Are You a First Time Tax Payer? Here’s Everything You Need to Know

Nov 28, 2017 | 12 months ago | Read Time: 3 minutes | By iKnowledge Team

Filing income tax returns is every individual’s rite of passage into adulthood. It is an intimidating experience, to say the least, and the number of government rules and guidelines don’t help either. If you are a first time tax payer, we’ve got you covered. Read on to discover all there is about filing income tax returns:

Why to file returns and when?

Filing Income tax returns is every responsible citizen’s duty. Apart from fulfilling your civic responsibility, filing IT returns is essential if you want to avail loans, or apply for a Visa, for instance. A clean tax history goes a long way in building trust with banks and other official institutions. And of course, there is also the circumstance of heavy penalties from the IT department in case of non-payments.

A financial year covers the period from April 1 to March 31 of the next year. You can either file your returns online or physically by July 31. Persons earning ₹5 lacs and above are required to file their returns online, as well as individuals owning assets outside India and whose income require auditing. The e-filing process is simple and can be done by the registering on the IT department’s website: Income Tax India

 

Income tax slabs and corresponding tax rates

Before we jump onto the tax rates, let us first discuss the different sources of income that affect an individual’s taxability. Each source adds to the process of income tax filing. The sources of income are categorized as following:

  • Income from salary
  • Income from house property
  • Income from capital gains
  • Income from business and profession
  • Income from other sources

The only persons required to file returns are those earning above ₹2.5 lacs p. a. Please refer to the table below to identify your tax bracket:

Income slab for an individual Income Tax rate
Up to ₹2.5 lacs per annum Nil
₹2.5 lacs to ₹5 lacs per annum 5% of the amount exceeding ₹2.5 lacs
₹5 lacs to ₹10 lacs per annum 20% of the amount exceeding ₹5 lacs
More than ₹10 lacs per annum 30% of the amount exceeding ₹10 lacs

 Tax exemptions

In order to encourage taxpayers to invest in certain assets and sectors of the economy, the government has provided a few major tax exemptions. Under Section 80C, you can invest up to ₹1.5 lacs in tax saving assets. Tax-deductible categories include Home loans, NPS, ULIPs, Health insurance, term insurance, to name a few.

Documents required

To file your IT returns, you must have these necessary documents ready:

  • Proof of Identity
  • Proof of Address
  • Bank account details
  • Permanent Account Number (PAN) card, attached with your Aadhar number
  • For salaried individuals, Form 16 (this form is your TDS certificate which acts as a proof of exactly how much tax is to be deducted from your income.)
  • Proof of investments (to avail tax deduction under any scheme like 80C)
  • Home loan interest certificate and owner’s details (to claim deductions under Home Loan repayment scheme)

It is important to note that capital gains have different rates, depending on their term duration. If you have made profits from your investments in Mutual Funds, Gold, FDs, or equities, you must file it in your tax declaration. To file correct tax files, find out the rates on long-term and short-term capital gains.

If you have multiple sources of income, it is advisable to take the help of a Chartered Accountant (CA). Maintain all details and documents as required and have a hassle-free tax filing experience.

Want to know your taxes? Access our easy to use tax calculator, and plan your finances.

Need more information? Here’s something you might like to read on Income Tax:

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