Income Tax in India: Basics, Slabs and E-filing Process 2022

Let us understand about Direct Tax and Indirect Tax:

• Direct Tax - The wealth or income of an individual attracts the Direct Tax. You cannot shift the burden of Direct Tax to someone else. Example - Income Taxes.
• Indirect Tax - The price of goods or services attracts the Indirect Tax. Here, you can shift the burden of payment of tax to another person. The consumer has to pay the final payment of tax. Example of indirect tax - Goods and Services Tax (GST) or Customs Duty. 

Basics of Income Tax in India

The Income Tax Act, 1961 governs the levy of Income Tax in India. There are certain classifications made under this Act for different persons or assessee. A person or assessee under this Act includes:

• An individual
• Hindu Undivided Family (HUF)
• Association of Persons (AOP)
• Body of Individual (BOI)
• A firm
• A company
• Any other assessee as described under this Act

Factors Considered for Establishing Residential Status

For an individual, the duration of days in which they stayed in India determines their residential status. The days of their stay are computed for the previous financial year or previous year.

• Assessment year - This is the year in which the income earned during the previous financial year is both assessed and taxed.
• Previous Year - The year for which the income is chargeable to tax.

Assessee Classification

An assessee is classified into two main categories:

• Resident - They are liable to pay tax on their global income. This includes the income earned from both India and outside India.
• Non-residents - They are liable to pay taxes on the income accrued or deemed to be accrued in the previous financial year.
• Resident individuals are further classified as under:
  • Individuals under 60 years of age.
  • Individuals aged 60 years or more but under 80 years.
  • Individuals aged 80 years or more.

Classification of Income Under Different Heads

There are five sources of Income:

1. Salaries- Salaries, pensions, etc are taxable under this head.
2. Income from House Property - Rental income earned from house property is taxable under this head.
3. Profits and Gains from business or profession - Income from any business operation or profession is taxable under this head.
4. Capital Gains - Profit from the sale of capital assets like mutual funds, land, house property, etc are taxable under this head.
5. Income from Other Sources - Income which is chargeable to tax, but is not chargeable under the first four heads is taxable under this head. Example - interest from fixed deposits, saving bank account interest, winning from lotteries, etc.

An individual may have more than one source of income. In that case, compute their income first under the individual heads of income. The figures under the summary of all the sums computed under these heads are 'Gross Total Income'. 

Exemptions- There are some incomes that are wholly exempted from income tax (e.g. - agricultural income). Exclude these incomes completely as they will not form part of the 'Total Income'. 

Deductions - There are some deductions and allowances prescribed under each head of income. Consider them before reaching your net income chargeable to tax. Examples of these deductions are - 

• municipal taxes and interest on loan under income from house property.
• interest earned from PPF, etc.

Computation of Tax As Per Income Tax Slab

Income Tax Slabs: Old Regime

Income tax Slab in the case of individual (resident or non-resident), HUF, AOP, BOI or any other artificial juridical person who is:

Under 60 years of age:

60 years of age and above but less than 80 years of age:

80 years of age and above:

The above slabs belonged to the old regime. Individuals and HUFs, now, have an option to pay tax at certain concessional rates, if they do not avail of certain exemptions/ deductions. Example - Leave Travel Concession, Standard deduction under 'Salaries', interest on housing loan on a self-occupied property, etc. The rates of the new regime are as follows:

Income Tax Slabs: New Regime

Some of the deductions or exemptions allowed under the new regime are as follows:

• Transport allowance for specially-abled individual
• Conveyance allowance (incurred as a part of employment)
• The Compensation received to meet the cost of travel
•  Daily allowance

Surcharge - Surcharge is the amount of income tax charged at a certain rate if the income of an individual exceeds a certain limit. The following list is the rate of surcharge applicable to Individual/ HUF/ AOP/ BOI/ Artificial Juridical Person:

Health and Education Cess - Health and Education cess is levied at the rate of 4% on the total amount of income tax plus surcharge. 

