Income Tax
An income tax is a tax imposed on individuals or entities in respect of the income or profits earns by them during a financial year.
Types of Income Based on Income Tax Criteria
Salary Income
Business or Professional Income
Income from Property
Income from Other Sources
Capital Gain Income
What is income Tax Return (ITR)?
Income Tax Returns is a form used to declare the claiming of tax deductions, net tax liability and to report the gross taxable income. It is mandatory for individuals who earn a certain amount of money have to File Income Tax Returns.
What is Income Tax Return Filing?
Income Tax filing is the process by which taxpayer has to file a report of his total income earned on financial year. Through Income Tax Department official portal individual can complete their filing of returns.
Documents Required to
Fill Income Tax Return
Pay Slip
Pan Card
Bank Statement
Interest Certificate
TDS Certificate
Proof of Tax Saving Investments
Form 16A, 16B & 16C
Form 26AS
Income Tax Return Due Date for Individual Tax Payers
The due date for income tax return filing is 31st July of every year.
Income Tax Return Due Date for Companies and Taxpayer
The due date for income tax return filing is requiring tax audit is 30th September.
Note: Section 44AD of the Income Tax Act deals with tax audit under Income Tax Act.
Penalty for Late Filing Income Tax Return
Late Filing between 1st Aug and 31st Dec - INR Rs.5000
Late Filing After 31st Dec - INR Rs.10,000
Penalty if taxable income is less than INR Rs.5 lakhs - Rs.1000
Old vs New Tax Regime
Business Tax Return Filing
In India all operating businesses are required to file income tax return every year. In addition, a business may also be required to file TDS return and pay advance tax to stay compliant under the Income Tax Act.
Proprietorship Tax Return Filing
All proprietors,
Below age of 60 years : Total income exceeds total income exceeds ₹ 2.5 lakhs.
Over the age of 60 years but below 80 years : Total income exceeds ₹ 3 lakhs.
Over the age of 80 years and above : Total income exceeds ₹ 5 lakhs.
Tax Audit
Total sales turnover is over ₹ 1 crore during the FY. In the case of a professional, audit would be required if total gross receipts is more than ₹ 50 lakhs during the FY.
Tax Return Due Date
Due date without audit : July 31
Due date with audit : Sep 30
Partnership Tax Return Filing
Irrespective of amount of income or loss all partnership firm are required file the income tax return. Partnership firms are taxed as a separate legal entity under the Income Tax Act. Therefore, the income tax rate applicable for partnership firms is similar to LLPs and Companies registered in India.
If there was no business activity, NIL income tax return must be filed before the due date for a partnership firm.
Tax Audit
Partnership carrying on business with a total sales of over ₹ 1 crore are required to obtain tax audit. Similarly, partnership firms, carrying on a profession wherein gross receipts in profession exceed ₹ 50 lakhs in the previous year are required to obtain tax audit.
Tax Return Due Date
Due date without audit : July 31
Due date with audit : Sep 30
Income Tax Rate for Partnership Firms
Partnership liable to pay 30% of total income. When total income exceeds ₹1 crores then 12% surcharge applicable on the amount of income tax. In addition to the income tax and surcharge partnership firm must pay 4% Health & Education cess.
LLP Tax Return Filing
Irrespective of amount of income or loss all Limited Liability Partnership companies are required file the income tax return, LLPs are a separate legal entity and are taxed separately from the Partners of the LLP.
Income tax rate applicable for LLPs is similar companies registered in India.
If there was no business activity, NIL income tax return must be filed before the due date for a partnership firm.
Tax Audit
Turnover exceeded ₹40 Lakh or whose contribution exceeded ₹ 25 Lakh are required to get their accounts audited by a practising Chartered Accountant. In addition for international transaction with associated enterprises or undertook certain Specified domestic Transactions are required to file Form 3CEB and must be certified by a Chartered Accountant.
Note: Form 3CEB Deadline: 30th Nov
Tax Return Due Date
Due date without audit : July 31
Due date with audit : Sep 30
Income Tax Rate for Partnership Firms
For registered LLP's income tax rate in India is a flat 30% on the total income. When total income exceeds ₹1 crores then 12% surcharge applicable on the amount of income tax. In addition to the income tax and surcharge partnership firm must pay 4% Health & Education cess.
Form 16/16A
Certificate Issued by employers to their employees.
