10 Things to Know About Income Tax as a Tax Payer in India

May 08, 2018 | 7 months ago | Read Time: 3 minutes | By iKnowledge Team

Get to know the basics like financial year, income tax slabs, income declaration, and more before you file your returns.

Tax compliance in the country has seen a rise in the recent past due to rising incomes. Despite this welcome change, statistics show that less than 2 % Indians pay their taxes. So, why paying your taxes is so important? When citizens pay their taxes, it aids in the social and economic progress of a country. Most people are unaware of the basics of income tax, why to pay, and how to pay income tax.

Here are 10 things on income tax that every taxpayer must be aware of:

  1. The difference between financial year and assessment year

In a financial year, you earn an income and the year starts on the 1st of April and ends on the 31st of March. The assessment year is the year after the financial year. For instance, if your financial year began from 1st April 2017 and ended on 31st March 2018, the assessment year will start from 1st April 2018 and end on the 31st of March 2019. Make sure that you enter the correct year while filing your tax returns or making the payment of challan.

  1. What income tax slab you fall under

You must know what income tax slab you fall under and what percentage of tax you have to pay. There are different income tax slabs for citizens, senior citizens as well as super senior citizens and co-operative societies.

Income tax slab for:

  1. Individual (resident or non-resident) aged less than 60 years

Taxable Income

Tax Rate (FY 2017-18)

Up to Rs. 2,50,000

Nil

Rs. 2,50,000 to Rs. 5,00,000

5%

Rs. 5,00,000 to Rs. 10,00,000

20%

Above Rs. 10,00,000

30%

  1. Resident senior citizen, aged 60 years or more but less than 80 years

Taxable Income

Tax Rate (FY 2017-18)

Up to Rs. 3,00,000

Nil

Rs. 3,00,000 to Rs. 5,00,000

5%

Rs. 5,00,000 to Rs. 10,00,000

20%

Above Rs. 10,00,000

30%

  1. Resident super senior citizen aged 80 years or more

Taxable Income

Tax Rate (FY 2017-18)

Up to Rs. 5,00,000

Nil

Rs. 5,00,000 to Rs. 10,00,000

20%

Above Rs. 10,00,000

30%

This is in addition to the surcharge that is 10% of tax where the total income exceeds Rs. 50 lakhs and 15% of tax if the total income exceeds Rs. 1 crore. As for Education Cess (EC) and Secondary and Higher Education Cess (SHEC): 3% of tax plus surcharge.

Note: An individual is entitled to rebate u/s 87A if his/her total income does not exceed Rs. 3,50,000. The amount of rebate shall be 100% of income tax or Rs. 2,500, whichever is less.

From FY18-19, Health and Education Cess @ 4% of Income Tax shall be levied instead of the current EC and SHEC.

  1. How to use form 26AS

Examine Form 26 AS online to check the tax deducted or advance tax paid from other incomes. Any tax on salary can be checked from Form 16 provided by your employer. Any mismatch could lead to a notice from the tax authorities.

  1. Verify your ITR

After filing your income tax return every year, you need to verify your ITR. There are two ways to verify your ITR: manually and electronically. You can verify the ITR electronically through net banking and by using Aadhaar OTP. You can also do it manually by sending ITR-V to CPC Bangalore.

  1. Disclose assets over Rs. 50 lakhs

If you are a taxpayer earning over Rs 50 lakhs, you must disclose your financial assets. This includes both movable and immovable assets.

  1. Disclose your foreign assets and income

Disclose the details of your foreign assets as well as other related information. This includes foreign bank account opening date, the interest you accrued during the year etc.

  1. Add income from the previous employer

If you are transitioning from one job to another, make sure you provide the information of your previous employer to the new employer. If you forget to do this, it may increase tax liability.

  1. Pay any advance taxes

If your estimated tax liability after TDS is Rs. 10,000 or more, you are required to pay advance tax. You are required to pay this tax in installments during the year by all individuals and corporate taxpayers.

  1. Include interest from FDs (26AS)

FDs are taxable, so you must include interest from tax-saving FDs and other FDs. Keep in mind that you must include this income in your 26AS for tax compliance.

  1. Original documents unnecessary

You don’t have to submit any original documents to the IT department. You just need to keep the documents in case you are asked to furnish them later.

Conclusion

Following the above guidelines while filing returns can prevent discrepancies. Failing to do so could lead to notices from the IT department.

Advt. No. : IA/May 2018/3920


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