Know which sections of the Income Tax Act you are required to file a tax return so that you have time to make sure all your information is correct and the process is as easy as possible.
The Income Tax Act, 1961 applies to individuals residing in India. This means that you are subject to income tax under the provisions of this act, even if you do not have a permanent residence in India. In addition, certain provisions of this act apply to individuals who are temporarily present in India for business or pleasure. This blog discusses about various Sections of Income Tax Act in detail as follows.
There are six main sections of the Income Tax Act that apply to individuals residing in India: Section 1 applies to individual residents who are citizens of India or whom Indian nationals may be deemed to be resident for tax purposes.
- Section 2 applies to individuals who are not citizens of India and who are not ordinarily resident in India.
- Section 3 applies to companies that are registered under the Companies Act, 1956.
- Section 4 applies to trustees of trusts that are registered under the Trusts Act, 1925.
- Section 5 applies to persons who are beneficiaries under pension schemes that are registered with the Pension fund Regulatory and Development Authority (PFRDA).
- Sections 6 and 7 apply to non-resident Indians who have income from sources within India.
In addition, there are a number of special provisions that apply specifically to individuals who reside in India and engage in business activities here. For example, section 194B allows taxpayers residing outside India to dispose of income that arises from a business carried on outside India only to the extent such disposal does not create an artificial price for the property or, in certain cases, does not cause a loss to a person who is providing it.
Learn more about filing Income tax return
What Are the Filing Dates in India?
The Indian Income Tax Act, of 1961, applies to individuals and Hindu undivided families who are residents in India. The filing date for the personal Income Tax class is the same as the due date for payment of the tax. For individuals, the due date is April 15th of the year following the taxable year. For Hindu undivided families, the due date is July 15th of the year following the taxable year.
Use Vakilsearch`s Income tax calculator to decide your taxable earnings and document your Individual Tax Return (ITR) with ease.
Which Forms Need to Be Filed by Individuals and Businesses in India?
Individuals: Tax returns for the previous financial year (Form 1040) must be filed by April 15 of the following year.
Businesses: Tax returns for the previous financial year (Form 1040) must be filed by April 15 of the following year if they had a taxable income of more than $1,000 (₹ 79375.50) or if they have a balance sheet item worth more than $5,000 (₹396877.50) at the end of the previous fiscal year.
What Are the Penalties for Not Filing Your Tax Return on Time in India?
If you file your tax return late, you may face penalties, including a fine and/or imprisonment. The penalties for filing a late tax return depend on the type of tax you’re responsible for paying and the time period for which the return is late. Generally, the more income you have and the more money you owe in taxes, the harsher the penalties.
Filing a late tax return can also lead to your account being frozen or even closed. This can make it difficult to access your money, borrow from banks, or get a mortgage. If you have other financial obligations, filing a late tax return can also result in them being deferred or even canceled altogether.
There are several steps you can take to avoid penalties and ensure that your tax return is filed on time. First, make sure you have all of the information needed to file your return. Second, check the deadlines that apply to you. Finally, keep track of when your return is due and file as soon as possible if it’s still within the applicable deadline.
If you need help filing your tax return or understand which sections of the Income Tax Slab rates apply to you in India, speak with Vakilsearch today.
Taxation for Individuals
Individuals in India are taxed on their taxable income. Taxable income is defined as all income from any source except net rental income and pension contributions. Net rental income is Income from renting out property that you own or lease. Pension contributions are amounts you contribute to a government pension plan.
Taxable income is calculated using a statutory formula based on an individual’s total income and marital status. Total income includes all sources of income, including salaries, wages, tips, bonuses, investment dividends, interest, royalties, and rent received from real estate or other property owned or leased by the individual. marital status refers to an individual’s relationship to his or her spouse at the time the income
About Section 92CD Modified Return
If you are an individual who is resident in India and has an income from any source, then u/s 92cd modified return applies to you. U/s 92cd modified return of the Income Tax Act: https://eportal.incometax.gov.in/iec/foservices/#/login deals with the calculation of your income and taxes on it.
There are a few key things to keep in mind when dealing with u/s 92cd modified return. First, you need to know what your taxable income is. This is your total income after all deductions have been made, including any losses that you may have incurred.
