11/10/2010

Income tax in India - Wikipedia, the fre…

Income tax in India
From Wikipedia, the free encyclopedia

The government of India imposes an income tax on taxable income of individuals, Hindu Undivided Families (HUFs), companies, firms, co-operative societies and trusts (Identified as body of Individuals and Association of Persons) and any other artificial person. Levy of tax is separate on each of the persons. The levy is governed by the Indian Income Tax Act, 1961. The Indian Income Tax department is governed by the Central Board for Direct Taxes (CBDT) and is part of the Department of Revenue under the Ministry of Finance, Govt. of India.

Contents
1 Overview 1.1 Charge to Income-tax 1.2 Residential Status 1.3 Departmental Structure 1.4 Heads of Income 2 Individual Heads of Income 2.1 Income from Salary 2.2 Income From House property 2.3 Income from Business or Profession 2.4 Income from Capital Gains 2.5 Income from Other Sources 3 Income Exempt from Tax 3.1 Dividends 3.2 Other Exempt Income 4 Deduction 4.1 Section 80C Deductions 4.2 Section 80D: Medical Insurance Premiums 4.3 Interest on Housing Loans Section 80 E 5 Tax Rates 5.1 Surcharge 5.2 Tax Rate for non-Individuals 5.3 Refund Status for Salaried tax payers 6 Corporate Income tax 6.1 Tax Penalties 7 References 8 See also 9 External links
en.wikipedia.org/…/Income_tax_in_India 1/10

whether it is revenue or capital.000 (for resident individual of 65 years or above)= NIL 1..000 = NIL Up to 1.90..001 upwards = 30% Education cess is applicable @ 3 per cent on income tax.e. viz. Income tax is a tax payable. (i) ResiOrdinarily Residents (Residents) (ii) Resident but not Ordinarily Residents and (iii) Non Residents.000 = 10% 5.00. including income outside India. at the rate enacted by the Union Budget (Finance Act) for every Assessment Year. Not Ordinarily residents are taxable in relation to income received in India or income accrued in India and income from business or profession controlled from India. and shall be chargeable to the income tax at the rate or rates prescribed under the finance act for the relevant assessment year.org/…/Income_tax_in_India 2/10 .00.60. surcharge = NA Residential Status f a hree residential status.000 (for women)= NIL Up to 2.000 = 20% 8.[2] Non residents are taxable only for the income received in India or Income accrued in India. There are several steps involved in determining the residential status of a person [1] All residents are taxable for all their income. i. The changeability is based on nature of income.001 – 5.40.11/10/2010 Income tax in India .wikipedia. Departmental Structure Chairman Board Members of Direct Taxes Chief Commissioner Commissioner Additional Commissioner Joint Commissioner Deputy Commissioner Assistant Commissioner Income Tax Officer Tax Inspector en. shall be determined on basis of his residential status. The principles of taxation of income are-: Income Tax Rates/Slabs Rate (%) Up to 1.60. on the Total Income earned in the Previous Year by every Person.Wikipedia.001 – 8.00. the fre… Overview Charge to Income-tax Every Person whose total income exceeds the maximum amount which is not chargeable to the income tax is an assesse.00.

taxable[3]: 1. 50%/40%(metro/non-metro) of basic 'salary' 3. basic Salary for this purpose is basic+DA forming part+commission on sale on fixed rate. Actual HRA received 2. Professional taxes: Most states tax employment on a per-professional basis. Salaries Income from House Property Profits and Gains of Business or Profession Capital Gains Income from Other sources Individual Heads of Income Income from Salary All income received as salary under Employer-Employee relationship is taxed under this head. No bills are required for this amount.. Annual value in case of a self occupied house is to be taken as NIL. annual value is assumed to have accrued to the owner. as Tax Deducted at Source (TDS). Income from salary is net of all the above deductions.) From this.600 per year) is tax free if provided as conveyance allowance. 2. 5. Conveyance allowance: Up to Rs. 3. 2. Employers must withhold tax compulsorily.11/10/2010 Income tax in India . 4. deduct : en. Income From House property Income from House property is computed by taking what is called Annual Value.wikipedia. viz. if income exceeds minimum exemption limit. Rent paid minus 10% of 'salary'.000 per year is tax free if supported by bills. the Form 16 will contain any other deductions provided from salary such as: 1. and provide their employees with a Form 16 which shows the tax deductions and net paid income.org/…/Income_tax_in_India 3/10 .Wikipedia. (However if there is more than one self occupied house then the annual value of the other house/s is taxable. 15. House rent allowance: the least of the following is available as deduction 1. The annual value (in the case of a let out property) is the maximum of the following: Rent received Municipal Valuation Fair Rent (as determined by the I-T department) If a house is not let out and not self-occupied. From this Net Annual Value. 800 per month (Rs. Such taxes paid are deductible from income tax. Medical reimbursement: Up to Rs. the fre… Tax Assistant Heads of Income The total income of a person is divided into five heads. usually a slabbed amount based on gross income. 4. deduct Municipal Tax paid and you get the Net Annual Value. 3. In addition. 9.