A resident individual (whose income does not exceed ₹5,00,000), can avail rebate under section 87A under the Act. This section aids in determining the rebate rate by calculating gross income and substracting other deductions. Deduct this rebate from the income tax before the calculation of health and education cess. The amount of rebate will be 100% of the income tax or ₹12,500, whichever is lower. 

The exception to the above slabs:

Certain incomes are not taxable as per the slab presented above. One such income is income under the head 'Capital Gains'. Capital Gains are taxable as per the following:

• Tax on Short Term Capital Gains (STCG) as per Section 111A:

• Tax on Long Term Capital Gains (LTCG) under Section 112A:

• In the above transactions under section 112A, the benefit of indexation and currency fluctuation is not available.
• Tax on Long Term Capital Assets under Section 112:

Tax Rates applicable to Company

• Domestic Company

The following are the standard income tax rates for domestic businesses:

Surcharge for Domestic Companies

• Foreign Company

Surcharge for Foreign Companies

How To Calculate The Holding Period of An Asset?

What is Income Tax Return?

Return of Income is a format where an individual furnishes the details of their income. The details include their total income and tax payable. Central Board of Direct Taxes (CBDT) notifies the format for filing of returns for different individuals. The details declared are classified as income under different heads, gross total income, deductions, exemptions, total income, and tax payable. For every Individual/ AOP/ BOI/ HUF/ Artificial Juridical Person, the ITR-V must be filed.

Also Read: Challan 280 : How To Pay Your Income Tax Online With Challan 280

Steps for E-filing of Income Tax Return for an Individual

1. Visit the portal of https://www.incometaxindiaefiling.gov.in/home
2. If you are not registered, then register to the portal by filling in the required details. Registration has four steps - 
   • Entering your basic details like PAN, residential status, name, date of birth, etc.
   • Fill up the registration form.
   • The portal will verify your details for registration purposes.
   • After verification, your registration will be successful.
3. If you are already registered, then log in to the portal. Log in requires entering your user ID (PAN), Password, Captcha Code. Then press the login button.
4. Click on the E-file menu and then click on the 'Income Tax Return' link.
5. Then on the Income Tax Return Page:
   • PAN is auto-populated.
   •  Select the Assessment Year and ITR Form number.
   • Select the Filing type as 'Original or Revised Return'.
   • Select 'Submission Mode' as 'Prepare and Submit Online'.
6. Click on continue.
7. Read the instructions and fill in the required fields of the e-ITR Form. To avoid any loss of data, click on the 'Save Draft' button periodically. 
8. Select the appropriate Verification option in the 'Taxes Paid and Verification' Tab. Choose any one of the following option to verify the Income Tax Return:
   • I would like to e-verify
   • I would like to e-verify later within 120 days from the date of filing.
   • I would not like to e-verify and would send the signed ITR-V through speed post or normal post to the address - 'Centralized Processing Center (CPC), Income Tax department, Bengaluru - 560500', within 120 days of filing.
9. Click on the 'Preview and Submit Button'. Then verify all the data entered in the e-ITR.
10. Submit the e-ITR form.
11. If you chose the 'I would like to e-verify' option then e-verification is done through any of the following after entering Electronic Verification Code (EVC) or One Time Password (OTP). This EVC or OTP is valid only for 60 seconds. If you choose the other two options then the ITR will be submitted online but it is not verified. To complete the verification process, you need to send the signed ITR-V form to CPC.
12. View the uploaded ITRs on the website of https://www.incometaxindiaefiling.gov.in/home

Details Required While Filing The Return

• Personal details like name, address, contact details, etc.
• Bank account details.
• Income details.
• Tax calculation.
• Tax paid.

Conclusion

The above tax guide presents you with the basic concepts of Income Tax in India. It also gives a description of the slab rates, the process of e-filing of the income tax return for an individual. There can be mistakes incurred while filing the return. You can revise that return and rectify the mistake. You can also file a belated return if there is a delay in filing a return