Income Tax FAQs

It is a tax levied by the Government of India on the income of every person. The provisions governing the Income-tax Law are given in the Income-tax Act, 1961.​

Income-tax is levied on the annual income of a person. The year under the Income-tax Law is the period starting from 1st April and ending on 31st March of next calendar year. The Income-tax Law classifies the year as (1) Previous year, and (2) Assessment year.

The year in which income is earned is called as previous year and the year in which the income is charged to tax is called as assessment year.

e.g., Income earned during the period of 1 st April, 2015 to 31 st March, 2016 is treated as income of the previous year 2015-16. Income of the previous year 2015-16 will be charged to tax in the next year, i.e., in the assessment year 2016-17.​

Income-tax is to be paid by every person. The term ‘person’ as defined under the Income-tax Act covers in its ambit natural as well as artificial persons.

For the purpose of charging Income-tax, the term ‘person’ includes Individual, Hindu Undivided Families [HUFs], Association of Persons [AOPs], Body of individuals [BOIs], Firms, LLPs, Companies, Local authority and any artificial juridical person not covered under any of the above.

 

Thus, from the definition of the term ‘person’ it can be observed that, apart from a natural person, i.e., an individual, any sort of artificial entity will also be liable to pay Income-tax.

Generally, the tax on income crystallizes only on completion of the previous year. However, for ease of collection and regularity of flow of funds to the Government for its various activities, the Income-tax Act has laid down the provisions for payment of taxes in advance during the year of earning itself. It is called as ‘pay as you earn’ concept. Taxes may also be collected on your behalf during the previous year itself through TDS and TCS mode. If at the time of filing of return you find that you have some balance tax to be paid after taking into account the credit of your advance tax, TDS & TCS, the shortfall is to be deposited as Self Assessment Tax.

Generally, the tax on income crystallizes only on completion of the previous year. However, for ease of collection and regularity of flow of funds to the Government for its various activities, the Income-tax Act has laid down the provisions for payment of taxes in advance during the year of earning itself. It is called as ‘pay as you earn’ concept. Taxes may also be collected on your behalf during the previous year itself through TDS and TCS mode. If at the time of filing of return you find that you have some balance tax to be paid after taking into account the credit of your advance tax, TDS & TCS, the shortfall is to be deposited as Self Assessment Tax.

Advance tax is to be calculated on the basis of expected tax liability of the year. Advance tax is to be paid in instalments as given below:​​

  1. a)         In case of all the assessees (other than the eligible assessees as referred to in section 44AD) :
  2. i)          Up to 15 per cent – On or before 15th June
  3. ii)         Up to 45 per cent – On or before 15th  September

iii)        Up to 75 per cent – On or before 15th December​

  1. iv)        Up to 100 per cent –On or before 15th March
  2. b)         In case of eligible assessee as referred to in Section 44AD:

Up to 100 per cent – On or before 15th March

Note: Any advance tax paid on or before 31st day of March shall also be treated as paid during the same financial year.

[Substituted by the Finance Act, 2016 w.e.f. 1-6-2016]

The deposit of advance tax is made through challan ITNS 280 by ticking the relevant column, i.e. , advance tax.

Under the Income-tax Law, the word income has a very broad and inclusive meaning. In case of a salaried person all that is received from an employer in cash, kind or as a facility is considered as an income. For a businessman his net profit will constitute his income. Income may also flow from investments in the form of Interest, Dividend, Commission, etc. Further, income may be earned on account of sale of capital assets like building, gold, etc.

Income shall be computed as per relevant provision of Income-tax Act, 1961 which lays down detail condition for computation of income chargeable to tax under various heads of income​

An exempt income is not charged to tax, i.e., Income-tax Law specifically grants exemption from tax to such income. Incomes which are chargeable to tax are called as taxable incomes.

Yes, such winnings are liable to flat rate of tax at 30% without any basic exemption limit. In such a case the payer of prize money will generally deduct tax at source (i.e., TDS) from the winnings and will pay you only the balance amount.

Yes, you can claim relief in respect of income which is charged to tax both in India as well as abroad. Relief is either granted as per the provisions of double taxation avoidance agreement entered into with that country (if any) by the Government of India or by allowing relief as per section 91 ​ of the Act in respect of tax paid in the foreign country.​

Profession means exploitation of one’s skills and knowledge independently. Profession includes vocation. Some examples are legal, medical, engineering, architecture, accountancy, technical consultancy, interior decoration, artists, writers, etc.

