Some questions and answers based on Income Tax in India
Indirect Taxes are those which are indirectly levied on persons – such as Excise, Sales Tax, Service Tax, VAT and Customs Duty. Here taxes are collected from everybody through the price of the products.
(i) Amt paid towards life insurance premiums/ health insurance premiums
(ii) contributions to provident fund
(iii) school/college tuition fee paid
(iv) Investment in mutual funds
(v) investments in NSC
(vi) Interest component of housing loans
(vii) certain donations are allowed too
With a maximum ceiling of Rs. 1,50,000/- So if all the amounts add up to Rs.150000 or more – the max deduction allowable will be Rs. 150000/-
But the person can also have other incomes too – which can be taxed under the other 4 heads of income. It is the duty of the employee to inform the employer (in our case the Bank) of any other income the employee is earning; such as income from renting of his house, or income from FDs etc.
The employer then accordingly calculates the employees total income and deducts TDS (Tax deducted at Source) – which is mandatory for the employer to deduct and deposit with the Govt.
1. How many heads of income?
Ans.: Five – Income from Salaries, House Property, Capital Gains, Business or Profession and Other Sources.2. Income Tax Authority in India?
Ans.: CBDT – Central Board for Direct Taxes. Current Chairperson of CBDT is Ms. Anita Kapoor3. What kind of tax is Income Tax?
Ans.: It is a personal tax. It is a tax on a person’s income. It is directly levied on a person’s income and hence also known as a direct tax.Indirect Taxes are those which are indirectly levied on persons – such as Excise, Sales Tax, Service Tax, VAT and Customs Duty. Here taxes are collected from everybody through the price of the products.
4. What is the slab rates for ‘Individual assessee’?
Ans.: The latest slab rates for Individual Assessee is:
Assessee’s Age
|
Upto 59 years of age
|
60 years to 70 years
of age
|
Above 80 years of
age
|
All categories
include men and women both
|
Senior Citizens
|
Very Senior Citizens
|
|
Basic
Exemption limit – NIL
tax upto Income of
|
Rs. 2,50,000
|
Rs. 3,00,000
|
Rs. 5,00,000
|
Tax @ 10%
|
Rs. 2,50,001 – Rs.
5,00,000
|
Rs. 3,00,001 – Rs.
5,00,000
|
NIL
|
Tax @ 20%
|
Rs. 5,00,001 – Rs.
10,00,000
|
Rs. 5,00,001 – Rs.
10,00,000
|
Rs. 5,00,001 – Rs.
10,00,000
|
Tax @ 30%
|
Above Rs. 10,00,000
|
Above Rs. 10,00,000
|
Above Rs. 10,00,000
|
5. How much is Education Cess?
Ans.: Education Cess is 3% of tax calculated as per the slab rates.6. What are the common deductions/ tax planning methods used for reduction in tax liability?
Ans.: For reduction in tax, individuals utilize provisions of Chapter VI A – where deductions from Total Taxable Income are given on the following expenses:(i) Amt paid towards life insurance premiums/ health insurance premiums
(ii) contributions to provident fund
(iii) school/college tuition fee paid
(iv) Investment in mutual funds
(v) investments in NSC
(vi) Interest component of housing loans
(vii) certain donations are allowed too
With a maximum ceiling of Rs. 1,50,000/- So if all the amounts add up to Rs.150000 or more – the max deduction allowable will be Rs. 150000/-
7. If you are employed in a bank as an officer – under which head of income will your income from bank be taxed?
Ans.: Bank employee’s salary will be taxed under the Head ‘Income from Salaries’.But the person can also have other incomes too – which can be taxed under the other 4 heads of income. It is the duty of the employee to inform the employer (in our case the Bank) of any other income the employee is earning; such as income from renting of his house, or income from FDs etc.
The employer then accordingly calculates the employees total income and deducts TDS (Tax deducted at Source) – which is mandatory for the employer to deduct and deposit with the Govt.
