What is income tax?

Income tax is a direct tax people and businesses have to pay in a financial year. The income tax is calculated based on the tax slab an individual falls.  Here are some other interesting facts about income tax in India.

It is a direct tax.

Income tax is a direct tax, levied on a person or company’s annual income.

Central govt imposes income tax

The central government levies and collects income tax in India through the income tax department.

 

What is income?

Income tax is levied on money earned as salary, income from house property, profits from business, gains from profession, capital gains and income from other sources.

 

Types of income

Under the income tax law, there are the following 5 types of income: 

1. Income from Salary
2. Income from Business and Profession
3. Income from Other Sources
4. Income from House Property
5. Income from Capital Gains

   

Types of taxpayers 

Rate of tax on income is different, based on the type of taxpayers. These types include:

• Individuals*
• Hindu Undivided Family (HUF)
• Association of Persons (AOP)
• Body of Individuals (BOI)
• Firms
• Companies

 Individuals are classified as resident and non-resident Indians. Resident individuals are further classified into:

• People less than 60 years of age
• People aged more than 60 but less than 80 years
• People aged more than 80 years

  

Rate of tax under old tax regime

Rate of income tax is different for people, depending on the income slab they fall under.

Income tax slabs for individual aged below 60 years & HUF (old tax regime)

Income	Old tax regime slab
Up to Rs 2.50 lakh	Nil
From Rs 2.50 lakh-Rs 5 lakh	5%
From Rs 5 lakh-Rs 7.50 lakh	20%
From Rs 7.5 lakh-Rs 10 lakh	20%
From Rs 10 lakh-Rs 12.50 lakh	30%
From Rs 12.50 lakh-Rs 15 lakh	30%
Above Rs 15 lakh	30%

 

Income tax slabs for individual aged between 60-80 years 

Income	Old tax regime slab
Up to Rs 3 lakh	Nil
From Rs 3 lakh-Rs 5 lakh	5%
From Rs 5 lakh-Rs 10 lakh	20%
Over Rs 10 lakh	30%

 

Income tax slabs for individual aged over 80 years 

Income	Old tax regime slab
Up to Rs 5 lakh	Nil
From Rs 5 lakh-Rs 10 lakh	20%
Above Rs 10 lakh	30%

 

Deductions made available

Taxpayers are given the option to claim several deductions for money they spend for specific investment purposes. For instance, income tax deduction is allowed on payment of both the principal and interest component payments throughout the repayment tenure of your home loan under    Section 80C, Section 24, Section 80EEA and Section 80EE.

 

Rate of tax under new tax regime

The Budget 2023-24 has proposed the following tax rates under the news tax regime:

Income	New tax regime slab
Up to Rs 3 lakh	Nil
From Rs 3 lakh to Rs 6 lakh	5%
From Rs 6 lakhs to Rs 9 lakh	10%
From Rs 9 lakh to Rs 12 lakh	15%
From Rs 12 lakhs to Rs 15 lakh	20%
Above Rs 15 lakh	30%

Click here to know more.

 

ITR is your income-spending-tax statement.  

Income tax return forms are a detailed statement of a person’s annual earnings, applicability of tax, tax liability, investment and deductions.

 

Resident and non-resident taxpayers

While resident taxpayers have to pay income tax for money earned in India and abroad, non-residents have to pay tax on the income generated in India only.

 

Income tax latest news 

No new change in new income tax regime: Finance ministry

April 1, 2024: No new changes related to income tax are coming into force from April 1, the finance ministry said in a statement issued on March 31. The announcement by the ministry is in response to some misleading social media posts.

Offering clarification about applicability of the new tax regime, the ministry said that the regime was applicable for persons other than companies and firms as a default regime from the financial year 2023-24 (assessment year 2024-25 of AY2024-25).

Although, the new tax regime is the default tax regime, taxpayers can choose the tax regime that they think is beneficial to them, it added.

The option for opting out from the new tax regime is available till filing of return for the AY 2024-25. Eligible persons without any business income will have the option to choose the regime for each financial year. So, they can choose the new tax regime in one financial year and old tax regime in another year and vice versa.

 

Budget 2023-24: No tax on income of up to Rs 7 lakh under new tax regime

February 3, 2023: Taxpayers opting for the new tax regime will not have to pay any tax if their annual income is up to Rs 7 lakh, the Union Budget 2023-24 has proposed. According to the changes proposed in the Union Budget, the basic exemption limit under the new tax regime is also hiked to Rs 3 lakh from Rs 2.5 lakh.

“An individual with annual income of Rs 9 lakh will have to pay only Rs 45,000 in tax. And, an individual with income of Rs 15 lakh will have to pay Rs 1.5 lakh tax, down from Rs 1.87 lakh under new tax structure,” finance minister Nirmala Sitharaman said in her Budget Speech.

Read full coverage of the story here.

 

Budget 2023-25 extends standard deduction benefit to new tax regime

February 3, 2023: The Budget 2023-24 has extended the benefit of standard deduction on salary under Section 16 of the Income Tax Act, 1961, to those taxpayers who opt for the new tax regime offered under Section 115 BAC. This benefit was only available to people paying taxes under the old regime. The deduction amount under both the regimes is Rs 50,000.

 

Read full coverage of the story here.

 

 

Budget 2023: Highest surcharge on income tax reduced from 37% to 25%

 

February 2, 2023:  The highest surcharge on personal income tax is reduced from 37% to 25% in the new tax regime in the Budget 2023-24. As a result the highest tax rate on highest income slab with income above Rs 5 crore will now be 39% as against 42.744% surcharges. Currently the surcharge on income tax under both old regime and new regime is 10% on income above Rs 50 lakh and up to Rs 1 crore; 15% on income Rs 1 crore and up to Rs 2 crore; 25% on income above Rs 2 crore and up to Rs 5 crore; 37% on income Rs 5 crore. But, this proposed reduction in surcharge will only be applicable under the new tax regime.

FAQs

What is Income Tax Returns (ITR)?

Income Tax Returns (ITR) are the basis of calculating a person's income tax. A form, ITR is a statement of the status of the taxpayer, all his sources of income, applicable deductions and tax payable or tax refund, if any.

What are income tax slabs?

Tax slab categorises taxpayers in different categories based on their annual income. Rates are different for each slab.