INCOME TAX SERVICE
Tax can be termed as in very simple words as the government’s revenue or source of income. The money collected under the taxation system is put into use for the country’s development through several projects and schemes. Tax is a compulsory payment to be made by every resident of India. It is a charge or burden laid upon persons or the property for the support of a Government. Government decided the rates and the items on which tax will be charged, like income tax, GST, etc.
A tax is a mandatory fee or financial charge levied by any government on an individual or an organization to collect revenue for public works providing the best facilities and infrastructure. The most common type of tax that eligible citizens must pay to the government. A part of your income is paid to the government every year and the government uses this money to fund support the growth and development activities across the country.
An Individual who earns income above a certain amount is subject to income tax. Your income could be from salary, interest income from savings, income from mutual funds, sale of property or business or professional income. Income tax rates are pre-decided in every year’s Union Budget in the Parliament of India.
Frequently Asked Questions
These taxes are further subcategorized into direct & indirect taxes depending the way they are paid to the taxation authorities.
Let us immerse deeper into both types of tax in detail:
- Direct Tax
The definition of direct tax is hidden in its name which implies that this tax is paid directly to the government by the taxpayer e.g. Income Tax and Wealth Tax.
From the government’s perspective, estimating tax earnings from direct taxes is relatively easy as it bears a direct correlation to the income or wealth of the registered taxpayers.
- Indirect Tax
Indirect taxes are quite different from direct taxes & the collection process is also a bit different. These taxes are based on consumption that are applied to goods or services when they are bought and sold. The indirect tax payment is received by the government from the seller of goods/services.
Some general examples of indirect tax include sales tax, Goods and Services Tax (GST), Value Added Tax (VAT), etc.
Income tax is a direct tax on the income in a financial year.
Below are some types of incomes and their taxation rules in India:
Income from salary/pension: This includes basic salary, taxable allowances, perquisites, and profit in lieu of salary, as well as pension received by the person who himself/herself has retired from the service. Incomes from salary & pension are added in the computation of taxable income.
Income from business: This includes actual & presumptive incomes from business and professions that individuals do in their personal capacity and is included to taxable income after adjustment of the deductions allowed.
Income from house property: An income tax assesses can own one or more house properties. These house properties can be self-occupied or rented out or even vacant. This head describes the rules relating to such ownership. It also describes how interest on home loan is to be accounted for in the case of self-occupied, rented out and vacant properties. An income tax assesses can claim certain deductions such as municipal taxes and a standard deduction for house maintenance in certain cases. The final net income or loss under this head is then added to or deducted from the income from the other heads.
Income from other sources: This includes incomes such as interest from a savings account, fixed deposits (FDs), family pension and many more. Income from Lottery, Betting, etc are included in the total income, but excluded from taxable income as different tax rates are applicable on these.
Capital Gain: Capital gains arise at the time of selling capital assets like gold, house properties, etc. Depending on the types of capital assets & the period of holding, gains on the sale of such assets are categorised as short-term and long-term capital gains. Although capital gains are part of income tax, they are not included to taxable income.
ITR-1: This is for resident Indians having Income from Salaries, one House Property, Other Sources (interest, family pension etc.), & Agricultural Income up to Rs 5,000. This form does not apply to an individual who has invested in Unlisted Equity Shares or is a Director in a company or has a total income of over Rs 50 lakh.
ITR-2: This ITR form is applicable to Individuals & HUFs who do not have income from profits and gains of business or profession.
ITR-3: This ITR form is for individuals & HUFs having income from profits and gains of business or profession need to use this form.
ITR-4: This form applies to resident Indian Individuals, HUFs, and Firms except LLP having income from Business and Profession up to Rs 50 lakh.
ITR-5: This form applies to assesses other than Individual, HUF, Company, and persons filing the ITR-7 Form.
ITR-7: This form is applicable for the persons, including companies, who need to furnish return.
Income Tax Slabs
Income tax slabs under the new tax regime for all individuals - FY 2020-21
Income Tax Slab
Up to Rs 2.5 lakh
Rs 2.5 lakh - Rs 5 lakh
5% (Tax rebate of Rs 12,500 available under section 87A)
Rs 5 lakh - Rs 7.5 lakh
Rs 7.5 lakh - Rs 10 lakh
Rs 10 lakh - Rs 12.5 lakh
Rs 12.5 lakh - Rs 15 lakh
Rs 15 lakh and above
- Applicable ITR form-Taxpayers need to choose the ITR form applicable to them.
- Link Aadhaar with PAN- It is mandatory for taxpayers to link Aadhaar before the filing of income tax returns.
- For Salaried Employees
If you are a salaried employee, gather these documents to e-file your income tax returns: -
- Form-16 issued by your employer
- Month wise salary slips
- Documents related to interest income
- Bank statement/passbook for interest on savings account.
- Interest income statement for fixed deposits.
- TDS certificate issued by banks and others.
- Form 26AS-nForm 26AS is a summary of taxes deducted on your behalf and taxes paid by you. This is provided by the Income Tax Department.
- Section 80 Investments- Section 80C investment document such as investment made under PPF, NSC, ULIPS, ELSS, LIC qualify for deductions under Section 80C.
- These Documents Required to Claim the Following Expenses as Deductions
- Your contribution to Provident Fund
- Your children’s school tuition fees
- Life insurance premium payment
- Stamp-duty and registration charges
- Principal repayment on your home loan
- Equity Linked Savings Scheme/Mutual funds investment
The maximum amount that can be claimed under Section 80C is Rs 1.5 lakhs.
- Other Investment Documents
- Interest paid on housing loan
- Education loan interest payments.
At CA Mantra, we specialize in providing Income tax services to individuals, small scale and medium scale businesses which are highly effective and efficient.
We assist you in these terms: -
- Assisting in preparation of Income Tax Return
- Assessment of Tax Returns
- Provide Consultancy in income tax matters and tax planning
- International taxation consultancy
- Transfer Pricing matters-TP Study, TP Audit, TP Assessment & Objections with DRP
- TDS & Withholding tax compliance
- Income tax Appeals before CIT (Appeals)
- Income tax Appeals before Income Tax Appellate Tribunal (ITAT)
- Survey, Search & Seizer Consultancy
- Appearance before Investigation Wing of Income Tax Department
5 Steps to File ITR on Income tax Government Portal
Step 1- Calculation of Income & Tax
The taxpayer needs to calculate his/her income as per the income tax law provisions applicable to him/her.
Step 2- Tax Deducted at Source (TDS) certificates and Form 26AS
The taxpayer should summarise his TDS amount from the TDS certificates received by him for all the 4 quarters of the financial year. Form 26AS helps the taxpayer in summarising the same.
Step 3- Choose the right Income Tax Form
The taxpayer needs to ascertain the income tax form/ITR Form applicable for filing his/her income tax return (ITR).
There are 2 modes available for filing–online and offline. The online mode is available only for ITR 1 and ITR 4; it is not available for forms of other categories of individual taxpayers. The offline mode of filling is available for all types of income tax forms.
Step 4- Download ITR utility from income tax portal and fill your details
Fill in the relevant and accurate details of your income and check the tax payable or the refund receivable as per the calculations of the utility. The details of income tax challan can be filled in the downloaded form.
Step 5- Validate the information and Upload file on the income tax portal
Click on the ‘Validate’ button to ensure all the required information is filled. Upon successfully validating, Now, log in to the income tax e-filing portal and click ‘Income Tax Return’ option.
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