The employer (banks or
any other employer for that matter who pays ‘Salary’) issues a ‘Form 16’
– also known as TDS Certificate - to its employees detailing out the TDS
deducted and deposited on behalf of the employee (it is employees tax liability
which the employer is taking the responsibility of paying to the Govt.)
It is very important for the employer to issue and for the employee to obtain the Form 16 – as it pertains to TDS and forms a very necessary part of the proof that TDS has been deducted and paid.
It is very important for the employer to issue and for the employee to obtain the Form 16 – as it pertains to TDS and forms a very necessary part of the proof that TDS has been deducted and paid.
8. In which head will you tax interest income from Fixed Deposits with Banks?
Ans.: Income income
from FDs will be taxed under the head ‘Income From Other Sources’.
9. Which is the current Assessment Year?
Ans.: The current
Financial Year (F.Y.) is 2014 – 2015. i.e., 1 April 2014 – 31 March 2015.
The ‘Previous Year’ (P.Y.) as per income tax is also 2014 – 2015 – as when assessment of income will be done it actually becomes the previous year!
The Assessment Year – that is the year in which assessment of tax is done – the current assessment year for the F.Y./P.Y. 2014-15 = 2015-16!
10. What is ‘Advance Tax’?
Ans.: Advance Tax is the tax paid by Assessee (Individual/ HUF/ Company etc.) – in advance during the F.Y. or P.Y. before the end of the 31st March of the relevant F.Y./P.Y.
Advance Tax payment is mandatory if the taxable income of a person is more than Rs. 10,000/- But salaried employees need not worry much as the TDS deducted by their employers takes care of that!
However – for Individual Assessees advance tax has to be paid 3 times in the P.Y. in the following manner:
1st installment of Advance Tax – before 15th September of the P.Y. = atleast 30% of the total advance tax liability;
2nd installment of Advance Tax – before 15th December of the P.Y. = atleast 60% of the total advance tax liability (minus) the amount paid in the 1st installment;
3rd installment of Advance Tax – before 15th March of the P.Y. = 100% of the total advance tax liability (minus) the amounts paid in the 1st and 2nd installments.
If advance tax is not paid, and/or the amounts paid in the installments fall short as per the calculations – penalty is levied by the Income tax authorities!
And so – if you would have noticed – before the respective due dates – there is always an advertisement from the Income Tax Deptt. in all the dailies reminding people to deposit Advance Tax on time!
The ‘Previous Year’ (P.Y.) as per income tax is also 2014 – 2015 – as when assessment of income will be done it actually becomes the previous year!
The Assessment Year – that is the year in which assessment of tax is done – the current assessment year for the F.Y./P.Y. 2014-15 = 2015-16!
10. What is ‘Advance Tax’?
Ans.: Advance Tax is the tax paid by Assessee (Individual/ HUF/ Company etc.) – in advance during the F.Y. or P.Y. before the end of the 31st March of the relevant F.Y./P.Y.
Advance Tax payment is mandatory if the taxable income of a person is more than Rs. 10,000/- But salaried employees need not worry much as the TDS deducted by their employers takes care of that!
However – for Individual Assessees advance tax has to be paid 3 times in the P.Y. in the following manner:
1st installment of Advance Tax – before 15th September of the P.Y. = atleast 30% of the total advance tax liability;
2nd installment of Advance Tax – before 15th December of the P.Y. = atleast 60% of the total advance tax liability (minus) the amount paid in the 1st installment;
3rd installment of Advance Tax – before 15th March of the P.Y. = 100% of the total advance tax liability (minus) the amounts paid in the 1st and 2nd installments.
If advance tax is not paid, and/or the amounts paid in the installments fall short as per the calculations – penalty is levied by the Income tax authorities!
And so – if you would have noticed – before the respective due dates – there is always an advertisement from the Income Tax Deptt. in all the dailies reminding people to deposit Advance Tax on time!
I hope this is useful!
