Income Tax Basics For Young Professionals
The taxation structure of our country has the important impact on the economy. The tax worries everyone. The tax system is not a complex thing until and unless you have some basic knowledge. Understanding taxation is not easy but it is necessary for each individual.
Before getting into tax let's understand Financial year and assessment year. The financial year is the year in which tax returns are filed starting from 1st April and end on March 31st. Assessment year is the year in which we evaluate the previous year income. AY is followed by a financial year.
It is the tax which you pay to the government. There are two types of taxes in India direct and indirect tax. The direct is paid directly to the government and indirect is paid to the third party for goods and services. Besides salary, there are other incomes you are earning from other sources like
These are just brief of what we pay. It is in great details. There is a certain slab one need to follow to file a return and every citizen needs to pay tax as per law.
How much tax each individual has to pay?
People income is categorized in different brackets known as slabs. In India there are four tax brackets like up to Rs 250000- No tax, between Rs 2.5 lakhs- Rs 5 Lakhs- 5% of taxable income, Between Rs.5 lakhs and Rs.10 lakhs-20% + Rs 12500 and above 10 Lakhs-30% + Rs 112500. This slab is for the years 2017-18 for the taxpayer under 60 years and there are two other slabs as per the age groups like above 60 years and above 80 years.
How taxable income is computed?
First gross total income is calculated from five heads- Income from salary, Income from house property, earning from business or profession, income from capital gain and income from other sources. From gross total income, all the deductions will be made and taxable income is computed.
When you should pay tax?
Income tax is paid on yearly basis and the last date to file a tax would be July 31st.
Filing a return
Either you can file tax on your own or hire a good CA. You have the choice of filing a tax online and offline. If you are new to filing returns, the first step is to get registered with the government e-filing website. You can fill the ITR 1 form is you are working professionally while others need to contact the Chartered accountant. There are many institutes who provide Tax E-Filing Return Training Course. You can take training and get more knowledge about filing ITR. Some of the documents you need to submit are Form 16, Form 16A, bank statement, property details, Interest certificate, investment details and receipt of advance tax. There is a huge list which you can get from income tax website.