Income Tax-Income Tax Guide 22-23,Updates of Tax Slabs, Tax Payment, Tax Filling

Table of Contents

• What is Income Tax?
• Budget Updates – 2023
• Who is a Income Taxpayer? – Types of Tax Payers
• Who is taxpayer in India? – Categories of taxpayers
• What are the 5 heads of income?–Types of Income 
• Income Tax Process and Payment
• Income Tax Return – Filing your ITR
• Documents Required for ITR Filing

What is Income Tax?

Income tax is a type of direct tax that the central government charges on the money that individuals and businesses make within a financial year. The government receives funding via taxes. The government uses these funds for various welfare programmes, infrastructure improvements, healthcare and education services, and subsidies for farmers and the agricultural industry. Direct taxes and indirect taxes are the two basic forms of taxes. It is determined using the income tax department's set tax slabs.

Budget Updates – 2023

1. The new tax regime's tax slabs will be as follows:

2. The New Tax Regime now offers a tax credit on income up to Rs 7 lakhs. This suggests that under the new tax system, you are not required to pay tax if your taxable income is less than 7 lakhs.

3. The new tax code for salaried people includes the standard deduction of Rs. 50,000.

4. The default tax system will be the new IT system. Taxpayers can, however, opt for the previous system.

5. TDS rate for EPF withdrawals decreased from 30% to 20%.

Who is a Income Taxpayer? – Types of Tax Payers

Direct taxes can generally three types of taxpayers:

• Individual taxpayers: – These include companies, firms, and other business entities that generate income from their business operations. They are required to file their income tax returns and pay taxes on the profits earned.

• Corporate taxpayers: – These include companies, firms, and other business entities that generate income from their business operations. They are required to file their income tax returns and pay taxes on the profits earned.

• Non-resident taxpayers:– These are individuals or businesses that are not resident in India but have earned income from sources within the country. They are required to file their income tax returns and pay taxes on the income earned in India.

Who is taxpayer in India? – Categories of taxpayers

The types of taxpayers are classified into different categories based on their income, age, and other factors. The main categories of taxpayers in India are:

      1. Individual taxpayers:–These include resident individuals who earn an income from various sources such as salary, rental income, interest on deposits, capital gains, and so on. Individual taxpayers are further classified based on their age, such as:

• Resident individuals below 60 years of age

• Resident senior citizens aged between 60 years to less than 80 years

• Resident super senior citizens aged 80 years and above

      2. Hindu Undivided Family (HUF):– This is a joint family entity in which members share a common ancestry and have a joint family business. HUFs are taxed as a separate entity and have their own tax rate.

      3. Company:– This refers to an incorporated business entity that is treated as a separate legal entity from its owners. Companies are taxed as a separate entity and have their own tax rate.

      4. Partnership firm:– This refers to a business entity formed by two or more persons who share profits and losses. Partnership firms are taxed as a separate entity and have their own tax rate.

      5. Limited Liability Partnership (LLP):– This is a type of partnership in which the partners have limited liability. LLPs are taxed as a separate entity and have their own tax rate.

      6. Trusts:–This refers to a legal arrangement in which a trustee holds and manages assets for the benefit of beneficiaries. Trusts are taxed as a separate entity and have their own tax rate.

      7. Association of Persons (AOP) and Body of Individuals (BOI):– AOPs and BOIs are entities formed by a group of individuals who come together for a common purpose. They are taxed as a separate entity and have their own tax rate.

What are the 5 heads of income?–Types of Income 

Income is classified into different categories for the purpose of taxation. The various types of income are:

1. Salary income: This includes any income received by an employee from their employer, such as basic salary, allowances, bonuses, commissions, and perquisites.

2. Income from house property: This includes any income received by an individual from their property, such as rental income from a residential or commercial property.

3. Capital gains: This includes any profit earned from the sale of a capital asset, such as shares, mutual funds, real estate, and other investments.

