Income tax is the annual direct tax on income which every individual, corporate firm, local authority or company is legally required pay to the government if they fulfil certain criteria. This tax on income is calculated on the net taxable income of a person or entity for the applicable fiscal.
In India, tax on income is applicable at incremental income tax slab rates i.e. lower income is taxed at a lower slab rate (including nil rate) and higher income features a higher slab rate. The income tax cycle in India currently coincides with the start of the fiscal on 1st April of the year and ends on 31st March of the next calendar year.
Before you make your income tax payments you should have a working knowledge of how income tax is computed. This will not only give you an idea on how much you have to pay but also find out ways in which you can save tax. If you are aware of the income tax slabs, computing the tax amount is easy. The final tax which is payable is calculated by applying the tax rates which are in force and then by deducting the taxes which have been paid through TDS (tax deduction at source).
To save the maximum amount of tax, it is necessary that you examine the deductions which have been defined under the different sections of IT Act, 1961. Certain investment avenues such as National Savings Certificate and Public Provident Fund are eligible for deduction under section 80C of the IT Act 1961. However, most tax payers tend to ignore a range of investment avenues which are eligible for tax concessions. Here is a quick rundown on investments which qualify for deductions under different sections of the Income Tax Act:Under section 80C, the Income Tax deductions are allowed for the following:
A taxpayer can claim for additional deductions under various sections. Some of these are mentioned below:
A number of confusions arise when terms like income tax rebate, income tax exemption and income tax deduction are used. Although all these terms are beneficial to the tax payer, they have different meanings.