Finally, you need to file a correct tax return u/s 92cd modified return. If you fail to file a correct tax return using Section cd modified return, then you may face penalties and interest charges. So be sure to follow all the instructions carefully when filing this section of the Foreign Income Tax
Chapters of the Income Tax Act 1961
The Income Tax Act consists of 23 chapters, some of which are further divided into subparts. Below is an overview of each chapter:
| Chapter | Overview |
| Chapter I | Introduction and overview of the Income Tax Act. |
| Chapter II | Scope and commencement of the Income Tax Act. |
| Chapter III | Income that is not included in the total income. |
| Chapter IV | Calculation of total income. |
| Chapter V | Other sources of income, including capital gains, businesses, and properties. |
| Chapter VI | Aggregation of income, and rules for carrying forward and setting off losses. |
| Chapter VIA | Deductions applicable when calculating total income. |
| Chapter VIB | Restrictions on certain deductions for companies. |
| Chapter VII | Parts of total income exempt from income tax. |
| Chapter VIII | Applicable rebates and reliefs in income tax calculation. |
| Chapter IX | Double taxation relief. |
| Chapter X | Special cases where tax is not payable. |
| Chapter XA | General anti-avoidance rules. |
| Chapter XI | Additional tax on undistributed profits. |
| Chapter XII | Tax calculation rules in special cases. |
| Chapter XIIA | Special rules for certain Non-Resident Indian (NRI) income. |
| Chapter XIIB | Special tax provisions for specific companies. |
| Chapter XIIBA | Special tax provisions for certain limited liability partnerships. |
| Chapter XIIBB | Special tax rules for conversion of the Indian branch of a foreign bank to a subsidiary company. |
| Chapter XIIBC | Special tax rules for resident companies. |
| Chapter XIIC | Special tax rules for retail trade. |
| Chapter XIID | Special tax rules for distributed profits of domestic companies. |
| Chapter XII DA | Special tax rules for distributed income from share buybacks by domestic companies. |
| Chapter XIIE | Special tax rules for distributed income. |
| Chapter XIIEA | Special tax rules for distributed income by securitisation trusts. |
| Chapter XIIEB | Special tax rules for accredited income of certain institutions and trusts. |
| Chapter XIIF | Special tax rules for income from venture capital funds and companies. |
| Chapter XIIFA | Special tax rules for business trusts. |
| Chapter XIIFB | Special tax rules for income of investment fund schemes and income from them. |
| Chapter XIIG | Special tax rules for income of shipping organisations. |
| Chapter XIIH | Tax implications on fringe benefits. |
| Chapter XIII | Information on Income Tax Authorities. |
| Chapter XIV | Procedure of income tax assessment. |
| Chapter XIVA | Special rules to avoid repeated appeals. |
| Chapter XIVB | Special rules for assessing search cases. |
| Chapter XV | Tax liabilities in special cases. |
| Chapter XVI | Special tax rules applicable to firms. |
| Chapter XVII | Rules for tax collection and recovery. |
| Chapter XVIII | Tax relief on dividend income in specific cases. |
| Chapter XIX | Tax refunds. |
| Chapter XIXA | Case settlements. |
| Chapter XIX-AA | Role of the Dispute Resolution Committee in specific cases. |
| Chapter XIXB | Advance rulings. |
| Chapter XX | Appeals and revisions. |
| Chapter XXA | Acquisition of immovable property to prevent tax evasion in special transfer cases. |
| Chapter XXB | Mode of accepting or repaying payments to counteract tax evasion in special cases. |
| Chapter XXC | Buying immovable property by the central government in certain transfer cases. |
| Chapter XXI | Imposable penalties. |
| Chapter XXII | Punishable offences and prosecutions. |
| Chapter XXIB | Certificates of tax credit. |
| Chapter XXIII | Miscellaneous provisions. |
Important Sections of the Income Tax Act 1961
The Income Tax Act of 1961 contains several sections, but there are five crucial ones that every taxpayer should be familiar with:
Section 80C – Tax Deduction on Investments
Section 80C allows taxpayers to claim deductions for certain investments, reducing their taxable income. This includes investments in Tax Saving Mutual Funds, Tax Saving Fixed Deposits, and other specified instruments.
Section 80CCC – Tax Deduction for Contribution to Pension Funds
Section 80CCC encourages taxpayers to invest in pension funds by offering deductions on contributions. This deduction is available from the taxpayer’s gross total income for the relevant financial year, promoting long-term financial planning for retirement.
Section 80CCD – Tax Deduction for Contribution to National Pension Scheme
Section 80CCD provides tax benefits for contributions to the National Pension Scheme (NPS). Different sub-sections under this provision offer unique deductions, making it essential for taxpayers to understand each one to maximise their tax savings.
Section 80TTA – Tax Deduction for Interest on Savings Account
Section 80TTA allows individuals to claim deductions of up to INR 10,000 annually on interest earned from savings account deposits. This applies to accounts held in post offices, banks, or cooperative societies, providing relief on smaller income amounts.
