Budget News ’23: Union Finance Minister Nirmala Sitharaman proposed the Union Budget for the financial year 2023-24 in the Lok Sabha on 1st February ’23. In it, new tax regime has been introduced in which there’s an increase of tax rebate on income of Rs 7 lakhs from the earlier Rs 5 lakhs. Check new tax slabs below.
From what is income tax and income tax return to how to do income tax calculation and file ITR, this article provides just the information you need.
The income tax slab rates for the financial year 2023-2024 i.e. assessment year 2024-2025 are as follows:
Income Tax Slab Rates FY 2023-24 for Individuals, NRIs & HUF – “New Tax Regime”
|Income Tax Slab||Income Tax Rate|
|Up to Rs 3 lakhs||NIL|
|Above Rs 3 lakhs – Rs 6 lakhs||5%|
|Above Rs 6 lakhs – Rs 9 lakhs||10%|
|Above Rs 9 lakhs – Rs 12 lakhs||15%|
|Above Rs 12 lakhs – Rs 15 lakhs||20%|
|Above Rs 15 lakhs||30%|
*AY = Assessment Year
What is Income Tax?
Income tax is a type of direct tax which is levied directly on the person earning income. This tax is levied once in a financial year. In India, we count 1st April to 31st March as one financial year.
What is Income?
To put it simply, income is the compensation received by a person in lieu of their work. You did some work and you received something in return, be it in cash or in kind, it will be counted as your income. Now, income tax is calculated on taxable income.
The income could be a salary, business profits, rental income, dividends, capital gains, interest, or other forms of income. That said, even the money you earned in a lottery is taxable.
Did You Know?
Agriculture Income is not taxable in India, under the Income Tax Act, 1961.
Who is a Person in the Income Tax Act?
As per Section Section 2(3) of the IT Act 1961, a person is any individual or any sort of artificial entity which earns income/profit. This person is then liable to pay income tax as per the applicable income tax slabs.
Furthermore, a person includes:
- HUF (Hindu Undivided Family)
- Association of Persons (AOPs)
- Body of Individuals (BOAs)
- Limited Liability Partnership (LLP)
- Local Authority
- Any other artificial juridical person who is not mentioned in this list
What is Income Tax Return?
An income tax return (ITR) is a document or a form which is to be filled by every person who earns an income. This document gives detailed information of your previous year’s income and the taxes you paid on this income.
Also, if you have paid the income tax in excess, the difference is returned to you by the Income Tax Department. This is why this form or document is called as the Income Tax Return or ITR.
An ITR serves as an income proof as well as allows you to claim the applicable income tax returns.
Who Should File Income Tax Return (ITR)?
If any of the following circumstances apply to you, filing an income tax return (ITR) in India is imperative:
- If your annual taxable income exceeds the basic exemption ceiling mentioned below.
|For individuals below 60||INR 2.5 lakh|
|For individuals above 60 but below 80||INR 3 lakh|
|For individuals above 80||INR 5 lakh|
- If you want to request a refund from the Department of Revenue
- If you earned or invested in foreign assets throughout the fiscal year
- If you want to apply for a visa or a loan
- If the taxpayer is a corporation or a partnership, regardless of profit or loss
- Deposited a total of more than Rs.1 crore in one or more current bank accounts
- Spent more than Rs.2 lakh on international travel for yourself or another person
- Spent more than Rs.1 lakh on electricity consumption
Why Should I File ITR?
Any person, including artificial entities mentioned above, must file their Income Tax Return every year. ITR must be filed even if their income is not taxable. If your income is eligible for an income tax refund, filing an ITR becomes all the more necessary. Without this, you won’t be able to claim any refunds if you paid income tax in excess and wish to claim rebates.
How is Income Tax Calculated in India?
Income tax calculation can be done with an easy-to-use tool online. An income tax calculator provides an estimate of the taxable income and payable tax on providing the necessary details.