33AC. In summary. 44BBB. 44AD. viz. 35A. there are few more sections under this Chapter.50. the fre… 30% of Net value as repair cost (This is a mandatory deduction) Interest paid or payable on a housing loan against this house In the case of a self occupied house interest paid or payable is subject to a maximum limit of Rs. 4.Wikipedia. if regular books of accounts have been maintained and Profit and Loss Account has been prepared. with no upper limits. 35ABB & 41. The computation of income under the head "Profits and Gains of Business or Profession" depends on the particulars and information available. An architect works out of home and co-ordinates work for his clients. 43B & 44-C.1.e.30. i. Deductible Expenses . 44AB & 44C). Sections 44 to 44DA (except sections 44AA. the incomes chargeable as "Income from Business or Profession" shall be computed in accordance with the provisions contained in sections 30 to 43D. Income from Business or Profession carry forward of losses An example . Section 44AA deals with maintenance of books and section 44AB deals with audit of accounts. he travels to sites in his car. the sections relating to computation of business income can be grouped as under: 1. 5.000 (if the loan is taken before 1 April 1999). books and magazines for his professional practice. Deemed Incomes . 44AE. However.Sections 33AB. The balance is added to taxable income.. 44A.11/10/2010 Income tax in India . The income referred to in section 28. which contain the computation completely within itself. 44-D & 44-DA.Sections 37(2)..org/…/Income_tax_in_India 4/10 . 3. 40. he has a peon to help him collect payments He has a maid who comes in daily part of the society maintenance bills entertainment expenses incurred. all interest is deductible. then the computation would be as under: Income (including Deemed Incomes) chargeable as income under this head xxx Less: Expenses deductible (net of disallowances) under this head xxx Profits and Gains of Business or Profession xxx However.Sections 30 to 38 [except 37(2)]. 44AF.Sections 44.Sections 42 & 43D Self-Coded Computations . Special Provisions . 40A.000 (if loan is taken on or after 1 April 1999 and construction is completed within 3 years) and Rs.. Inadmissible Expenses .wikipedia. 33ABA.[4] If regular books of accounts are not maintained. 44BBA. All the following expenses would be deductible from his professional fees. 44BB. then en. he uses a computer. For all non self-occupied homes. 44B. Section 44C is a disallowance provision in the case non-residents. 2.