Section 80TTB – Tax Deduction on Interest Income for Senior Citizens
Section 80TTB is specifically for senior citizens aged 60 and above. It permits them to claim tax deductions on interest income from their deposits, with a maximum deduction limit of INR 50,000 per financial year. This section helps ease the financial burden on senior citizens by reducing their taxable income.
Understanding these sections can help taxpayers make informed decisions about their investments and savings, ultimately leading to significant tax savings.
Who is a Person Under the Income Tax Act 1961?
Under the Income Tax Act of 1961, the term ‘person’ is defined in Section 2(31). It encompasses a broad range of entities, categorised into seven main types:
Individual
This category includes any single person, such as a salaried employee, teacher, or sole proprietor. Individuals are taxed based on their income and other applicable provisions.
Hindu Undivided Family (HUF)
An HUF is a family unit that is recognised under Hindu law, consisting of members who are lineally descended from a common ancestor. HUFs are treated as separate entities for tax purposes.
Company
This includes both public and private companies incorporated under the Companies Act. For example, Winiin Taxscope Private Limited and Infosys Ltd. fall under this category. Companies are taxed differently from individuals and HUFs.
Firm
A firm refers to a partnership firm that operates under a partnership deed. It is recognised as a separate entity for tax purposes.
Association of Persons (AOP) / Body of Individuals (BOI)
This category includes any group of individuals or entities that come together for a common purpose. It applies even if the group is not formally registered.
Local Authority
Local authorities include municipal corporations, panchayats, and other local governing bodies, such as the Jaipur Development Authority. They are subject to specific tax rules.
Artificial Judicial Person
This includes entities that are not natural persons but are recognised by law as having legal rights and obligations, such as trusts or certain organisations.
Main Objectives of Income Tax Act 1961
The Income Tax Act of 1961 was introduced with several key objectives in mind:
Price Stability and Inflation Control
The Act aims to stabilise prices by setting rules and regulations that influence economic behaviour. By controlling private spending, it helps manage inflation and stabilise the economy.
Encouraging Employment
By reducing product prices and increasing demand, the Act indirectly supports job creation. Lower costs can lead to higher production levels and the creation of new employment opportunities.
Addressing Wealth Inequality
The Act’s progressive taxation system is designed to address wealth disparities among citizens. Higher income earners pay a larger share of their income in taxes, which helps in redistributing wealth more fairly.
Economic Control
The Act adjusts tax rates based on economic conditions to help manage fluctuations in the value of money. This flexibility allows the government to respond to economic changes and stabilise the economy.
Promoting Domestic Production
The Act includes provisions like import duties that encourage domestic production. By imposing duties on imported goods, it helps domestic manufacturers compete more effectively in the market.
Provisions of Income Tax Act 1961
The Income Tax Act of 1961 includes several key provisions designed to manage and regulate various aspects of taxation. These provisions ensure a structured approach to tax administration and dispute resolution:
Appeal to Higher Courts
- Section 260A: Allows for appeals to the High Court. Taxpayers can challenge the decisions of lower courts or tribunals by appealing to the High Court if the matter involves significant legal questions.
- Section 261: Provides for appeals to the Supreme Court. For cases involving substantial questions of law, an appeal can be made to the Supreme Court, which is the highest judicial authority.
Annual Information and Financial Transaction Statement
This provision requires taxpayers to provide a detailed statement of their financial transactions and other relevant information annually. This helps in assessing the accuracy of income declarations and financial disclosures.
Representation by Authorised Persons
Taxpayers can be represented by authorised representatives in tax matters. These representatives handle various aspects of the tax process on behalf of the taxpayer, including filing returns and attending hearings.
Taxability of Income
The Act outlines how different types of income are to be taxed. It provides detailed rules for determining taxable income and ensures that all sources of income are appropriately accounted for.
Transaction Undertaking
The Act specifies the modes of undertaking transactions related to tax compliance. This includes guidelines on how transactions should be conducted and reported to comply with tax regulations.
Assessing Tax Authorities
The Act designates specific authorities responsible for assessing and collecting taxes. These authorities are tasked with ensuring that taxpayers comply with the provisions of the Act.
Instructions to Subordinate Authorities
Higher tax authorities issue instructions to subordinate officials to ensure consistent and fair application of tax laws. These instructions help in the uniform implementation of tax regulations across different regions.
Appeal Application for Reference by the Income Tax Officer
Taxpayers can request the Income Tax Officer to refer certain issues to higher authorities or courts. This provision allows for the review of complex or contentious tax matters by more experienced legal bodies.
What are the Deductions Available Under the Income Tax Act 1961?
