Basic Income Tax terms that everyone should know


(Last Updated On: August 3, 2019)

Filing Income Tax returns, paying taxes and understanding the tax terminologies seems to be such an impossible thing to do. You might have sometime tried hands upon these things, but, would have returned unsuccessful.

We will try help you decode the basic terms and all such things necessary to make Income Tax Filing easy for you.
1. Financial Year & Assessment Year

The financial year is the year in which you earn an income. Assessment year is the year in which you evaluate your income and file income tax return. You will be able to disclose your income for the year only after completion of the year. Hence, assessment year is always the year next to financial year.

For example :-

If you are disclosing income earned from 1st April 2017 to 31st March 2018, you would be filing your income tax return for  FY 2017-18 and AY 2018 -19 respectively.

Understanding difference between Financial Year & Assessment Year becomes vital as these are quoted on every document you file or receive from the income tax department.

2. Selection of ITR forms

The income tax return is filed with department in a prescribed set of forms known as income tax forms. The understanding of IT forms becomes important because government every year issue new forms, which are relevant for filing ITR in that year. There are different forms for people earning income from different sources like salary, business & profession etc.

3. Show exempt incomes

Some incomes which are not chargeable to tax are known as exempt incomes. Although no tax needs to be paid on such income but mentioning them while filing ITR is required. One such common example is saving bank account interest. Saving bank account is exempt from levy of taxes upto Rs.10,000/- hence people have adopted the wrong practise of not specifying the amount earned as interest while filing return.

4. From where to get your ITR done

This might be a thing which have bothered you number of times. Put an end to all such confusions and find the list here of different modes from which you can get your income tax return filing done

  • You can file yourself online through Income tax india website or third party softwares for free.
  • You can download ITR form in excel format from income tax india website, fill it and upload online.
  • Other one is the traditional option to visit a CA near you, submit him all the information and he will do the required.
  • You can also contact e-CA, i.e. an online CA. Who will help you with everything related with return filing.
  • Income tax department has authorised some tax return preparers to help you file income tax return. Tax2win is an authorised TRP, so you can contact us for filing your ITR.

5. Slabs under Income tax act

In India we follow slab taxation system, which can be classified based upon the age of taxpayer. The tax rates differ with difference in slabs, hence it becomes important to gather a knowledge of slab taxation system prevalent.

  • Income Tax Slab For Individuals :

1.1 Individual (resident or NRI), who is of the age less than 60 years :

Taxable income

Tax Rate (F.Y. 2017-18)

Up to Rs. 2,50,000

Nil

Rs. 2,50,000 to Rs. 5,00,000

5%

Rs. 5,00,000 to Rs. 10,00,000

20%

Above Rs. 10,00,000

30%

1.2 Senior Citizen (Resident), who is of the age 60 years and above but less than 80 years:

Taxable income

Tax Rate (F.Y. 2017-18)

Up to Rs. 3,00,000

Nil

Rs. 3,00,000 – Rs. 5,00,000

5%

Rs. 5,00,000 – Rs. 10,00,000

20%

Above Rs. 10,00,000

30%

1.3 Super Senior Citizen (Resident), who is of the age 80 years or above:

Taxable income

Tax Rate(F.Y. 2017-18)

Up to Rs. 5,00,000

Nil

Rs. 5,00,000 – Rs. 10,00,000

20%

Above Rs. 10,00,000

30%

ADD:

Surcharge: 10%  of tax where total income exceed Rs. 50 Lac but does not exceed 1 crore
                      15% of tax if total income exceeds Rs. 1 crore.  

EC : 2% of tax + surcharge

& SHEC: 1% of tax + surcharge

Note: Rebate u/s 87A is available to an individual taxpayer = 100% of income-tax payable or Rs. 2,500 ( whichever is less )
The rebate will be applicable only if total income of that individual does not exceed Rs. 3,50,000/-

“EC & SHEC shall be replaced by Health & Education Cess @ 4% from Assessment Year 2019-20”

B. Income Tax Slab Rate For Co-operative Society:

Taxable income

Tax Rate(F.Y. 2017-18)

Up to Rs. 10,000

10%

Rs. 10,000 to Rs. 20,000

20%

Above Rs. 20,000

30%

ADD:

Surcharge: 12% of tax where total income exceeds Rs. 1 crore

EC : 2% of tax + surcharge

& SHEC: 1% of tax + surcharge


C. Income Tax Slabs for  partnership firm & local authority :

A partnership firm (including LLP) or a local authority are taxable at 30%. Surcharge and Education Cess shall be levied as under.

