What is Income Tax?
Income tax is a direct tax which is imposed by government as a legal charge on income of individuals or firms. It is defined under direct tax as it cannot be shifted from one person to another and is paid only by person on whom it is actually levied, whether he is an individual, company or any other organization.
How Income Tax is collected in India?
CBDT (Central Board of Direct taxes) is a legal establishment that defines Income tax rules in India. It issues timely changes to the Income Tax Act 1961 for levying different tax amounts on different individual incomes and maintains all records of yearly tax collections made to government. Earlier, Income tax was paid manually by sending the required documents to the tax department but now with the change in their digital structure tax filing is now done through their internet portal naming Incometaxindia.gov.in.
How it is calculated?
Income tax is an annual contribution made to government which follows a period of 1st April to 31 march as a financial tax assessment year . For every taxpayer calculation and submission of income taxes is followed by these tax years.
Filing of income tax to present system is done through a proper sequence which starts with defining a residential status to assessee (tax payer) according to section 6 of IT Act , following with calculations of taxable income under various heads including “Income from Salary, Capital gains, Profits of business , Income from house property and other sources and defining the total to different income slabs which ultimately gives a sum of tax payable.
To Simplify this process, government has proposed three ways to collect Income taxes from public :
- Voluntary Self Payment : which is paid by every loyal tax payer annually .
- TDs (Tax deducted at source) : which is deducted from the source of income before making actual payment I.e which is deducted before you receive your salary.
- TCs ( Tax collected at Source)
Why Should I Pay Income Tax?
Income tax department to ensure better compliance’s and following of tax rules, has included a separate Section 271 to the act to specify what legal actions can taken against an assessee being person/company or any other organization for ignoring tax submission and for hiding their income details from tax department . For every assessee it is an essential thing to submit a tax return every year taking it is a prior responsibility as timely payment of their obligations would help them to get more government facilities , easy finance and remain untouched from legal hands .