Basics of Income Tax: A Complete Guide for Beginners

Income tax is a direct tax charged by the government of India from the income that has been earned by one or any entity. The Income Tax Act of the year 1961 defined it in such a way that any individual or a company that receives an income amount more than a certain exemption limit or is bound to pay income tax. This tax is one of the major revenue-earning taxes, which the government uses to finance public services, development projects, and welfare.

Advance tax is the amount of tax paid on income that is earned during that particular financial year. Whenever your tax liability crosses ₹ 10,000/- then you are expected to pay advance tax in four installments. Most employees are not required to be concerned with this because tax at source (TDS) is paid by the employer from the employee’s salary.

TDS is a technique that is applied while making payment to a third party whereby tax is actually deducted at the source itself. It is obligatory for employers and other persons to deduct TDS on salary, interest, rent, and any other payment that is subjected to tax. The amount is then deducted from the payment made to the organization and has to be paid to the government, the taxpayers are entitled to claim this amount while filing their income tax returns.

ITR is a process of completion of returning income tax and it is compulsory for people earning above the limit of exemption. The process entails submitting information on earnings and taxes remitted to the Income Tax Department. The forms that are used in filing the ITR depend on the source of income and even the category of the taxpayer. Common ITR forms include:

• ITR-1: Applicable to the individual who is earning through salary and other sources of income not exceeding ₹50,00,000.
• ITR-2: For the taxpayers having income from other sources and capital gains.
• ITR-3: Those persons who have received income from business.
• ITR-4: For Presumptive income from Business.

Before filing your ITR, ensure you have the following documents ready:

• PAN and Aadhaar Cards: Criticisms have however pointed out that fingerprints are essential for identification.
• Form 16: This is for employers to detail the salary given to the employee and the TDS that has been paid.
• Form 26AS: A brief record of the taxes which have been deducted and remitted to the government.
• Proof of Investments: Records for ascertaining any amount that has been claimed under various sections.
• Bank Statements: For incomes from interest and from other sources.

Section 16 of the Income Tax Act allows a standard deduction of ₹ 50,000 from the gross salary of the salaried person. It is a claim regardless of the real cost of the deductions taken.

Currently, the government offers tax rebates under Section 87A where those earning up to ₹ 5 lakh net taxable income can get a rebate. This rebate enables eligible taxpayers to have a decent reduction on the tax amount payable to them which can reach zero.

Any Form ITR which is not filed before the due date attracts certain penalties. Another thing that must be noted is that the late filing penalty cannot exceed ₹10,000 as laid under Section 234F. Further, taxpayers may incur interest for the failure to pay the amount of taxes due.

Any Form ITR which is not filed before the due date attracts certain penalties. Another thing that must be noted is that the late filing penalty cannot exceed ₹10,000 as laid under Section 234F. Further, taxpayers may incur interest for the failure to pay the amount of taxes due.

• E-filing of income tax returns is encouraged due to its numerous advantages:
• Convenience: Receive files from any location at any point in time they want.
• Faster Processing: When you file your return through the internet, those returns are processed faster than those returns filed on paper forms.
• Immediate Acknowledgment: Get a notification that your return submission is successful as you make the submission.
• Easy Access to Records: Keep records for future use and reference.

To check the status of your filed ITR, follow these steps:

• Go through the official website of the Income Tax Department in India.
• Go back to the section known as the Income Tax Return Status.
• It is required that the investor enter PAN and acknowledgment number if required.
• To view the status of your return, click on submit.