4. Business or profession income: This includes any income earned by a person from a business or profession, such as trading, manufacturing, consulting, or freelance work.

5. Income from other sources: This includes any income received by an individual from sources such as interest on savings or fixed deposits, gifts received, lottery winnings, and so on.

Income Tax Process and Payment

Taxpayers are required to pay income tax on the income they earn. The income tax payment process involves the following steps:

• Calculating taxable income: The first step is to calculate the total income earned during the financial year from all sources, including salary, rental income, capital gains, and other sources.

• Deductions and exemptions: Once the total income is calculated, deductions and exemptions allowed under the Income Tax Act can be claimed to arrive at the taxable income.

• Determine tax liability: Based on the taxable income, the applicable tax rate can be applied to calculate the tax liability.

• Advance tax payment: If the tax liability exceeds Rs. 10,000, taxpayers are required to pay advance tax in installments during the financial year.

• TDS payment: Tax deducted at source (TDS) by employers, banks, and other entities is also considered as a part of income tax payment. If the TDS amount is higher than the tax liability, a refund can be claimed while filing the income tax return.

• Self-assessment tax: If there is any balance tax liability after TDS and advance tax payments, it can be paid as self-assessment tax before filing the income tax return.

Income Tax Return – Filing your ITR

An Income Tax Return (ITR) is a form used by taxpayers to file their income tax with the Income Tax Department of India. Filing an ITR is mandatory for individuals, Hindu Undivided Families (HUFs), and other taxpayers who meet certain criteria. Here are some important points to keep in mind regarding ITR:

       1. Types of ITR forms: There are several types of ITR forms that taxpayers can use, based on their income sources and other criteria.

       2. Deadline for filing ITR: The deadline for filing ITR is July 31st for individuals and HUFs who are not required to get their accounts audited. For other taxpayers, the deadline is September 30th.

       3. Importance of filing ITR: Filing ITR is important as it helps the government to assess the total income, tax liability, and other details of taxpayers. It also serves as proof of income for many purposes, such as availing loans, visas, and government schemes.

       4. Penalties for non-filing or late filing of ITR: Failure to file ITR or late filing can attract penalties and interest charges. The penalty can be up to Rs. 10,000 for taxpayers with income up to Rs. 5 lakhs and up to Rs. 1 lakh for those with income above Rs. 5 lakhs.

       5. Corrections and rectification: In case of any errors or discrepancies in the filed ITR, taxpayers can make corrections and rectifications within a specified time period.

Documents Required for ITR Filing

Here are some of the essential documents required for filing Income Tax Return (ITR) in India:

• PAN card: A Permanent Account Number (PAN) card is mandatory for all taxpayers to file ITR.

• Form 16: Form 16 is a certificate issued by the employer that contains details of the salary earned, TDS deducted, and other deductions claimed by the employee during the financial year.

• TDS certificates: Tax Deducted at Source (TDS) certificates are issued by banks, companies, or other entities that have deducted tax at source. These certificates contain details of the TDS deducted and deposited with the government.

• Bank statements: Bank statements for all the bank accounts held during the financial year are required to verify the income earned and tax payments made.

• Investment details: Details of investments made during the financial year, such as in Public Provident Fund (PPF), Equity-Linked Savings Scheme (ELSS), National Pension System (NPS), etc., are required to claim deductions under Section 80C.

• Rental income details: Details of rental income received during the financial year, including rent receipts, lease agreements, and maintenance bills, are required to calculate the taxable income.

• Capital gains details: Details of capital gains from the sale of assets, such as property, stocks, and mutual funds, are required to calculate the taxable income.

• Form 26AS: Form 26AS is a statement that contains details of the tax deducted at source, tax deposited, and other tax-related details.

It's important to keep all the necessary documents and records for at least seven years in case of any future tax assessments or audits. It's advisable to consult a tax expert for the latest updates and guidelines regarding ITR filing and the documents required.