainsIncome from sale of a capital asset such as mutual funds, shares, house property.
Business and ProfessionThis is when you are self-employed, work as a freelancer or contractor, or you run a business. Life insurance agents, chartered accountants, doctors and lawyers who have their own practice, tuition teachers,
Other SourcesIncome from savings bank account interest, fixed deposits, etc.

 

Tax Slabs

People’s incomes are grouped into blocks called tax slabs. And each tax slab has a different tax rate.

In India, we have four tax slabs each with an increasing tax rate.

  • Income earners of up to 5 lakhs
  • Income earners of between 5 lakhs and 10 lakhs
  • And those who make more than 10 lakhs per year
Income RangeTax rateTax to be paid
up to Rs.2,50,000No taxNo tax
Between Rs.2.5 lakhs and Rs.5 lakhs5%5% of your taxable income
Between Rs.5 lakhs and Rs.10 lakhs20%Rs.12,500+ 20% of income above Rs. 5 lakhs
Above 10 lakhs30%Rs.1,12,500+ 30% of income above Rs.10 lakhs

 

This is the income tax slab for FY 2017-18 for taxpayers under 60 years. There are two other tax slabs for two other age groups:

  • those who are 60 and older ;
  • those who are above 80.

 

Exceptions to the Tax Slab

Capital gains are taxed depending on the asset you own and how long you’ve had it.

Type of capital assetHolding periodTax rate
House PropertyHolding more than 24 months 20% 
Holding less than 24 months Depends on slab rate
Debt mutual fundsHolding more than 36 months 20%
Holding less than 36 months Depends on slab rate 
Equity mutual fundsHolding more than 12 months Exempt
Holding less than 12 months 15%
SharesHolding more than 12 months Exempt 
Holding less than 12 months 15%
FMPsHolding more than 36 months 20%
Holding less than 36 months Depends on slab rate 

 

Indians living abroad or Indians earning foreign income are also taxed differently based on their residential status and their income in India.

  • If you are a NRI, only your income earned or accrued in India is taxable.
  • If you are resident Indian for that financial year, then your global income is taxable.

 

31-Jan-1731-Mar-1731-Jul-17Oct – Nov
Deadline to submit your investment proofsDeadline to make investments under Section 80CLast date to file your tax returnTime to verify your tax return

 

 

 

 

TDS (Tax Deducted at Source)

TDS stands for tax deducted at source. As per the Income Tax Act, any company or person making a payment is required to deduct tax at source if the payment exceeds certain threshold limits. TDS has to be deducted at the rates prescribed by the tax department.

The company or person that makes the payment after deducting TDS is called a deductor and the company or person receiving the payment is called the deductee. It is the deductor’s responsibility to deduct TDS before making the payment and deposit the same with the government. TDS is deducted irrespective of the mode of payment–cash, cheque or credit–and is linked to the PAN of the deductor and deductee.

TDS return filing is mandatorily required every quarter by all persons and entities who have deducted tax at source.

TDS is deducted on the following types of payments:

  • Salaries
  • Interest payments by banks
  • Commission payments
  • Rent payments
  • Consultation fees
  • Professional fees

However, individuals are not required to deduct TDS when they make rent payments or pay fees to professionals like lawyers and doctors.

TDS is one kind of advance tax. It is tax that is to be deposited with the government periodically and the onus of the doing the same on time lies with the deductor. For the deductee, the deducted TDS can be claimed in the form of a tax refund after they file their income tax return.

 

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