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Tax Overview

Introduction

Income Tax in India

Income tax in India is levied by the Central Government on taxable income of individuals, companies, Hindu Undivided Families (HUFs), co-operative societies, firms, and trusts (recognized as association of persons and body of individuals) and any other artificial person.

Imposition of tax is different for every person and is governed by the Indian Income Tax Act, 1961. The Central Board of Direct Taxes (CBDT) has the overall responsibility of regulating the Income Tax Department in India. It is a division of the Department of Revenue under the Ministry of Finance, Government of India.

 

Tax is charged in respect of the income of the financial year (known as previous year) in the next financial year (known as assessment year) at the rates fixed for such assessment year in the Finance Act passed each year by the Parliament.

The Act categorises the income of a person under different heads and provides for the manner of computation of taxable income of each head. These heads of income are:-

  • Salaries
  • Income from house property,
  • Profits and gains of business or profession,
  • Capital gains, and
  • Income from other sources

 

Overview of Income Tax in India

Charge to income tax

Every individual whose overall income surpasses the highest amount that is not chargeable to tax under the Income Tax Act becomes an assessee. His income is subject to taxation at the rate, which has been stipulated by the Income Tax Act, 1961 for the pertinent assessment year. This is also dependent on the residential status of that particular individual.

Obligations to file return of income

Every person,-

-being a company or a firm; or

-being a person other than a company or a firm, if his total income or the total income of any other person in respect of which he is assessable under Income tax Act, 1961 during the previous year exceeds the maximum amount which is not chargeable to tax

shall on or before the due date, furnish a return of such income.

The due date of filing return of income for persons not covered under Audit is 31st July while for the persons covered under Audit is 30th September of the relevant Assessment year.

Assessment Year is defined as the year succeeding the Financial Year. eg A person has to file his return of income before 31st July 2015 for the income earned during the Financial Year 1st April 2014 to 31st March 2015.