<p>Individual taxpayers are usually busy during this time every year, as they have to file their Income Tax returns before July 31. Many individuals who are working, eagerly wait for their F16 from their employer. <br /><br /></p>.<p>Many others are busy filing their returns online and the remaining ones who do not understand anything about I-T, run to their CAs to get their returns filed. <br /><br />It’s better that all of us understand some of the concepts and terminologies used in Income Tax so that we can manage the pressures or concerns associated with filing of I-T returns.<br /><br /> Income tax, which is one of the direct taxes and a source of revenue for the government, is levied on the total income of the individual earned during a financial year. And direct taxes are those which are levied on and paid by the same individual.<br />ing the financial year (also called the previous year) is assessed. <br /><br /> As income tax is paid by the individual on the total income earned during a financial year, the total income of the individual has to be computed. Gross total income can be earned by an individual through many sources. IT department has categorised these sources in to the following heads: Income from Salary, Income from house property(Rental income), Income from Profession or Business, Income from Capital Gains, and Income from other sources. Example: interest income or dividend income, winning from lottery and horse racing, among other incomes.<br /><br /> The first step while computing your tax liability is to calculate the Gross total income, which is arrived at after adding income from all heads as mentioned above.<br /><br /> The government allows individuals to claim certain exemptions from the total income. However, it is to be noted that exemptions can be claimed only against that particular source or head of income only. <br /><br /> Any exemption on HRA or LTA can be claimed from salary income only. Also, any standard deduction towards maintenance or repairs of a house can be claimed from rental income.<br /> Few other popular exemptions are dividends received on shares /mutual funds (Now restricted to Rs 10 lakh) and maturity proceeds of a life insurance policy.<br /><br /> Second step is to claim deductions under various sections of I-T Act. All tax payers must be aware that I-T Act also allows for certain expenses and investments to be claimed as deductions from total income. <br /><br /> Third step is to arrive at taxable Income. Taxable income is arrived at after subtracting all deductions from Gross total income. Income tax has to be paid on the taxable income as per IT slabs. <br /><br /> Rebate is claimed on taxable income of less than Rs 5 lakh. The existing provisions of section 87A of Income-tax Act, provide for a rebate of Rs 5,000 from the amount of income-tax payable to an individual resident in India whose taxable income is less than Rs 5 lakh in a financial year. This is done with the objective to provide relief to resident individuals in the lower income slab.<br /><br /><em> (The writer, a former banker,works with Manipal Banking Academy, Bengaluru)</em></p>
<p>Individual taxpayers are usually busy during this time every year, as they have to file their Income Tax returns before July 31. Many individuals who are working, eagerly wait for their F16 from their employer. <br /><br /></p>.<p>Many others are busy filing their returns online and the remaining ones who do not understand anything about I-T, run to their CAs to get their returns filed. <br /><br />It’s better that all of us understand some of the concepts and terminologies used in Income Tax so that we can manage the pressures or concerns associated with filing of I-T returns.<br /><br /> Income tax, which is one of the direct taxes and a source of revenue for the government, is levied on the total income of the individual earned during a financial year. And direct taxes are those which are levied on and paid by the same individual.<br />ing the financial year (also called the previous year) is assessed. <br /><br /> As income tax is paid by the individual on the total income earned during a financial year, the total income of the individual has to be computed. Gross total income can be earned by an individual through many sources. IT department has categorised these sources in to the following heads: Income from Salary, Income from house property(Rental income), Income from Profession or Business, Income from Capital Gains, and Income from other sources. Example: interest income or dividend income, winning from lottery and horse racing, among other incomes.<br /><br /> The first step while computing your tax liability is to calculate the Gross total income, which is arrived at after adding income from all heads as mentioned above.<br /><br /> The government allows individuals to claim certain exemptions from the total income. However, it is to be noted that exemptions can be claimed only against that particular source or head of income only. <br /><br /> Any exemption on HRA or LTA can be claimed from salary income only. Also, any standard deduction towards maintenance or repairs of a house can be claimed from rental income.<br /> Few other popular exemptions are dividends received on shares /mutual funds (Now restricted to Rs 10 lakh) and maturity proceeds of a life insurance policy.<br /><br /> Second step is to claim deductions under various sections of I-T Act. All tax payers must be aware that I-T Act also allows for certain expenses and investments to be claimed as deductions from total income. <br /><br /> Third step is to arrive at taxable Income. Taxable income is arrived at after subtracting all deductions from Gross total income. Income tax has to be paid on the taxable income as per IT slabs. <br /><br /> Rebate is claimed on taxable income of less than Rs 5 lakh. The existing provisions of section 87A of Income-tax Act, provide for a rebate of Rs 5,000 from the amount of income-tax payable to an individual resident in India whose taxable income is less than Rs 5 lakh in a financial year. This is done with the objective to provide relief to resident individuals in the lower income slab.<br /><br /><em> (The writer, a former banker,works with Manipal Banking Academy, Bengaluru)</em></p>
