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Income tax Department

The income tax department’s vision is to create progressive tax policies, to make the compliance easy and to enforce tax laws with fairness. The inception of the income tax department of India, occurred in 1922 with the help of the income tax Act ruled out in the same year. The central board of revenue Act constituted the board with functional responsibilities for the administration of the income tax Act.

There are four types of incomes that come under the scope of tax liability-

  1. Income received in india- Irrespective of the residential status of the assessee, income received in India is subject to taxes. If the income is received through an employee of India but salary received through a non-resident employee and then remitted afterwards to India, is not taxable.

  2. Income accruing or arising in India- Accrual of income refers to the case when the employee has accrued the rights to receive a particular amount of income, when the employee has already received his/her income. It's considered to be the ‘income arising in India’

  3. Incomes deemed to be received in India- The income that is deemed to be received in India is considered to be a part of the assessee’s income even though such incomes are not received through the assessee. The term ‘statutory receipt’ can be used to conveniently cover for such incomes. The annual increment in provident fund can be considered as an income which is ‘deemed to be received in India

  4. Income deemed to accrue or arise in India- Income that is deemed to accrue or arise in India are the incomes that, in reality, do not accrue or arise in India but are received in India via direct or indirect methods. The income is deemed to accrue or arise in India, if:

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  1. Through or from any business connection in India

  2. Through or from any property in India

  3. Through or from the transfer of capital assets, that are situated in India

  4. Through any asset or source of income in India

The income tax department distinguishes the nature of income received by various sections of the society into five categories. The five categories of income received are also known as income tax heads. The five categories of income tax heads are:

  1. Income from salary includes the tax levied on the income that is received by the employees. It includes any form of remuneration/compensation that is received by an employee in exchange of the services provided by him/her as a part of the contract of employment.

  2. Income from house property- The income accrued by the owner of a property from the tenants is taxable. The income tax levied on the owner of the property is based on the property that is owned and not the total rent that is received by the owner.

  3. Income from gains and profits from business- The difference between the expenses and revenue earned by a business-owner is taxable. The income accumulated by a business-owner which is taxable includes:

  1. The income earned by the assessee in the assessment year

  2. Profits on the income by an organisation

  3. Profits on the sale of a certain license

  4. Shares received by the assessee as the result of partnership with a firm

  5. Benefits received for being the part of a business

  1. Income from capital gains are earned by selling or transferring capital assets which were originally a part of investments. Any property that is held by an assessee as a part of the business is considered as capital gains, and is subject to taxation

  2. Income from other sources includes income that is earned in the form of interest income earned on the bank deposits, windfall gains like winning lotteries and also income accumulated through gambling of any form. Under article 56(A) of the income tax Act, income earned from or through any of these sources is taxable as well.

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Income Tax Rebate

When a taxpayer pays a larger amount of tax than the total amount of tax payable, the amount of actual tax paid by him/her is subject to income tax rebate.

Due to continuous revisions in the tax slabs suggested by the income tax department, the income tax paid by the assessee is sometimes larger than the total amount of tax that is subject to him/her. In order to receive income tax rebate, there’s a need for the employee to file ITR with the income tax department. On successful filing of ITR, the total amount of additional tax paid along with the interest is returned to the assessee. However, it is important for the assessee to file the ITR on time in order to receive the tax refunds.

Income Tax Rebate under section 87 A

Income tax rebate under section 87A deals with the marginally lower income-earning sector. In order to claim income tax rebate under section 87A, the following criteria must be met by the taxpayer:

  1. Total taxable salary includes the salary received under various income tax heads like- salary received by the employees, capital gains accrued by the business-owners, income received from the ownership of house/property etc

  2. Any losses incurred under any of the income tax heads are deducted by the income tax department and the total income tax payable is calculated.

Eligibility to claim income tax rebate under section 87 A

Every individual who comes under a particular income tax slab isn’t eligible for income tax deductions. The taxpayers who are eligible for income tax rebate for the Fiscal year 2018-19 (which is equivalent to assessment year 2019-20), need to satisfy the following conditions:

  1. You need to be a resident of India

  2. The total income after deductions must be less than 3,50,000, hence, complying with Section 80, income tax act, 1961

Income Tax Deductions

Taxes are applicable on all your incomes; salary, income accrued from house/property, income earned from investments and shares and even the money that you earn by betting or gambling!

Section 80 of income tax Act allows the taxpayer to benefit from a number of deductions and exemptions which are facilitated by the income tax department, thereby reducing the tax outgo.

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SectionDeduction onAllowed Limit (maximum) FY 2018-19
Section 80C

--Investment in PPF

– Employee’s share of PF contribution

– NSCs

– Life Insurance Premium payment

– Children’s Tuition Fee

– Principal Repayment of home loan

– Investment in Sukanya Samridhi Account

– ULIPS

– ELSS

– Sum paid to purchase deferred annuity

– Five year deposit scheme

– Senior Citizens savings scheme

– Subscription to notified securities/notified deposits scheme

– Contribution to notified Pension Fund set up by Mutual Fund or UTI.

– Subscription to Home Loan Account scheme of the National Housing Bank

– Subscription to deposit scheme of a public sector or company engaged in providing housing finance

– Contribution to notified annuity Plan of LIC

– Subscription to equity shares/ debentures of an approved eligible issue

– Subscription to notified bonds of NABARD

Rs. 1,50,000
80CCCFor amount deposited in annuity plan of LIC or any other insurer for pension from a fund referred to in Section 10(23AAB).
80CCD(1)Employee’s contribution to NPS account (maximum up to Rs 1,50,000)
80CCD(2)Employer’s contribution to NPS accountMaximum up to 10% of salary
80CCD(1B)Additional contribution to NPSRs. 50,000
80TTA(1)Interest Income from Savings accountMaximum up to 10,000
80TTBExemption of interest from banks, post office, etc. Applicable only to senior citizensMaximum up to 50,000
80GGFor rent paid when HRA is not received from employerLeast of :

– Rent paid minus 10% of total income

– Rs. 5000/- per month

– 25% of total income

80EInterest on education loanInterest paid for a period of 8 years
80EEInterest on home loan for first time home ownersRs 50,000
80CCGRajiv Gandhi Equity Scheme for investments in EquitiesLower of

– 50% of amount invested in equity shares; or

– Rs 25,000

80D

Medical Insurance – Self, spouse, children

Medical Insurance – Parents more than 60 years old or (from FY 2015-16) uninsured parents more than 80 years old

– Rs. 25,000

– Rs. 50,000

80DDBMedical treatment for handicapped dependent or payment to specified scheme for maintenance of handicapped dependent

– Disability is 40% or more but less than 80%

– Disability is 80% or more

– Rs. 1,25,000
80DDB

Medical Expenditure on Self or Dependent Relative for diseases specified in Rule 11DD

– For less than 60 years old

– For more than 60 years old

– Lower of Rs 40,000 or the amount actually paid

– Lower of Rs 1,00,000 or the amount actually paid

80U

Self suffering from disability:

– Individual suffering from a physical disability (including blindness) or mental retardation.

– Individual suffering from severe disability

– Rs. 75,000

– Rs. 1,25,000

80GGBContribution by companies to political partiesAmount contributed (not allowed if paid in cash)
80GGCContribution by individuals to political partiesAmount contributed (not allowed if paid in cash)
80RRBDeductions on Income by way of Royalty of a PatentLower of Rs 3,00,000 or income received

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