Know Your Tax

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The word ‘Tax’ fills despair in an average Indian’s heart. Forever, the citizens of this country are trying innovative ways to avoid paying taxes, some outrightly fraudulent and illegal. There is no surprise then that less than 3% of India’s vast population pays taxes on the income they earn.

What is more surprising is that each of us demands better infrastructure, opportunities and facilities from the government. Ever imagined how the government (from any party) would be able to pay for the nation’s collective progress if no one funds it?

Yes, we all have the moral and national obligation to fund our government in the form of taxes. With the tax paid by us, we all get better roads, efficient energy, stronger defence and a heap of subsidiaries enjoyed by different factions of society.

So, let’s get one thing straight. Taxes are good and we must pay them.

It is important, however, to know your tax. You must know which applicable tax category you fall in, what tax deductions and benefits you are entitled to and most importantly, when is the time for paying the tax.

Through this blog, we are clarifying a few concepts related to taxation in India, especially for the salaried class.

Previous Year and Assessment Year

Many of us often get confused with these two terms. Previous Year is the financial year in which a person’s earnings become liable for taxation. Assessment Year is the financial year in which the person has to file the income tax return. In India, a financial year is a 12-month period that starts from 1st April and ends at 31st March.

The current financial year started on 1st April 2017 and will end on 31st March 2018. For us, the previous year would be FY 2017-18 and we are liable to pay tax for the income earned in the previous year in FY 2018-19, i.e., the new financial year that will begin on 1st April 2018 and will end on 31st March 2019.

Income Tax Return

A tax return is essentially a form that you fill and submit to the Income Tax Department of India with the details of your income and tax. There are several different types of Income Tax Returns (ITRs)for varied classes of assesses (see the chart below):

ITR

Income Tax Slab

Tax slab

(Source: Basunivesh.com)

  • Surcharge – 10% for income b/w INR 50 lakh – 1 Crore and 15% for income above INR 1 Crore
  • Rebate of up to INR 2,500 for taxable salary up to INR 3.5 lakh
  • Education and higher education cess of 3%

Note that from July 2017 onwards, it is mandatory to furnish your Aadhar number while filing individual tax returns.

 

While the Income Tax Department keeps advertising the last date for filing income tax returns through newspaper, radio and TV ads, it generally occurs at the end of September in the Assessment Year for businesses and end of July for individuals.

 

Of course, there is a lot to know about the taxation which we will take up in our upcoming blogs. Till then, create/login to your account in http://incometaxindiaefiling.gov.in/home and explore more about the tax regulations, deductions and more. Filing your return on the Income Tax Department’s portal is not just easy, it is free, too! With a little browsing, you can get the hang of it and can easily file your returns in the due timeframe.

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