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Income Tax

The percentage of the income which is paid to the government for funding of infrastructure development,for paying salaries of the employees which get employed by state or central government,etc is called Income tax.Income tax act,1961 administers the provision of levying,collecting and recovering income tax in India.

CBDT is responsible for regulation of Direct Tax laws via IT department and it comes under the revenue department of Ministry of Finance.Income tax department also takes care of detection of avoidance of tax.

Impact of Union Budget 2018 on Income tax:

In Union Budget 2018,five major changes have been introduced in Income Tax :

  1. Increase in the cess of personal and corporation income tax from 3% to 4% which will increase collection of Income Tax.

  2. Deduction of Rs 40,000 on the income of salaried individuals taking the place of present exemption in the form of medical cost reimbursements and other allowances.

  3. All the profits from mutual funds and stocks which are above Rs. 1 lakh will be charged at the rate of 10%.The long term capital gains which were invested in mutual funds and stocks till 31st January,2018 were exempted from deduction of tax.

  4. There had been lots of changes which has been introduced for senior citizens such as the exemptions has been increased from Rs 10,000 to 50,000 on prepayments which were made in banks.Deduction limit of premium to be paid for medical expenditures or health insurances had been increased from Rs 30,000 to 50,000.No TDS deduction under the 194A section and provision of benefits of interest which has been received from recurring and fixed deposits.

Income Tax Collection:

The annual cycle of tax starts from 1st of April and ends on 31st March of the next year.The previous year is the one in which income has been earned and assessment year is the one on which the tax is charged.

There are three ways by which tax is collected by the government:

  1. Taxes Collected

  2. Tax which is deducted from monthly salary (TDS).

  3. Advance tax and self assessment tax

Income Tax slab rates for 2018-19:

For individuals and Hindu Undivided Families( both men and women ) who are less than 60 yrs old:

Income SlabTax Rate
Up to Rs 2,50,000Nil
2,50,000-5,00,0005%
5,00,000-10,00,00020%
> 10,00,00030%
Surcharge :
50 lakh - 1 crore or > 1 crore15%
Cess3% of total income tax + surcharge

For individuals and Hindu Undivided Families( both men and women ) who are more than 80 yrs old:

Income SlabTax Rate
Up to 3,00,000Nil
3,00,000-5,00,0005%
5,00,000-10,00,00020%
> 10,00,00030%
For people > 80 years old, Income up to 5 lakhNil
Surcharge and Cess will be same as above

Income Tax Return:

The income tax can be saved by making several investments under section 80C and 80D.The section 80C allows the individual to save up to Rs 1,50,000 through investments and 80D deals with deductions of tax on medical insurance of around Rs 25,000.Tax refund could be claimed through Form 16.HRA components such as investments, PF,insurance are need to be mentioned in Form 16 for declaring investments.

Refund status of Income Tax:

There are three ways to check the status:

  1. To check the income tax refund status,an individual should visit the official website www.incometaxefiling.gov.in

  2. Send the email to the IT department mentioning all the details of refund in it.

  3. Call on toll free number to check the status(1800-4250-0025).

Income Tax Return:

Following are the forms that needs to be filled based on the income group.For filing ITR, bank account statements,form 16 and previous year’s return copy will be required.

FormDescription
ITR-1The individuals who have income from one house property,salary and other sources like interest
ITR-2Individuals and HUF who doesn’t have income from business and profession.
ITR-2ANo income from business or profession,capital gains and foreign assets
ITR 3Partners in firms but not carrying business under proprietorship
ITR 4Individuals having income from proprietary business
ITR 4SIncome tax return from Presumptive business
ITR 5For person other than individual,HUF,company and person filing ITR-7
ITR 6Companies claiming return under section 11
ITR 7Companies which file return under section 139(4A),139(4B),139(4C),139(4D),139(4F)
ITR VAcknowledgement form of filing income tax return

How to save Income tax?

There are few sources to save income tax:

  1. Investment options

    1. Under section 80C, Income tax can be claimed by using mutual funds such as ELSS.As compared to fixed deposits and PPF’s, ELSS is more beneficial for making money.
    2. Unit linked Insurance Plans
  2. Insurance: Health and life insurance options

  3. House loans: Tax deductions up to Rs 1,50,000 can be claimed.

  4. Other options:

    1. PF or Provident Fund: By investing in PF account, a reasonable amount of tax can be saved.

    2. NSC or National Saving Certificate: In this a lower amount of Rs 100 can be saved even for a period of five years at least.

    3. Fixed Deposits: With a lock in period of five years a considerable amount of tax can be saved while earning interest.

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