It’s a prescribed form through which a person can furnish the details of his /her income earned through different sources of income and taxes paid for the relevant financial year to the Income Tax Department.

Yes, you are required to file your income tax return if your income exceeds Rs. 2,50,000 in a Financial Year i.e. the basic exemption limit without giving effects to any type of deductions/investments.

Yes, even if your employer deducts and deposits your TDS on regular and timely basis, you are still required to file your tax return if your income exceeds Rs. 2,50,000. This helps in determining any dues or eligibility for refunds.

Full form of TDS is Tax Deducted at Source. Under Income Tax Act, there are certain payments including salary, interest etc. in which the one who makes such payment is liable to deduct tax. TDS is finally adjusted with the final tax payable at the time of computation of income tax return.

Your employer gives you Form-16 as a certificate of total TDS deducted from salary. Details of TDS deducted and the details of salary, allowances & deductions are mentioned in Form-16.However the details of deductions mentioned are subject to the proof of deductions submitted by you to your employer. Hence real computation may change from the computation mentioned in Form-16.

It is given at the end of year and helps you file your income tax return. Remember Form-16 is not an alternative for Income Tax Return. Filing Income tax return is mandatory even if correct TDS has been deducted as per Form—16.

The bank from which you receive your pension income will issue your Form 16.

No, you cannot claim deduction for personal expenditures while computing your income tax as per the Income Tax Laws.

For the purpose of Income Tax, anyone who has attained the age of 60 years is called as Senior Citizen and if the age of any person exceeds 80 years, he’ll be called Very Senior Citizen.

Full form of PAN is Permanent Account Number which is a 10 digit alpha numeric identification which is issued to each tax payer by the Income Tax Department.

Full form of TAN is Tax Deduction Number which is a 10 digit alpha numeric number allotted to those who are liable to deduct TDS by the Income Tax Department.

No. The following points explain this clearly:

  • You need to file an Income Tax Return if your Total Taxable Income exceeds the basic exemption limit before taking into account deductions, i.e., tax saving investments.
  • The basic exemption limit for financial year 2019-2020is as under: –
Gender, Age & Residential Status Basic Exemption Limit
Resident Female & Others Rs.2,50,000
Resident Senior Citizen
(Age > = 60 yrs and < 80 yrs as on 31st March of Financial year)
Rs.3,00,000
Resident Very Senior Citizen
(Age > = 80 yrs as on 31st March of Financial year)
Rs.5,00,000
  • You do not need to file an Income Tax Return if your total taxable income does not exceed the basic exemption limit before taking into account deductions, even though you may have a PAN.
  • However, following categories of persons irrespective of the income:
  1. Deposited an amount exceeding Rs.1 crore in current accounts by any mode during the year.
  2. Having electricity bill in aggregate exceeding Rs.1 lakh during the year.

3. Incurred an expenditure exceeding Rs. 2 lakhs on travel out of India during the year.

Income Tax Slab Rate for AY 2020-21 for Individuals:

  • Individual (resident or non-resident), who is of the age of less than 60 years on the last day of the relevant previous year:
Taxable income Tax Rate
Up to Rs. 2,50,000 Nil
Rs. 2,50,000 to Rs. 5,00,000 5%
Rs. 5,00,000 to Rs. 10,00,000 20%
Above Rs. 10,00,000 30%
  • Resident senior citizen, i.e., every individual, being a resident in India, who is of the age of 60 years or more but less than 80 years at any time during the previous year:
Taxable income Tax Rate
Up to Rs. 3,00,000 Nil
Rs. 3,00,000 to Rs. 5,00,000 5%
Rs. 5,00,000 to Rs. 10,00,000 20%
Above Rs. 10,00,000 30%
  • Resident super senior citizen, i.e., every individual, being a resident in India, who is of the age of 80 years or more at any time during the previous year:
Taxable income Tax Rate
Up to Rs. 5,00,000 Nil
Rs. 5,00,000 to Rs. 10,00,000 20%
Above Rs. 10,00,000 30%

Plus:
Surcharge: 10% of tax where total income exceeds Rs. 50 lakh 15% of tax where total income exceeds Rs. 1 crore
Health and Education Cess: 4% of tax plus surcharge

Note: A resident individual is entitled for rebate u/s 87A if his total income does not exceed Rs. 5,00,000. The amount of rebate shall be 100% of income-tax or Rs. 12,500, whichever is less.