The Income Tax Act 1961 provides various deductions to help taxpayers reduce their taxable income. Here are the key deductions available:
Section 80C: Investments and Savings
Taxpayers can claim a deduction of up to ₹1.5 lakh under Section 80C. This section covers deductions for investments in specified financial instruments, including Tax Saving Fixed Deposits, Equity Linked Savings Schemes (ELSS), and Public Provident Fund (PPF). The total limit of ₹1.5 lakh also includes deductions available under Sections 80CCC and 80CCD.
Section 80D: Health Insurance Premiums
Taxpayers can claim a deduction of ₹25,000 for premiums paid towards health insurance for themselves, their spouses, and their children. For senior citizens (aged 60 or above), the deduction limit is ₹50,000. This helps reduce taxable income while encouraging health insurance coverage.
Section 80CCD: Pension Contributions
Section 80CCD allows deductions for contributions made to the Atal Pension Yojana (APY) or the National Pension Scheme (NPS). This section enables taxpayers to save for retirement while reducing their taxable income.
Section 80DD: Medical Expenses for Disabled Dependents
Taxpayers can claim a deduction under Section 80DD for expenses incurred on the medical treatment and rehabilitation of dependents with disabilities. This deduction is available to individuals or Hindu Undivided Families (HUF) with disabled dependents.
Section 80TTA: Savings Account Interest
Section 80TTA provides a deduction of up to ₹10,000 on interest earned from savings bank accounts. This benefit is available to individuals and HUFs, reducing the tax burden on interest income from savings accounts.
Section 80DDB: Medical Treatment for Specified Illnesses
This section allows for deductions on medical expenses incurred for the treatment of specified illnesses, such as cancer or neurological diseases. The deduction is aimed at alleviating the financial burden of medical treatments.
Section 80U: Disability Deduction
Section 80U offers a deduction for individuals with physical or mental disabilities. This deduction helps to ease the financial challenges faced by individuals with disabilities.
Section 80G: Donations to Charitable Institutions
Taxpayers can claim deductions for donations made to charitable organisations under Section 80G. The deduction can range from 50% to 100% of the donation amount, depending on the type of charitable institution and the nature of the donation.
Section 80E: Education Loan Interest
Under Section 80E, taxpayers can claim a deduction on the interest paid on education loans taken for higher education. This encourages investment in education by providing tax relief on loan interest.
Conclusion
In this article, we have discussed the different sections of the income tax act that apply to individuals in India. We hope this article has provided you with the information you need to file your taxes in an effective and efficient way.
FAQs
What does the Income Tax Act apply to?
The Income Tax Act applies to the taxation of income earned by individuals, companies, and other entities in India. It governs the assessment, collection, and administration of income tax.
How many sections are there in Indian Income Tax Act?
The Income Tax Act contains a total of 23 chapters and 298 sections.
Which Income Tax Act is applicable in India?
The Income Tax Act, 1961 is the primary legislation that governs income tax in India. It is the current applicable Act.
What are the important sections in Income Tax Act?
The Income Tax Act includes various important sections that cover different aspects of taxation. Some notable sections include Section 80C (deductions for investments), Section 10 (exemptions), Section 139 (filing of income tax returns), Section 234A, 234B, and 234C (interest on late filing and payment), and Section 115BAC (new tax regime for individuals and HUFs).
How many types of Income Tax Act are there?
There is one Income Tax Act in India, which is the Income Tax Act, 1961. It is the comprehensive legislation that governs income tax in the country.
What section of Income Tax Act is salary?
The provisions related to salary income are primarily covered under Section 15 to Section 17 of the Income Tax Act. These sections provide rules for the computation and taxation of income from salaries.
Which is the first Income Tax Act?
The history of income tax in modern India begins in 1860, when James Wilson, India's first finance minister, presented the first income tax statute.
What are the 5 types of taxes in India?
The five types of taxes in India are:Income Tax: Tax on income earned by individuals, companies, and other entities. Goods and Services Tax (GST): A value-added tax levied on the supply of goods and services. Securities transaction tax: Tax on trades on the National Stock Exchange (NSE), Bombay Stock Exchange (BSE), and other recognized stock exchanges. Custom Duty: Tax on the import and export of goods. Excise Duty: Tax on the production, sale, or consumption of certain goods.
Which part of salary is non taxable?
There are various components of salary that may be non-taxable or party taxable, depending on the specific exemptions and deductions provided under the Income Tax Act. Common examples include the House Rent Allowance (HRA) received by an employee, special allowances, reimbursements for specific expenses, and exemptions for leave travel allowance (LTA) and medical reimbursements, subject to certain conditions.
Who is the father of taxation?
Mr. Raja Chelliah is the one and only father of India's tax reforms.
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