Classes Of Income Tax

There is a popular saying, Nations are made when taxes are paid’. And, when filing ITR, you should know that there are 3 kinds of taxes: wealth tax, corporate tax, and capital gains tax.

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This form contains the information of the income tax paid by an assessee, filing of which helps in easy acquiring of loans, visa application and also helps avoid penalties.

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Classes Of Income Tax

All incomes and profits are taxable by the government of India. However, each income source has a different taxable percentage, depending on the rate and the age of the person. For investments, taxing rates are measured based on the time period from when it was invested in.

Under the Income Tax Act 1961, there are five sources stipulated, like salary, business or profession, house property, capital gains and other sources. Income from other sources includes income from residual sources.

Let us see in depth the different types of taxes, as it is an important function to be known and understood.

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Income Tax Department

Even in a world that is technologically driven with computers and PAN card systems in place, it is difficult to assess and keep track of every individual’s income tax status given the population of 1.35 billion in India. Therefore, the government of India set up a department which can exclusively regulate and keep a check on the taxes filed and incomes confessed by the citizens of India or if taxes have been overpaid. The Income Tax Department can efficiently monitor the announced income versus the taxes paid previously and therefore proves to be a valuable asset to the government.

Tax on Income from salary

An employee working at a firm or company is recruited on a certain scale of remuneration or a salary package. This package usually involves the basic, the PF or Provident Fund, gratuity, credit of salary given in advance, holiday encashment, perquisites & retirement allowances. Of which, the basic, bonus if any and the commissions received are 100% taxable at different rates. However, few exemptions are permitted for perquisites and other benefits.

Tax on Income from Housing Property

Any housing property from which income is generated is taxable under Property tax. The property could be a workstation, parking lot, warehouse, industry, manufactory, field, backyard and much more.

In this case, the government does not tax the entire amount, but considers the municipal tax already paid, 30% of the tax paid for the total revenue generated and in case of home loans, also takes into account the interest paid for the loan which should amount to a maximum of Rs.1.50 lakhs.

Tax on Income from Profits & Gains of Business

Every revenue generated from any business inclusive of services offered at home such as tuitions taken at home is chargeable. Tax has to be paid on the credits collected and costs drawn for executing the business. Different reductions are permitted according to the Act, for instance running ads, rental tariff, travel expenditure, maintenance of appliances or gadgets, fixing costs and dividends on appropriated capital.

All enterprises or profession which has a yearly yield surpassing ten lakhs and a profit of Rs 1.2 should maintain an accounting book.

Tax on Income from Capital Gains

If a capital asset is held at stake for profit, it becomes taxable according to the capital gains and head income. Real estate properties are generally considered as capital assets and therefore has stake dividends, mutual funds and immovable property gains. Depending on the duration the investment or asset was held, the income tax for capital gain is calculated. An investment held for less than 3 years can be termed as short-term capital assets and assets held for a longer duration, that is, more than 3 years can be termed as long-term capital assets. However, assets such as Mutual funds, zero-coupon bonds are deemed as long-term assets in just one year of ownership.

Tax on Income from Other Sources

Revenue earned from game shows or sweepstake or gambling is also taxable. Also, cash acquired from family should also be declared if it is over and above 50,000 rupees.

Here’s the process of ITR Preparation and Filing.

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