People present their Income Declarations forms along with other required documents to pay Income tax..But, people have no idea about how to actually calculate income tax. Income Tax department is the regulating authority that decides the income tax charges that are to be paid by a person whose income surpasses the maximum amount. This further depends on the taxpayer’s residential status.Read more
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Indian Government gets revenue from the Income Tax Department. Further, in India tax is levied on Indian income. Wherein, tax is not levied on foreign income for those who are not the residents of India. But tax is levied on the foreign income earned by Indian residents. Income tax can be defined as the tax paid on one’s income. Income Tax is applied on someone who lived in India for about 182 days in the preceding tax year.
Along with this, tax will be levied on those who were in India for about 60 days at the time of preceding tax year and this was for about 365 days at the time of earlier 4 years. A resident’s complete income is separated into 5 parts which are known as the heads of income and thet are as follows:
Salary comprises of pension, wages, fees, gratuity, commission, provident fund contribution, perquisites, leave encashment, the contribution of the Central Government towards the pension and any compensation in exchange for a service.
The term Salary implies the remuneration or the monetary benefit received by the employee from its employer for the services he or she renders for a definite period of time.
This monetary benefit is paid at fixed intervals which are primarily on monthly basis. Salary comprises of:
Perquisites are payments that the employees received apart from their salaries.
Moreover, no reimbursement is made for their expenses. There are few perquisites that are taxable for employees, and they are the following:
Some of the Perquisites are taxable, but are taxable only some specific employees such as directors or those who have extensive interest in the company, they get taxed for:
Other than this there are perquisites that are exempted from tax deductions. The fringe advantages on which no tax is levied are:
When it comes to deductions from salary following are the deductions available:
From the Assessment Year 2006-2007, the standard deduction was not on salary income.
Using this table you can calculate the Net salary of an employee:
For calculating Total income from diverse sources, the incomes can be separated into the following categories:
All these income when put together gives you a combined income of a person.
The entitled deductions, reliefs and allowance are computed on each head.
Gross Total Income= A+B+C+D+E
Total Taxable Income= Gross Total Income- Deductions allowed from income
Total Tax Payable= Tax on Total Income- Rebates and relief allowed under Income Tax Act
The tax levied on the person is totally depended on upon the remuneration of that particular person.
The complete taxable income is accordingly segregated into 4 parts. Tax rates keep on changing every year and here we will discuss the tax calculated for the year 2015- 2016:
1. For a person falling under the age slab of fewer than 60 years; the total taxable income will be:
2. For a person is more than 60 years of age but less than 80 years; the total taxable income will be:
3. For a person of 80 years and above; following is the taxable income:
Along with these tax rates, a surcharge is also charged with people. Plus, an education cess of 2% is levied on the entire tax as well as the surcharge sum.
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