As per Income Tax Department website "Form 16/ 16A is the certificate of deduction of tax at source and issued on deduction of tax by the employer on behalf of the employees. These certificates provide details of TDS / TCS for various transactions between deductor and deductee. It is mandatory to issue these certificates to Tax Payers."
List of Deductions
Under 80C : Life insurance premium paid, contribution to PPF, Etc.
Under 80CC : Contribution to pension funds.
Under 80CCD(1) : Employee's contribution to a pension scheme.
Under 80CCD(1B) : Taxpayer's self contribution to a notified pension scheme.
Under 80CCD (2) : Employer's contribution to a pension.
Under 80D : Health insurance premium paid.
Under 80E : Interest paid on loan taken for higher education.
Under 80G : Donations made.
Under 80TTA : Interest income on savings account.
Structure of Form 16
Form 16 - Part A form generated by the employers through the TRACES portal. Components of Part A of the salary TDS certificate. This certificate provides the details (Refer Below) of the TDS that is deductions and deposits.
Employers Name & Address
Employers PAN & TAN
Employees PAN
Summary of tax deductions and deposits (quarterly) which is certified by the employer.
Form 16 - Part B
Form 16 - Part B is an annexure to Part A & Part B is prepared by the employer and it contains details of the breakup of the salary deductions approved under Chapter VI-A. In case of a job change in one financial year, Form 16 should be obtained by both employers. Some of the components of Part B are:
Detailed breakup of wages (or) salary.
Under section 10 detailed breakup of exempted allowances.
Under Chapter VIA deductions that are allowed under Income Tax Act .
Form 16 - Part A
What is TDS?
Tax deducted at source (TDS) is the tax that is collected by the Indian Government at the time when a transaction takes place.
TDS Return Filing
Tax deducted at source (TDS) return filing is a quarterly statement that is to be given to the Income Tax department. TDS return filing can be done completely online. While filing the TDS returns the various details to be mentioned are:
PAN of the both deductor and the deductee.
Amount of tax that is paid to the Indian government
TDS challan details
Others, if any
TDS Return Form
TDS Form 24Q I TDS Form 26Q I TDS Form 27Q I TDS Form 27EQ
What is a TDS Certificate?
After Tax Deducted at Source (TDS) is deducted by the deductor it is necessary to furnish the TDS Certificate. The deductee can cross-check the tax credit by viewing a valid TDS certificate from TRACES that bears a 7 digit unique certificate number and a TRACES watermark. The TDS certificates are to be preserved by the deductee. TDS certificates on payments other than salaries are issued every quarter and the TDS certificate for the salary is provided on annual basis.
Penalty for failure in filing the TDS returns: ₹200 under Section 234E per day by until the time the default is continuing.
Documents Required For TDS Return Filing
TDS Certificate I TDS Acknowledgement I PAN Card I Bank Statement I Tax Payment Challan
TDS return must be filed by employer with the Government every quarter as follows:
Income Tax Notice
The Income Tax (IT) Department sends the notices for various reasons like not filing the income tax returns, any defect while filing the returns, or other instances where the tax department is requiring any additional documents or information.
Types of Income Tax Notice
Notice u/s 143(1) - Intimation
Notice u/s 142(1) - Inquiry
Notice u/s 139(1) - Defective Return
Notice u/s 143(2) - Scrutiny
Notice u/s 156 - Demand Notice
Notice Under Section 245
Notice Under Section 148
Basic Documents required to reply to an Income Tax Notice
Income Tax Notice copy.
Proof of Income source such as (Part B ) of Form 16, Salary receipts, etc.
TDS certificates
Form 16 (Part A)
Investment Proof if they are applicable.
Documents Required For Income Tax Notice
TDS Certificate (Form 16, Part A) I Salary Slip I Income Tax Notice I Investment Details
Terms of Income Tax
Financial Year (FY) : One year term used by taxpayers for accounting and financial reporting.(i.e. April 1, 2022 to March 31, 2023)
Assessment Year : Assessment year is the one-year period from Apr 1 to Mar 31, beginning immediately after the fiscal year. (FY 2021-22 will be AY 2022-23)
PAN : Permanent Account Number (Unique 10 digit alphanumeric)
Assessee : Individual, a partnership, a corporation, an Association of Persons (AOP), a trust, or any other entity who determines his or her income and pays tax in accordance with the Income Tax Act.
TAN : 10 digit alphanumeric digit assigned by the Income Tax Department of India.