What is Income as per Income Tax Act?

The word income is broadly defined under Section2(24) of the Income Tax Act. Let’s understand what exactly “income” is:

  • In the case of a salaried person, the amount received from an employer either in cash or bank account.
  • For a businessman, the profit and loss from his business is considered as income
  • For the self-employed, the fees/earnings from different sources are income
  • If you are earning money by providing rental home, is income

Income is further classified by Income Tax in 5 categories:

  1. Income from Salary : The amount/money received by you from your employer every month. The amount of relationship between employee and employer should be considered as salary, or else it is considered under another head and all the allowances are exempted on the salary. The salary includes basic pay, medical, transport, annuity, gratuity, the advance of salary, prerequisites instead of salary, retirement benefits, etc. The aggregate of the above-mentioned incomes, before the deduction and after the exemptions is called gross salary which is taxable under Income Tax Act.
  2. Income From House Property : Any self-occupied or owned commercial or residential home property that gets you rental income is considered as income. Also, the interest on your home loan is considered as negative income.
  3. Income from Business or Profession : Income earned or profit gains through any business is considered as income. And this income is taxable under the Income Tax Act.
  4. Income from capital gains : Any profit or gain arising from transferring or selling any asset which is held for a specific period. This includes both movable or immovable assets.
  5. Other Sources : Any income that doesn’t cover under the above-mentioned methods. For example, you might win some kind of lottery. For 1 crore lottery, you have to pay 30% of tax.

What is the difference between Financial Year and Assessment Year?

The financial year is the year in which you have earned income. While Assessment year is the succeeding year in which you file the Income Tax return of the previous year.

What is Income Tax?

Income Tax is the tax imposed by the government on your yearly income. Income tax is the key source for the government to generate the funds to serve the public.

What is Corporate Tax?

When the companies pay taxes under the law of the Income Tax Act is called Corporate Tax.

Which body governs the filing of taxes in India?

The Income Tax Department is generally governed by the Central Board of Direct Taxes (CBDT). The CBDT provides the essential inputs for policy and planning to direct taxes on the public. CPC Bengaluru or Income Tax Centralized handles all the processing of Indian income tax refunds.

How much time does it take for a refund to get credited to my Bank Account?

Generally, the Income Tax Department processes your refund only after completing the ITR process. It usually takes 35-40 days from the date of e-verification done by Income Tax for the refund. However, if you choose the offline mode to file a refund by sending the documents to the CPC Bengaluru, it might take more time.

Save Income Tax

  • Use up your 1.5 lakh limit under section 80 C to save taxes. It includes Tax Saver FDs, PPF, NCS, Life Insurance Premium, and more.
  • Contribute to the National Pension System. The NPS allows you to invest in equity and debt pension funds to build a retirement corpus.
  • You can invest in health insurance premiums under Section 80 D. Choose any one health insurance policy and invest as per your requirements.
  • You can claim a tax deduction on House Rent Allowance. If you do not get HRA but pay rent, you can claim deduction under Section 80 GG.
  • Get tax deduction on your home loan. Under Section 24, the tax-deductible on home loans every year is up to Rs. 2lakh.
  • Keep some money in your savings account. Under Section 80TTA, the interest on a savings account is free up to Rs. 10,000.

Frequently Asked Questions

What is the administrative framework for Income Tax?

Central Board of Direct Taxes administrates the direct tax law through the Income Tax Department. However, Income Tax works under the law of CBDT.

What is the period for which an individual’s income is considerable for Income Tax?

Income tax is chargeable on the annual income of the assesses. The period of 1st April to 31st March is considered as the Income Tax period.

Where can I find experts for Income Tax-related advice?

Legaltaxpert is offering the best tax-paying advisory services in the country. You can contact us via mail or call for income tax-related advice.

How is advanced tax calculated and paid?

When the assesses has the excess tax liability of Rs. 10000. This tax is calculated on the current income and can be paid in 4 instalments.