Updated: Sep 14, 2019
Do you want to have the knowledge of income tax, want to know how easy it is??
Yes!!!!! So Let’s Begin!!!!!
Friends, let us discuss the very basic concept of income tax today.
Income tax is the tax which is paid to the government on earned income every year. Everyone (whose gross total income (excluding deductions) exceeds the basic exemption limit of income above which tax is charged, need to file ITR), need to pay income tax and file income tax return before or on due date. Whether one is individual, HUF, Partnership firms, Company, etc., all are required to file ITR.
HUF - Hindu Divided Family
AOP – Association of Person
BOI – Body of Individual
Before you start gaining knowledge of income tax, first of all, you need to know the meaning of Financial Year and Assessment year, Sources of Income, deductions.
Financial Year: Financial year is the year which starts from 1st April and ends on 31st March next year and of which income tax return is to be filed.
Assessment year: Assessment year is the year after financial year and in which tax is assessed and return is filed.
Let’s understand the concept of Financial Year and Assessment Year with example.
Suppose Year starts on 1st April 2018 and ends on 31st March 2019. So 2018-2019 is the Financial Year. Assessment year is 2019-2020.
Source of Income
Do you know the sources of Income??
No?? Then proceed further!!!!!
There are 5 sources of income:
1) Income from Salary
2) Income from House Property
3) Income from Capital Gains
4) Income from Business and Profession
5) Income from Other Sources
Do you want to know how can you reduce your income tax?? Yes!! Then continue!!!!!
Deductions reduce your Gross Income. This really helps in reducing your income tax.
Let’s understand this with an example.
Suppose you made an investment in LIC, then the amount you paid as premium is allowed to reduce from gross income.
Gross Income = Rs. 6.5 lacs
Investment in LIC = Rs.75,000
So, Taxable Income = 650000 – 75000 = Rs. 575000.
This means You need to pay tax on Rs. 5,75,000 only.
So I think I have made all your points clear about the fundamentals of income tax. This is all for the day!!
Grab some detailed knowledge of deductions to claim huge tax deductions.
Stay Tuned!! with TruFins.com- Your Personal Financial Advisory Expert
By Neha Kumari- TruFins Expert