T. For companies abroad. art etc. 2. exchange.11/10/2010 Income tax in India . which are taxed as such: Under section 111A. the higher capital gains taxes will apply to such transactions where STT is not paid. the tax liability is 20% of such gains suitably indexed (since STT is not paid). Income by way of Dividends 2. person has an option to either index costs to inflation and pay 20% of indexed gains. Long term asset are held by a person for three years except in case of shares or mutual funds which becomes long term just after one year of holding.wikipedia. but does not include some items like any stock-in-trade for businesses and personal effects. it is part of gross total income and normal tax rate is applicable. For Asst Yr 2009-10 the tax rate is 15%. Sale of such long term assets gives rise to long term capital gains. under this head income which does not meet criteria to go to other heads is taxed. As per Section 10(38) of Income Tax Act. All capital gains that are not long term are short term capital gains. or pay 10% of non indexed gains. The indexation rates are released by the I-T department each year. paintings. indexation benefit is available and tax rate is 20%. bonds.org/…/Income_tax_in_India 5/10 . no tax is payable. There are different scheme of taxation of long term capital gains. equity shares. A Capital asset is defined under section 2(14) of the I. Income from Other Sources This is a residual head. Income from horse races 3. for shares or mutual funds where STT is paid. extinguishment of rights in an asset. For tax purposes. 1. there are two types of capital assets: Long term and short term. 1961 as property of any kind held by an assessee such as real estate. 3. jewellery. the fre… the computation would be as under: Net Profit as per Profit and Loss Account Add : Inadmissible Expenses debited to Profit and Loss Account Deemed Incomes not credited to Profit and Loss Account Less: Deductible Expenses not debited to Profit and Loss Account Incomes chargeable under other heads credited to Profit & Loss A/c Profits and Gains of Business or Profession xxx xxx xxx xxx xxx xxx xxx xxx Income from Capital Gains Transfer of capital assets results in capital gains. STT has been applied on all stock market transactions since October 2004 but does not apply to off-market transactions and company buybacks. etc.Wikipedia. Act. In case of other shares and securities. In case of all other long term capital gains. There are also some specific incomes which are to be taxed under this head. Transfer has been defined under section 2(47) to include sale. These are: 1. tax rate is 10% From Asst Yr 2005-06 as per Finance Act 2004. therefore. Income from winning bull races en. Certain transactions are not regarded as 'Transfer' under section 47. relinquishment of asset. In all other cases. 1961 long term capital gains on shares or securities or mutual funds on which Securities Transaction Tax (STT) has been deducted and paid.

or by maturity) is generally exempt. and 13A deal with income which does not form part of an assessee's total income.org/…/Income_tax_in_India 6/10 .Tax Act) paid by Companies and Mutual Funds are exempt from tax. 10BA. These are : any sum received under sub-section (3) of section 80DD or sub-section (3) of section 80DDA . for avoiding double taxation.All assesses Exempt income :. on the basis of Education. [5]. charity. certificates. sports. though other funds do. does not pay any revenue to Sikkim State from Income tax. 10B. science. political.Gujrat is number state who collect maximum revenue from Center report of 2007.this refers to specific policies for disabled dependants. bonds. AOP. Sikkim is the only state of India where citizens do not pay income tax.Agricultural income Other points :. research.. or any sum received under a Keyman insurance policy. and international. the fre… 4. Subsidies to promote business. 5. Deduction en.wikipedia. Dividends Dividend income (as referred u/s 115-O of the I. funds and the like. Residents of Sikkim are eligible for this exemption but excluding the non-Sikkimese spouse of a Sikkimese. unregistered firms and artificial juridical persons. sections 10A.center Gov is now may change revenue % of state in coming year.11/10/2010 Income tax in India . However there are three types of payments under life insurance policy that are not tax free . These exemptions are provided from social. funds and institutions. BOI. Agricultural Income [Section 10(1)] Eligible Assesses :. 10BA. and other considerations. economic.Agricultural income means as it is defined in Section 2(1A) In case of individual. 10AA.on the basis of non-residents and non-citizens status. 10B. achievements. While section 10 provides a list of income absolutely exempt from tax. rewards.Wikipedia. and 13A deal with specific exemptions available to newly established industrial undertakings in free trade zones. Liquid and Money Market funds pay 25% dividend distribution tax. Any amount received from key man insurance policy an donation. 10AA.01123 Other Exempt Income The Indian Income tax act specifically exempts certain income from tax: Money received from an Insurance company as proceeds of an insurance policy (by way of an insurance claim. Constitutional considerations. on the basis of Certain specific securities. Income from shares (dividend) Income Exempt from Tax Sections 10. Center Gov Is liable to pay minimum fix revenue to state before next year from income tax collected from state. A 15% dividend distribution tax and surcharge of 3% is paid by companies before distribution. HUF. or any sum received under policies issued on or after 1 April 2003 where premium paid is greater than 1/5th the sum assured Maturity proceeds of a Public Provident Fund (PPF) account. Equity mutual funds (with more than 65% of assets invested in equities) do not pay a dividend distribution tax.10A.thats why Center Gov. on the basis of casual and non-recurring nature . on the basis of certain types of bodies. and political parties. agricultural income is to be aggregated for the purpose of determining the rate of tax on Non-Agricultural income and they would get tax rebate or relief.