This is how to use an income tax calculator online:
- Select your age bracket
- Enter your yearly salary
- Enter the investment details in the subsequent fields
- Enter the investment amount u/s 80C, etc., if any
- Enter your medical insurance premium, if you have a health insurance policy u/s 80D
- In case you live in a rented property, enter the rent paid and the HRA received
- If you have a home loan to pay back, enter the interest rate paid
- If you have an educational loan to pay back, enter the interest paid
Hit the Calculate button to get an estimate of your taxable income and the income tax you’ll be required to pay along with all the deductions you can claim, if any.
Documents Required to File ITR
Filing for income tax can be cumbersome, but if done correctly, you might end up saving a considerable amount of income tax. You can file your Income Tax Return offline or online, as per your convenience. However, with the new tax regime, ITR filing has become a fairly easy process and can be done online in minutes.
Before you begin the e-filing procedure, make sure you have all the necessary paperwork. This includes:
- Passbooks for bank and post office savings accounts, as well as PPF accounts
- Pay slips
- PAN Card, Aadhar Card
- Form 16 (Your employer will provide this TDS certificate, which will specify the salary you you got along with the TDS deductions, if any)
- Interest certificates from banks and post office
- Form 16A/16B/16C
- Form 26AS: Your annual tax statement contains all of the details concerning the taxes deposited against your PAN
- Proof of investments, if any
- Proofs required to claim deductions under sections 80D through 80U of the Internal Revenue Code (health insurance premium for self and family, interest on education loan)
- Bank statement for a home loan, if any
Did You Know?
According to the Income Tax Department, for the assessment year 2021-22, over 3.7 crore taxpayers filed income tax returns.
Steps to File ITR in India
Once you have grasped what is income tax, what type of tax is income tax, what is income tax return and know the answers to the related questions, e filing income tax returns on the government portal should be easy for you. Here are the steps:
|Step 1: Computation of the income and the tax|
|Step 2: Collect Tax Deducted at Source (TDS) Certificates and Form 26AS|
|Step 3: Choose the right income tax form|
|Step 4: Fill out the form online|
|Step 5: Validate the information entered and submit ITR|
What are the Benefits of Filing Income Tax Return?
Some of the benefits of filing income tax return are as below:
- Hassle-free processing of loans: Financial institutions ask for ITR receipts from the previous years during the process of loan application. It is, therefore, essential to file ITR if an individual plans to secure a car or home loan in the near future.
- Claim tax refund: All individuals can claim tax refund by way of filing ITR. It is especially beneficial for the self-employed and salaried individuals falling in the higher income bracket.
- Medical Insurance: The IT Department offers deductions up to Rs 50,000 on medical or health insurance premiums for a specified assessment year u/s 80D of the Income Tax Act.
- Compensation for loss: Any business or company can incur a loss at any point of time during a fiscal year. To compensate for a loss, it is important for companies to file IT Returns. This way, they can claim for exemption in income tax as they suffered losses.
- Avoid penalties: As mentioned before, it is mandatory for certain individuals to file ITR. Timely filing of Income Tax Return will help individuals avoid hefty fines.
- Income tax is levied by governments on the earnings of enterprises and persons within their jurisdiction
- Income tax supports the funding of government services, pay debts, and provide subsidies to citizens
- Income Tax Return is mandatory to be filed by every person earning an income
Income Tax: FAQs
There is no need to include any papers with your income tax return. However, the documents should be kept on hand if needed in the future by any competent authority.
You can save money on taxes by investing in a variety of assets. PPF, National Savings Certificates, National Pension System, ELSS schemes, and other typical choices are available.
An annual income of up to Rs 2.5 lakh is tax-free in the Indian tax system.
Individuals who do not require an audit of their accounts are usually required to file their income tax returns by the 31st of July, every year.
Companies, individuals, and working partners of firms with audited accounts, on the other hand, must file their income tax forms by the 30th of September, every year.
ITR filing is compulsory if the gross income of a taxpayer exceeds the basic limit of exemption. Gross total income includes the income from sources like capital gains, salary, etc.
Filing ITR returns is indicative of the fact that you are responsible. The Government mandates individuals who earn a specific amount of income annually within a pre-determined period of time.
You are required to file an income return if your total TCS/TDS is INR 25,000 as general public and INR 50,000 as a senior citizen. Also, if you’re a company, you need to file ITR regardless of your profits.
A student with no income can also file for an ITR. However, it is not a compulsion.