It is a tax imposed by the Government of India on any body who earns income in India. This tax is levied on the strength of an Act called Income Tax Act which was passed by the Parliament of India.
Income earned in India. is not limited to income earned within the geographical limits or boundaries of the country. Certain incomes are also deemed to have been earned in India although they may have been earned outside the country.
The job of monitoring the Income-tax collection by the government is entrusted to a Department called Income Tax. This department functions under the Department of Revenue, Depart of Finance Government of India.
Income earned in the twelve months contained in the period from 1st April to 31st March (commonly called Financial Year [FY]) is taken into account for purposes of Calculating Income Tax. Under the income tax Act this period is called previous year.
It is the twelve-month period 1st April to 31st March immediately following the previous year [the financial year in which the income was earned]. In the Assessment year a person files his return for the income earned in the previous year. For example for Financial Year 2006-07 the Assessment Year is 2007-08.
Any Individual or group of Individuals or artificial bodies who/which have earned income during the previous years are required to pay Income tax on it. The IT Act recognizes the earners of income under seven [7] categories. Each category is called a Status. These are Individuals, Hindu Undivided Family [HUF], Association of Persons [AOP], Body of individuals [BOI], Firms, Companies, Local authority and Artificial jurisdical person.
When Companies pay taxes under the Income tax Act it is called Corporate tax.
No, The Income tax Act applies to all persons who earn income in India. Whether they are Resident or non-resident
If an individual stays in India for 182 days or more in a year, he is treated as resident in that year regardless of his citizenship. If the stay is less than 182 days he is a non-resident.
A company is considered as ‘resident’ if it is incorporated under the Indian Companies Act. A foreign company can also become a ‘resident’ if the control and management of its affairs is done entirely in India during the previous year.
In case of resident individuals and companies, their global income is taxable in India. However non-residents have to pay tax only on the income earned in India or from a source/activity in India.
It depends on his/her residential status. If he/she is a resident all incomes earned globally are taxable. Therefore the same needs to be included in the return. However if any tax is paid on that income in the foreign country, he/she will get credit for the same.
The word “Income” has a very broad and inclusive meaning. In case of a salaried person, all that is received from an employer in cash, kind or as a facility is considered as income. For a businessman, his net profits will constitute income. Income may also flow from investments in the form of Interest, Dividend, and Commission etc. In fact the Income Tax Act does not differentiate between legal and illegal income for purpose of taxation. Under the Act, all incomes earned by persons are classified into 5 different heads, such as:
Income from Salary
Income from House property
Income from Business or Profession
Income from capital gains
Income from other sources
No.
Receipts can be classified into two kinds.
A) Revenue receipt
B) Capital receipt
The general rule under the Income tax Act is that, all revenue receipt are taxable unless a receipt is specifically exempted and all capital receipts are exempt from taxation unless there is a provision to tax it. Gifts and loans etc. are in the nature of capital receipts not attracting tax.
In a simple language, all that one derives from a source is called revenue receipt. For example Salary from employment, Rent from property, Interest or Divided from Investments, Profits from business. When an income is earned on account of transacting the source itself, it is called Capital receipt. For example Sale of land and building, business, Investment etc.
Gift exceeding Rs 50,000 is taxable unless it is received from any person who is a relative or on occasion of marriage or under will or by inheritance or in contemplation of death of the payer.
No. The dividend declared by Indian companies is not taxable in the hands of the share holders because tax on distributed profits have already been borne by the company.
Yes.
No
What is done after the income is earned does not determine its taxation. However charitable contribution to approved institutions will give you the benefit of certain deductions from taxable income.
Your daughter is the owner of the house and therefore she is liable to pay tax even though you receive the rent. If the house is transferred, then you would become the owner and you will have to pay tax on the rental income.
No.
At the moment individual, HUF, AOP, and BOI having income below Rs. 250,000/- need not pay any income tax. For other categories such as co-operatives societies, firms, companies and local authorities no such exempted limits exists, so they have to pay taxes on their entire income. In cases of senior citizens aged above 60 years and very senior citizens aged above 80 years, the exempted limit for the financial year 2015-16 are Rs. 3,00,000/- and Rs. 500,000/- respectively.
For every source of income you have to maintain proof of earning and the records specified under the IT Act. In case, no such records have been laid down, you should maintain reasonable level of records with which you can support the claim of income.