INCOME TAX: A LAYMANS OVERVIEW
In today’s world nothing is free. We have to pay taxes even for our basic needs in form of vat, service tax etc. Similarly a tax is levied on income of individual or business is known as Income Tax. The incidence of income tax can be progressive, proportional or regressive. The tax levied on individual is known as personal or individual income tax. Whereas when it is levied on the income of companies is known as Corporate tax or profit tax.
Indian overview: In India income tax is governed by the Indian Income tax Act 1961. The government of India imposes an income tax on individuals, Hindu undivided Family(HUF), Companies, firms, Co-operative Societies & trusts.
Every person whose total income exceeds the maximum amount which is not chargeable to income tax shall be liable to pay tax at the rates prescribed under the finance Act for the relevant assessment year.
An individual has to pay tax on his total income earned during previous year for every assessment year. The chargeability of tax not only depends on the nature of income (viz. revenue or capital) but also on residual status of an individual.
Objective: The objective of Income Tax Act is to tax only income and items which are construed as income chargeable unless specifically exempt.
What is income?
Sec.2 (24) of Indian Income Tax Act 1961 provides definition of income in an illustrative manner.
Tax Rates in India
India follows the progressive tax system for individual income tax. The effective tax rates with effect from April 1, 2010 are as follows.
Note: Surcharge has been abolished for personal income tax from the financial year 2009-10.
All the taxes in India are subject to an education cess of 2% & 1% of Higher secondary Education cess.
Due Dates
Extension of due date of filing income tax returns and tax audit reports for J&K & Bihar
The Central Board of Direct Taxes have extended the last date of filing of income tax returns and obtaining tax audit report under section 44AB of the Income Tax Act, 1961, due by 30th September 2008, to 30th November 2008 in the states of J&K & Bihar, in view of the dislocation caused due to law and order problem in the J&K. Where as in Bihar after considering the disruption caused by the floods in the state. (Order of CBDT)