35. 20. the incumbent should already be 65 as on March 31st. a maximum of Rs.00 (Rs.1. the rent is to be shown as income from such properties. From April. for the fiscal year 2010-2011. popularly known as Mediclaim Policies. This deduction is also applicable to the cheques paid by proprietor firms.00 for premium payment towards senior citizen dependant parents). Post office investments The investment can be from any source and not necessarily from income chargeable to tax. For consideration under a senior citizen category.000. (Only for 2 children)or towards coaching fee of various competitive exams. 2011).000 (Rupees One lac) which can be any combination of the below: Contribution to Provident Fund or Public Provident Fund Payment of life insurance premium Investment in pension Plans Investment in Equity Linked Savings schemes (ELSS) of mutual funds Investment in National Savings Certificates (interest of past NSCs is reinvested every year and can be added to the Section 80 limit) Payments towards principal repayment of housing loans. the fre… While exemptions is on income some deduction in calculation of taxable income is allowed for certain payments. If the house is not occupied due to employment.000 savings under IT deductions clause 80C. refund claims of T. 1999.00. This deduction is in addition to Rs.incometaxindia.000. Therefore.Wikipedia.htm) allows certain investments and expenditure to be tax-exempt. the incumbent's age should be 65 years during any part of the current fiscal. will no more be necessary. 1 2010.00.in/DitTaxmann/IncomeTaxActs/2007ITAct/section80c.S.a. Interest on Housing Loans Section 80 E For self occupied properties.000 per year is exempt from tax.000/p. The losses from all properties shall be allowed to be adjusted against salary income at the source itself. u/s 80c Saving) However. 15. However. 1.00 for premium payment towards non-senior citizen dependant parents or Rs. 15. spouse and children and (read as in addition to) Rs. the entire interest paid is deductible under section 24 of the Income Tax act. the house will be considered self occupied.wikipedia. The total limit under this section is Rs. interest paid on a housing loan up to Rs 150.000 is deductible under section 80CCF provided that amount is invested in infrastructure bonds.00 for premium payments towards policies on self.org/…/Income_tax_in_India 7/10 .Also any registration fee or stamp duty paid.[6] en. 100. eg. Section 80D: Medical Insurance Premiums Health insurance. this is only applicable for a residence constructed within three financial years after the loan is taken and also the loan if taken after April 1. 20. 30% of rent received and municipal taxes paid are available for deduction of tax.D.000.gov. deducted in excess. provides a deduction of upto Rs. Section 80C Deductions Section 80C of the Income Tax Act [1] (http://law. Payments towards tuition fees for children to any school or college or university or similar institution. on this count.000. (Excluding Rs.11/10/2010 Income tax in India . For let out properties.

86.000 for senior citizens of 65 and above and must be resident of india) From 1. the fre… Tax Rates In India.gov. 10 million) with effect from 1 June 2007 All taxes in India are subject to an education cess.000 : 20% of amount greater than Rs.000 + 34.90. income is taxed at a flat rate of 30% for Indian companies.An en. 2. The limit of 10 lacs was increased to Rs. About 10 per cent of the population meets the minimum threshold of taxable income[7][8] From April 1. 91.Wikipedia.00.60.001 to 8.001 to 5. A 15% surcharge (tax on tax) is applicable if the taxable income (taking into consideration all the deductions) is above Rs.00. 8.wikipedia. Local Authorities & Co-operative Societies.000 for senior citizens) Above 8.000 per year. 1.incometaxindia.asp) ) Salary taxpayers who have not received refunds for assessment years 2003\04 to 2006\07 can click on the link below and query using the PAN number and assessment year whether any refund due to them has been returned undelivered. Mainly education cess is applicable on excise duty and service tax Tax Rate for non-Individuals There are special rates prescribed for Firms.000 for women and Rs.org/…/Income_tax_in_India 8/10 . 1 crore (Rs.000 + 94.000 : 10% of amount greater than Rs.00.000 : 30% of amount greater than Rs.000 for women and Rs. 1.in/CCIT/refundsearch. (Rs.11/10/2010 Income tax in India . Corporate Income tax For companies. 1 crore (10 million). (link to check refund (http://www. Corporates. Individual income tax is a progressive tax with three slabs.[11]. 31.000 (Lower limit changes appropriately for women and senior citizens) From 5.000 for senior citizens) Surcharge Surcharge has been abolished for Personal income tax in the financial year 2009-10.60. 2010 new tax slabs apply.00. Secondary and Higher Secondary Education Cess of 1% is applicable on the subtotal of taxable income.40. 5.000 for women and Rs. which are as follows: No income tax is applicable on all income up to Rs. Foreign companies pay 40%.00.000 ( Rs.000 ( Rs.00. with a 10% surcharge applied on the tax paid by companies with gross turnover over Rs. [9] Refund Status for Salaried tax payers The Income Tax Department has put on its website the list of income tax refunds of all salary tax payers which could not be sent to the concerned persons for want of correct address. which is 3% of the total tax payable. 1 million). 1.60. With effect from assessment year 2009-10. [10]. 10 lakh (Rs. 26.