ADD:

Surcharge: 12% of tax where total income exceeds Rs. 1 crore

EC : 2% of tax + surcharge

& SHEC: 1% of tax + surcharge


D. Income Tax Slab Rate For Domestic Companies:

Domestic companies are taxable in two categories namely

  • Companies having Gross receipts or turnover upto 50 crores in F.Y.2015-16 – are taxable in AY 2018-19 at 25% rate of income tax
  • All others attract taxation at flat income tax rate of 30%

ADD:

Surcharge:

  • 7% of tax where total income exceeds Rs. 1 crore but is upto Rs. 10 crores
  • 12% of tax where total income exceeds Rs. 10 crore

EC : 2% of tax + surcharge

& SHEC: 1% of tax + surcharge


6. Check TDS from 26AS

Tax is deducted on salary you earn by the employer under section section 192. Also, if you earn any income from FD interest, rent, professional fees, commission, consultancy services etc, the income you receive is net of TDS (if income exceeds the prescribed limit).
While filing your taxes you can claim set off of taxes payable with such amount of TDS already deducted from your income on various occasions. There might occur a situation that your TDS is deducted but not deposited with the tax authorities or you forgot to claim any amount while filing your ITR.

In all such situation the ultimate loss will occur to you, hence we suggest cross checking your TDS details with form 26AS. If you notice any discrepancy in form 26AS contact the deductor to revise his return for avoiding expected IT notices at your end.

7. Don’t forget to include Incomes from 26AS

We often tend to forget incomes like interest received on FDs or income tax refunds, to be mentioned while filing income tax return. For such non routine transactions it is highly recommended to completely go through your form 26AS before filing ITR for this year. So that you don’t add to the list of unwilling defaulter as per income tax norms.

8. Payment of Advance Tax

Advance tax is nothing but paying your taxes to government before 31st march of the financial year. You are mandatory required to pay tax in advance if your total tax liability after setting off TDS in that year is Rs. 10,000/- or more.

The resident senior citizens not being professionals or doing any business are not required to make any payment for advance taxes.

9. Verification of income tax return with CPC

Verification is a next step after you have filed your ITR. It is an inevitable part of income tax return filing. In case No verification is done it lead to as if No ITR was filed by you.

With change in time verification has become more and more convenient. You can verify your return in these manners

  • OFFLINE : you can download the acknowledgement for ITR filed, sign the physical copy and send it by post to the CPC Bangalore.
  • ONLINE : you can log in to your income tax account and e-verify through Aadhar OTP, Net Banking, Electronic verification code on mobile and mail ID etc.

You are normally required to verify or e verify the return filed within a time limit of 120 days from filing the tax return.

10. Your current employer shall know previous incomes

Changing job for growth prospectus is a welcoming thing. And, we congratulate you for the same!
But, from taxation point of view, If you have changed a job during the year, disclose your income received from last employer to the current one. This is not compulsory but will make things easy for you in many ways. It will lead to correct deduction of TDS by your existing employer. And, will save you from tedious task of combining the income, exemptions, TDS deducted and re computation of taxes when you would be filing return after a substantial time.

11. Keep original documents in safe custody

The income tax department at the time of filing of ITR, never seeks for original copies of your income sources, basis of deduction claimed or anything. It is just at a later stage, after your return is processed department may ask you to furnish some details on which it want to gain some clarity. hence, you must keep a record of all documents so that, they can be produced before authority i asked. But, you need them to show while filing return is an absolute myth.

12. Income Tax Department NEVER asks for your Passwords

We keep on hearing everywhere that DON’T SHARE YOUR PASSWORDS for banks, income tax details etc. Still we come across new cases every next day.  Trust the experts, The Income tax department or any such authority NEVER asks you to share your passwords, PIN, OTP, Bank details etc. So become a vigilant citizens and a smart user and stop yourself being  trapped into these scams through fake phone calls or emails.
The departments have the relevant database stored with them and do not need your credentials to check anything.

13. Earning over Rs 50 lakhs – Disclose assets

If you are earning over Rs. 50 lakhs annually you need to disclose all your asset details while filing ITR. Both movable (like car) and immovable assets (like property) needs to be disclosed.
In case you overlook the provision you might expect a income tax notice soon. So, be tax compliant to avoid notices.

14. Are you in possession of foreign assets or income?

People have found way out to avoid taxes or reduce tax liabilities by investing abroad. To keep a check over such activities, Income Tax department has made it mandatory for all of us to report all assets we have or incomes we earn from abroad.

The reporting shall be made in your tax return filed for the concerned year.

We hope that the blog helped you learn the basic terms related to income tax filing. And, now onwards you will not be caught in the income tax word web. For any further queries please write in the comment section below. You can also seek our assistance for income tax return filing.  

Abhishek Soni

Abhishek Soni is a Chartered Accountant by profession & entrepreneur by passion. He is the co-founder & CEO of Tax2Win.in. Tax2win is amongst the top 25 emerging startups of Asia and authorized ERI by the Income Tax Department. In the past, he worked in EY and comes with wide industry experience from telecom, retail to manufacturing to entertainment where he has handled various national and international assignments.