What is Income Tax?
An income tax is a tax levied by the government on individuals and businesses in income that they generate. It mandatory by law that the taxpaying citizens of the country must file their income tax return annually in order to find out their tax responsibilities. The income tax paid by the taxpaying citizens of the country serves as a source of revenue for the government. The tax collected is used to fund two types of expenses for the country: recurring expenses and non-recurring expenses. Recurring expenses are the salaries paid to the government servants etc. Whereas, non-recurring expenses are utilized to build long term assets that are good for the country. Assets like, airports, railways, roads, bridges, schools, colleges, factories, etc. A growing economy usually focuses more on non-recurring expenses that are also known as capital expenses.
The financial year in India ends in march. And the details about the income tax in India are always disclosed at the annual union budget. Every year the government tries to make taxes affordable for the citizens. And just like always, the union budget of the year 2020 was no different. The Union Budget 2020 presented a new income tax slab system with decreased rates for those foregoing 70 tax exemptions and deductions under a “simplified tax regime”. This new system is optional and will co-exist with the old one with three slabs and various exemptions and deductions available to the taxpayer. If you are looking for information regarding the changes in the tax system, we have got you covered. Below is a list of the new income tax slab and rates.
- If an individual earns up to Rs. 2,50,000, he or she will have to pay zero tax.
- If the earnings of an individual range between 2,50,001 to Rs. 5,00,000, then the tax rate applicable to the individual is 5%.
- For an individual with an income between Rs. 5,00,001 to Rs. 7,50,000, the tax rate applicable is 10%.
- For an individual with an income between Rs. 7,50,001 to Rs. 10,00,000, the tax rate applicable is 15%.
- For an individual with an income between Rs. 10,00,001 to Rs. 12,50,000, the tax rate applicable is 20%.
- For an individual with an income between Rs. 12,50,001 to Rs. 15,00,000, the tax rate applicable is 25%.
- For an individual with an income above rs. 15,00,000, the tax rate applicable is 30%.
Filing your taxes on time is always a good idea. The process is also fairly simple. Before you file your taxes, you will need your Form 16 which is provided by your employer, and any proof of investment. Using these you can calculate the tax to be paid and refunds to collect, if any, for the fiscal year. Once you have all the documents ready, you can start the filing process.
- Visit the e-filling website.
- Register or log in
- Select your user type
- Fill your basic details
- Get your PAN card verified
- Activate your account
- And then file your income tax by following the instructions on the website.
Filling income online is an easy and short process. And you can do it from the comfort of your own home or office. Filing your income tax online can also save you some money which you would ideally pay to the person you hire to do your taxes. It is a time consuming process which saves you a lot of hassle of paperwork. If you consider yourself a number cruncher, you can always calculate your income tax manually. But for the individuals who find it difficult and want to save some time, there are various online income calculators available for free of cost.
Remember, it’s illegal to not pay your income tax. So get brushed up on the new income tax slabs and rates and file your taxes on time.