^ Business Income (http://www.php) 8.e.asp 7. ^ NSDL Refund Status Check (https://tin.com/tax_rates_in_India. a sum which shall not be less than.taxmann.com/DitTaxmann/IncomeTaxActs/2006ITAct/gr.incometaxindia.html) 10. ^ A Study of the Indian Tax System . ^ Surcharge has been revised from 10% to 7. Satikah (March 4. ^ Finance Act 2010 comes into effect (http://www.com/DitTaxmann/IncomeTaxActs/2006ITAct/section14. The Hindu Business Line (The Hindu).gov. From 2005-06. the amount of tax sought to be evaded by reason of the concealment of particulars of his income or the furnishing of inaccurate particulars of such income. Tax rates for foreign companies (http://www.gov. ^ Atreya. ^ Income Tax Act.ssrn.in/publications/1_Compute_Your_Salary_Income/2_Income_from_house_property.html) 5. is satisfied that any person(b) has failed to comply with a notice under sub-section (1) of section 142 or sub-section (2) of section 143 or fails to comply with a direction issued under sub-section (2A) of section 142. 6.(ii) in the cases referred to in clause (b).5% w.htm.com/business_income. point 4 of IT circular.org/…/Income_tax_in_India 9/10 . References 1. Retrieved 200803-04.Wikipedia.f AY 2010-11.com/2008/03/04/stories/2008030451502300.99% for domestic companies and 41. http://www.com/articles/budget2010.2% for foreign companies. in addition to any tax payable by him.htm) . ^ Determination of Residential Status (http://www.cfm? abstract_id=1286009) 3.com/2008/03/04/stories/2008030451502300.thehindubusinessline. ^ Tax Rates for Assessment Year 2008-09 (http://www. (http://incometaxindiaefiling. 2008).tin.com/Residential_Status.nsdl. ^ Taxable heads of income (http://www.taxmann. a sum of ten thousand rupees for each such failure. electronic filing of company returns is mandatory.[12] Tax Penalties "If the Assessing Officer or the Commissioner (Appeals) or the Commissioner in the course of any proceedings under this Act. (iii) in the cases referred to in clause (c).com/oltas/refundstatuslogin.in/download/Circular%20No.wikipedia.v-krishnan-and-company. ^ http://www.htm) 12.html) 11.v-krishnan-and-company.com/sol3/papers.thehindubusinessline.11/10/2010 Income tax in India .v-krishnan-and-company.saraltaxoffice. the fre… education cess of 3% (on both the tax and the surcharge) are payable. yielding effective tax rates of 33.saraltaxoffice.Corporate taxpayers must file electronically. in addition to any tax payable by him.htm) 4. "Decision to exempt incomes of Sikkim subjects hailed" (http://www.html) 2.Part I and II . but which shall not exceed three times.php) 9.Sunil Thacker (http://papers.com/articles/it-finance-act-2010. or (c) has concealed the particulars of his income or furnished inaccurate particulars of such income. he may direct that such person shall pay by way of penalty. ^ Income Tax Rates changed for 2010-11 (http://www.pdf) See also Service tax in India Central Excise (India) en.9-2006.

Inc. additional terms may apply.incometaxindiaefiling.Wikipedia.11/10/2010 Income tax in India . en.incometaxindia. See Terms of Use for details.wikipedia. the fre… External links Indian Income Tax Department (http://www. a non-profit organization.org/…/Income_tax_in_India 10/10 . Text is available under the Creative Commons Attribution-ShareAlike License.org/wiki/Income_tax_in_India" Categories: Taxation in India | Income taxes This page was last modified on 9 November 2010 at 13:09.gov..in) Retrieved from "http://en.wikipedia.gov.in) Electronic Filing of Income Tax Returns (http://www. Wikipedia® is a registered trademark of the Wikimedia Foundation.

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